Betterment levy in Israel and who has to pay it
Betterment levy in Israel and who has to pay it
The betterment levy, heitel hashbacha, is a charge imposed by the local planning authority when a planning decision increases the value of a property. It allows the public to share in value created by planning. For owners and investors it can be one of the most significant costs in a transaction, and it often surprises sellers who did not know a plan had changed their property. This guide explains the concept in general terms. Specific calculations always require an appraiser and a lawyer.
What creates a liability
A liability arises when a planning act raises the value of land. The main triggers are the approval of a new or amended plan, the grant of a relief from the plan and the approval of a use that deviates from the permitted one.
The liability is measured by comparing the value of the property before and after the planning act. The local committee's appraiser usually prepares the assessment.
Plan approval – new rights or uses in an approved plan
Relief – a deviation granted for a specific property
Permitted use – approval of a use not otherwise allowed
When the levy is paid
Although the liability arises when the plan is approved, payment is generally due on realisation. Realisation typically means selling the property, obtaining a building permit that uses the new rights or starting the new use.
This means a seller may owe a levy for rights that were created years earlier and never used. Checking the planning history of a property before selling is therefore essential.
Who pays
The legal obligation rests on the owner or long-term leaseholder at the time the liability arose, and it is collected on realisation. In a sale, the contract often allocates the levy between seller and buyer, and that allocation is a common point of negotiation.
In combination deals and urban renewal projects, the agreement should state clearly who bears the levy. Developers often assume it in renewal projects, but this must be written into the contract.
Exemptions, disputes and appeals
The law provides certain exemptions and reductions, including some for residential improvements and for particular urban renewal situations. Whether an exemption applies depends on the facts and on current law, which changes from time to time.
An owner who disagrees with an assessment can challenge it through a decisive appraiser or an appeals committee within fixed deadlines. Professional advice early in the process can make a significant difference.
Practical steps before a transaction
Before selling, buying or signing a renewal agreement, request the planning history of the property, ask the local committee whether a levy has been assessed and have an appraiser estimate the exposure.
Elkayam Group works in urban renewal, combination deals and complex deals and can help owners understand how the levy is handled in a proposed deal and which professionals to involve.
Check the plans that apply to the property
Ask about any existing assessment
Allocate the levy clearly in the contract
Frequently asked questions – betterment levy
Does every sale trigger a betterment levy
No. A levy is due only if a planning act raised the value of the property and it has not yet been paid or exempted. Many sales involve no levy at all.
Can the buyer be asked to pay the levy
The obligation is the seller's by law, but the contract can shift the cost. Buyers should check the allocation and confirm that any levy due is settled before registration.
Who pays the levy in a pinui binui project
It depends on the agreement and on current exemptions. Many renewal agreements place the cost on the developer, but owners should confirm this in writing.
Why Elkayam Group
The group works in development, urban renewal, combination deals and complex deals, works with backing companies and provides guarantees for clients. The team works in Hebrew, English and French.
Contact: +972-53-658-4252 · support@kobielkayamrealestateltd.com · Rival St 37, Tel Aviv