Client updates / Real Estate

The Ministry of Construction and Housing recently published a memorandum of law that prescribes a payment schedule for the first time that is specifically defined for urban renewal projects involving the addition of new apartments to existing buildings.

The Supervisor of Land Registration at the Ministry of Justice accepted a lawsuit filed by the housing committee of a condominium building in Tel Aviv and forbade one of the apartment owners from using his apartment for short-terms rentals (Airbnb, Booking).

The Israel Tax Authority (ITA) recently launched an application that allows anyone who previously executed a real-estate transaction to check whether he or she has a credit balance in respect of an overpayment of betterment tax or purchase tax.

In July 2018, the Israeli Knesset approved a draft bill in a second and third reading that addresses the obligation of apartment owners seeking to sell a property as a result of a general outline plan to pay land betterment tax.

According to a ruling handed down recently by the Israeli Supreme Court, when a real estate asset is sold before the seller enters bankruptcy proceedings, and the seller has not paid the betterment tax, the local council is not obligated to grant the buyer approval for registering the property under his name. Thus, the buyer will be required to pay the betterment tax.

The Israel Tax Authority (ITA) recently published a draft circular for public comment on the issue of classifying residential rent income. The ITA states that, according to its reasoning, income from the leasing of 10 or more apartments should be deemed business income.

A number of changes in the taxation of residential apartment sales will come into effect on January 2018.

In July 2017, the Fair Rent Law was enacted, an initiative of MPs Stav Shaffir and Roy Folkman. The main objectives of the New Law are to regulate the relationship between tenants and landlords and to define the minimum conditions for an apartment to be deemed “fit for dwelling.”

The Urban Renewal Law, which was promulgated at the beginning of April 2017, is attempting to regulate the phenomenon of obtaining apartment-owners’ signatures on undertakings towards developers and/or various entities (organizers) that are supposedly promoting urban renewal projects.

The new law prescribes that, as of January 1, 2017, every taxpayer must pay tax annually (January through December) for every residential apartment that he owns in excess of two apartments, at the sum defined pursuant to the provisions of the law. The taxpayer will be allowed to choose which of his apartments he deems to be his first two apartments, and which shall be taxable under this law.

A Supreme Court judgment handed down in December by the Honorable Justice Yoram Danziger ruled that the demand by local planning and building committees that deeds of indemnity be signed is illegal (Bikel Flowers Ltd. vs. the Local Planning and Building Committee – Rishon Letsiyon).

In March 2016 the government adopted the housing cabinet’s recommendations regarding criteria for allowing foreign construction companies to begin operating in Israel. This move is one of the government’s strategies for increasing the volume of residential construction in Israel.

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Developers can no longer rely on changes to an apartment, requested by the purchaser, as reason to avoid payment of compensation for late delivery. This was ruled recently by the Supreme Court in a case involving a dispute between purchasers of an apartment and a contracting company.

The Sale (Apartments) Law states that a delay of over 60 days from the date specified in the sale contract for the delivery of the apartment to the purchaser, means that the purchaser will be entitled to compensation without proof of damage, and this from the first day of delay.

In the abovementioned case, the sale contract which was signed by the purchasers and the contracting company stated that any request to change or supplement the apartment will postpone the delivery date of the apartment for at least 60 days.

It should be noted that clauses of this nature are common and appear in almost every sale contract from a contractor.

The Supreme Court ruled that the wording of the relevant clause is broad and vague, and gives the contractor unlimited options to determine the date of delivery, which creates uncertainty among the purchasers. Thus, the contractor prevents the purchasers from preparing themselves for a new and clear date on which the apartment will be delivered to them, and to plan their moves accordingly.

The Court further ruled that from now on, the contractor cannot rely on sweeping clauses in apartment sale contracts, which include provisions exempting him from paying compensation for delays in delivery of apartments, in any case where changes to the apartment were ordered by the purchasers.

However, the Court held that the parties can agree, for example, on a new and concrete postponed delivery date, in the case of making changes in the apartment at the request of the purchaser, in a later agreement signed by the parties.

The Court also noted that a new and postponed delivery date that will be determined by agreement, as mentioned, may be examined by the Court, in terms of its reasonableness in relation to the scope of changes made to the apartment and their nature.

The Israeli Tax Authority (ITA) recently announced, during a discussion of the parliamentary committee, that it is about to publish a tax circular in the matter of renting apartments for a short periods of time, including through Internet platforms such as Airbnb.

According to recently released data, In 2015 about 128,000 tourists visiting Israel rented apartments through Airbnb. This represents an increase of 45% compared to 2014, as well as an increase of 40% in the number of Israelis who offer their apartments for rent through Airbnb, which is now over 13,000.

Amendment 101 to the Building and Planning Law was promulgated in April 2015. The amendment concerns a transfer and expansion of authorities to the local committees and sweeping amendments designed to shorten, streamline and simplify construction licensing.