What differences in land zoning can do to the amount of the improvement levy: property sellers in the Neve Tzedek neighborhood in Tel Aviv were surprised to recently receive a demand for a NIS 14 million improvement levy from the Tel Aviv-Yafo Local Planning and Construction Committee, for the sale of land for NIS 35 million – meaning an improvement levy at the rate of 40% of the sale of the property. According to them, the levy should be significantly lower, and amount to only half of the municipality’s requirement.
The land, which is located at 1-3 Achava St. in the prestigious neighborhood in the south of Tel Aviv, is located between the main streets Shabazi and Mered, where the Natan Goldman House used to stand, a residence built in 1925 and destroyed in 1985. Today, a parking lot under the responsibility of the municipality operates on the land. The heirs of the landlords owned the land until recently, and decided to sell it.
The land, which has an area of approximately 458 square meters and the construction rights on it amount to approximately 1,400 square meters, was sold in August 2021. According to the sellers, only 58 square meters of it is designated as a road, while the rest of it is intended for residential construction. compiled by the appraiser and lawyer Erez Cohen for the sellers. The local committee determined on the other hand, as it appears from the appraisal made by the appraiser Yoram Barak, that 200 square meters of the plot is intended for the road – and this is the bone of contention between the parties.
“The previous situation versus the new” – that’s all the difference
The difference between the tenures directly affects the amount of the levy that the sellers will pay, since when calculating the improvement on the property there are two situations between which the appraiser compiling the assessment compares: a previous situation – that is, the rights to the land in the past, and a new situation – the rights that exist after the approval of a new plan. When a certain action is performed, such as the sale of land, the approval of a new plan usually affects the rights associated with it – and the difference between the two situations, the previous and the new, is what “creates” the improvement from which the levy is derived.
Things become more complicated when there is a plot with several designations, or when the designation changes following the approval of a new plan: the value of land is determined according to the designation, so residential land will be worth several times more than land designated as a road (road, for example). If part of it was designated as a road, and changed to a residential designation following the approval of a new plan, the difference between will be very large – and will result in a high improvement levy.
This is what happened, according to the determination of the local committee, on the land in question on Achava Street in Neve Tzedek: according to Shamai Barak’s assessment, 200 square meters of it was in the previous state designated as a road, and since it is now designated as residential – the improvement amounts to approximately NIS 28 million, and the improvement levy (which is half of the improvement itself) is NIS 14 million.
The sellers argue against a different calculation: according to the assessment compiled by Cohen, the “Tafri Neve Tzedek” plan applied to the area where the land is located, and was approved at the end of 2019, marking a significant portion of the land to be reserved for residential use, and reducing the portion classified as a road to approximately 58 square meters. Accordingly , the levy should only be about NIS 7 million.
“It is true that this is a significant and honorable transaction, but it is divided between 13 heirs,” says Cohen. “It’s a real absurdity: in what situation does the municipality collect almost 50% of a transaction as an improvement levy? Its appetite breaks all boundaries. This is an amazing method of operation, in which the situation is returned to the way it was, that is, to the designation of a road, and the sellers are required to pay for this decision.”
“We feel exploited and cheated”
The sellers also claim that the municipality promised them in the past that it would change the designation of most of the plot to residential, in favor of the definition in the previous situation – and as a result they withdrew a petition that they filed against the municipality – but in the end the assessment issued by the municipality does not consider the promise at all.
The sellers’ appraisal further states that according to documentation found in the building file, as of the date determining the previous plan that was valid in the area (cell/1200), the residence that stood on the lot was “a spacious private house that was lived in and was in use”. Therefore, the petitioners claim, “in the previous situation, the value of the built residence must be taken into account as the efficient and good use of the land.” In other words – calculate the improvement levy for the entire area according to residential designation in the previous state.
Yehiel Cohen, one of the sellers, says that “after the sale of the lot, we paid 35% appreciation tax, along with expenses for lawyers, appraisers and consultants that we had to meet as part of dealings with the municipality. Now, in addition to all these expenses, it is asking for another 40% of the value of the lot As an improvement levy. We feel exploited and cheated by the municipality, which hurt us all along the way.”
The issue is now awaiting the decision of a decisive appraiser.
The Tel Aviv Municipality stated: “Contrary to what has been claimed, the plots are zoned residential and not road zoned. We would like to clarify that the improvement levy assessment was issued in accordance with the law, however the owners of the conference submitted a request for the appointment of a decisive appraiser, and the claims regarding the amount of the assessment will be clarified within this framework and in accordance with the law.”