Nitsan Bar-Ilan Law Firm

Real Estate

We provide services for a variety of real estate transactions:

  • Purchase and sale – drafting and handling all types of contracts for sale or purchase of land.
  • Drafting tenancy in common agreements.
  • ‘Combination transactions’.
  • Legal assistance to developers and projects.
  • Representation of contractors.
  • Drafting of contracts with contractors and/or developers under National Master Plan (TAMA) 38 (fortification of buildings against earthquakes).
  • Representation of condominium committees in TAMA 38 transactions with contractors/developers and legal assistance throughout the project.
  • Representation of condominium committees/residents in disputes regarding the condominium.
  • Registration of a building as a condominium and drafting the bylaws.
  • Actions concerning neighbors’ disputes, including mediation by agreement of the parties between condominium/family dwelling residents.
  • Drafting and handling tenancy agreements (apartments, offices, land, agricultural farms-‘Nachalot’, storage space, etc.).
  • Handling eviction/nuisance removal orders, etc.
  • Transfer of rights in land among family members, i.e. transfer by gift, by inheritance, and pursuant to divorce.

In handling real estate transactions, we consider all the taxation issues and provide tax advice/tax planning for our clients, according to their wishes and needs. We register the rights at the Israel Land Administration and/the Land Registration Bureau (Tabo) and, from the registration of the 'note of caution' (he'arat azhara) at the beginning of the process, to the registration of ownership title to the land .

What is land

  • “Land” is defined in the Israel Land Law, 1969: as “land, anything built on it or planted in it and anything, permanent or temporary that is affixed to it”.

Under the law:

  • Ownership of land is the right to occupy land, to use it and to effect any transaction in respect thereof, under law or under an agreement,
  • Ownership of land includes ownership of the whole depth below the surface of the land, subject to any law relating to water, petroleum, minerals, etc., and of airspace above the surface of the land, but without preventing passage through such airspace, i.e. flight.
  • The State has the power to expropriate the land.

Land is also termed immovable property, because a characteristic of such property is that they cannot be moved (as distinct from chattels – which can be moved from one place to another).

What is a real estate transaction

Ownership of land is transferred by the sale of the land. There are other types of real estate transactions (easements), conferring a right of enjoyment, without transfer of ownership.


A non-perpetual right, granted for consideration, to occupy and use of land. A leasehold of over five years is termed ‘lease’, and a leasehold of over 25 years is termed ‘long-term lease’.

‘Key money’

This is a real estate transaction which is a kind of hybrid between the purchase of the property and the leasing thereof. Under this transaction, the buyer pays a lower price (about half of the full value of the property), and in consideration for this amount, receives the right of occupation of the property, and continues to pay particularly lower rent. In accordance of these payments, the tenant is given protection for his right to reside in the property until the end of his days. He can even bequeath this right to a first degree relative who lived with him at the period before his death. This system is anchored in special legislation, bearing the name “Tenant Protection Law”, which had gone through many changes until it became the current law.

Purchase / Sale

The completion of a land transaction, such as a transaction for the sale of a house which is under construction, can take a long time. In order to protect the rights of the buyer in such a transaction a note of caution (caveat), which is an entry in the Land Registry regarding a written undertaking by the owner of the land or the holder of the right in the land to effect a transaction or not to effect a transaction in respect of certain land, is registered.

The registration of a note of caution has two purposes:

  1. to warn and notify any person interested in the land that someone has started the purchase process, inspecting the register, which is open for public inspection, if there is an undertaking on the owner's land might effect a transaction in respect thereof.
  2. To prevent the owner of the land, who had undertaken a transaction with a certain buyer, from effecting a conflicting transaction with another person in respect of the same land without the consent of the buyer or without obtaining a court order.

Land taxation

Appreciation tax

Land Appreciation tax is a tax imposed on capital gains arising out of the sale of land or of shares in a real estate association. The statutory source of this tax is the Land Taxation Law, commonly known as the Appreciation Tax Law. Appreciation Tax Law was the previous name of this law, and land taxation is commonly called appreciation tax. This type of tax is a unique to Israel, and creates a distinction, in the taxation of capital gains, between the taxation of capital gains arising out of land and capital gains arising out of other sources.

The amount of this tax is determined by examining the capital gains created by the transaction, i.e., the consideration a person receives (or in unusual cases, the consideration that he should have received), against the price that he had paid when purchasing the property. The determination of an appreciation tax assessment is a complex matter, because it is determined under varying tax rates and according to a division into two periods: before and after the tax reform. Appreciation tax has a complex system of exemptions and tax deferments, the best known of which is the exemption for a single residential apartment.

A aforementioned, on certain conditions set out in the law, an exemption from payment of appreciation tax is granted. Thus, for example, a person who sold an apartment over 4 years ago, is entitled to an exemption (which is in effect until 31.12.13). The list of exemptions is long and we may prefer to utilize one rather than the other, because of (legal) tax planning, with respect to future transactions. We me even be able not to pay appreciation tax even without requesting a certain exemption, because of the calculation of the appreciation on the property, with the deduction of certain expenses on the property, such as financing expenses.

In Israel, ownership in land cannot be registered in the Tabo without a certificate from Appreciation Tax confirming that the tax had been paid or that there is an exemption.

