Opportunities to purchase rights in agricultural land that may be rezoned to residential are often presented to the public. Indeed, the purchase of such agricultural land may prove to be of great potential. However, there are several important points to keep in mind before purchasing agricultural land. This is so as not to discover you have bought a bill of goods.
- In light of the national policy to encourage development close to existing cities and central transportation routes, it is important to closely examine the location of the offered land. For example, the chances of rezoning land close to a city are higher than land within the jurisdiction of a regional authority.
- Carefully evaluate the planning status applicable to the proposed land in terms of planning and design. This will help you understand the likelihood of a rezoning plan. It is clear that to the extent the plan is in its initial stages, the purchase price may be lower. Nevertheless, there will also be less certainty on the possibility of rezoning and the time it will take. Additionally, be sure to examine the planning and design options, as well as the construction or structure limitations permitted for the land. (100 square feet do not mean 100 square feet of built structure.)
- In addition to the transaction price, take into account other associated costs. These include appreciation tax (which constitutes 50% of the appreciated value of the land transitioning from agricultural to residential), taxation, building levies and fees, development costs, and more.
- The nature of the rights purchased should be legally established. Are these rights for a specific parcel of land or for rights in partnership (rights in common, joint tenancy, etc.)? In the latter case, the rights are proportional rather than specific and require a partnership agreement. In addition, determine if there are any liens on the land.
- Identify the seller of the rights, and ensure the nature of his rights is legally established. Is the land privately owned or owned by the State? If owned by the State, a long-term lease agreement may be available and would include restricting provisions, including the possibility the Israel Land Authority will demand a restoration of the property rights along with a zoning change.
- Retain expert counsel (such as lawyers, designers, and assessors) to ensure representation of your own interests. Don’t be tempted to use consultants appointed by the rights seller in order to reduce costs.
If you would like to discuss the above or require further information, please contact us.