Because of the similarity in the Hebrew names, there is a common tendency to confuse this tax with betterment tax.

Betterment tax

Betterment tax is a payment that an owner of land is required to pay the local commission that had approved a plan and in doing so caused the value of his property to increase. The requirement to pay betterment tax to a local commission is conditional upon an increase in the value of the property as a result of the commissions’ giving one of following approvals:

  • approval of an urban building plan
  • approval of a concession
  • approval of relaxation
  • approval of non-conforming use

The tax amount is half of the increase in the value of the property, and it is paid on the date of realization of the rights in the land. The amount of the tax is determined by an assessor acting on behalf of the local commission, but it can be objected to within 30 days.

Purchase tax

Under the law, every buyer of land must pay purchase tax, according to brackets that are adjusted once a year, on 16 January. The tax is paid to the income tax authorities, within 50 days from the date of the signing of the purchase agreement.

Land, planning and building

Under the Land Law, the consent (by signing the permit application) of 75% of the residents of a condominium is required in order to expand an apartment. Instead of this majority, a majority of two thirds of the owners of the common property can also be obtained for this purpose. A majority of 60% of the residents is sufficient in the case of an addition of a reinforced security room.

However, if the neighbors’ refusal to give consent (sign the application) is unreasonable, regulation 2B of the Planning and Building (Application for Permit, Conditions and Fees) Regulations, 5730-1970, letters can be sent, by registered mail, to the those who refuse to sign, so that their objection can be heard. If the objection is unreasonable, the local planning and building commission may approve this building even without the said majority. The Inspector of Condominiums at the Ministry of Justice is responsible for examining situations where such conflicts exist, and he is very influenced by the planning position of the local commission with respect to the objection.


When bank financing is required in order to complete the purchase of land, the buyer requests a loan from the bank, called a mortgage.

‘Taking a mortgage from the bank’ is common expressions, but the bank does not actually give a mortgage but a loan, and the borrower (the buyer of the property) pledges the property to the bank to secure the repayment of the loan.

The financing is provided by the bank, the property is pledged and charged to the bank, and a note of caution is registered at the Israel Land Administration or in the Land Registry (tabo).

It is important to emphasize that a caution note is registered in favor of the bank with respect to the amount of the loan extended by the bank to the borrower, i.e., if I purchase and apartment for NIS 1,000,000, and take a mortgage loan from the bank in the amount of NIS 500,000, then the note of caution will be with respect to the amount of NIS 500,000, in favor of the lending bank.

What is a ‘combination transaction’

This is a transaction where the owner of land contracts with a contractor and/or developer, to construct a number of apartments or structures (depends on the transaction) on the land, in consideration for ownership of some portion of the land.

A full sale combination transaction – where all the land is transferred to the contractor/developer, in consideration for some of the apartments or houses constructed on the land by him.

A partial sale combination transaction – where only part of the land is transferred to the contractor/developer, in consideration for some of the apartments or houses constructed on the land by him.

The advantages of a combination transaction?

The owner of the land:

  1. saves the expense of building on the lot;
  2. is not responsible for the performance of the construction work and/or the quality thereof;
  3. saves the purchase tax on his constructed portion. The reason for this is that no money is exchanged in the transaction (unlike when a contractor sells an apartment), because the owner of the lot (the seller) receives construction services for his portion of the land.
  4. has peace of mind – the selection of a professional contractor ensures quality construction, because of the contractor’s interest in the profits of the project.

The developer or contractor:

  1. is able to charge the property in order to take a financing loan for the construction stages, because he receives the area without payment.
  2. Saves the purchase tax on the lot, because he does not actually effect a purchase transaction in respect of the lot.
  3. As this type of transaction is very complex and has many variables, it is recommended to obtain the services of a real estate appraiser, who will assess the value of all the parts of the transaction.

Payments and levies

The owner of the property:

  • VAT: on the construction services;
  • Betterment tax: on the land, if there is a liability;
  • Capitalization: if theland belongs to the Israel Land Administration
  • Appreciation tax: only partial – less than he would have paid for on the sale of the property

The developer or contractor

  • VAT
  • Purchase tax: only on his portion of the project
  • Fees: for obtaining building permits under law
  • Income tax

What is the combination rate/percentage

The combination rate/percentage is measured according to the market value of the apartments or structures that the owner of the land/the seller receives. It is important to note that for the purpose of assessment of the combination rate/percentage the risk and uncertainty (due to changes in the real estate market) of the owner of the land, who delivers the land to the contractor and receives his proceeds only at the completion of construction. The value of the transaction is determined by the determination of the combination rate/percentage. As this type of transaction is flexible and complex, it assessing the value of the transaction is not easy. A real estate appraiser tries to appraise the combination rate/percentage of each particular transaction through an economic examination of the combination transaction, and an appraisal of the value of the land and the value of the contemplated construction on the land, an attempt to predict the behavior of the real estate market until the completion of the transaction, an assessment of taxes and levies payments and of the risk assumed by the owner of the land, which are also factored in, etc., and also through a comparison with information on the combination rates/percentages in similar real estate transactions in the same area or in an area with the same characteristics and value.