In recent days, the Tel Aviv District Appeals Committee determined in a precedent-setting decision that in calculating the improvement levy on construction facilities as part of a long-term rental project, the value of land for rent should be based on less than the value of residential land for sale. .
This is a rental housing project initiated by the government company “Dira Lehashikir” in collaboration with the Israel Land Authority and the Holon Municipality in the Tel Giborim neighborhood of Holon, and Magorit won the tender for its construction. These are two plots with a total area of 2,450 square meters, where two residential towers with 42 apartments are to be built. As part of the tender for renting an apartment, as is customary in long-term rental tenders, 25% of the apartments are intended for long-term rental purposes at a regulated rent that is 20% lower than the market price and for a period of 20 years during which the developer will not be allowed to sell the apartments. Magorit applied for a building permit and increased the rights to build 54 apartments.
The decision of the Appeals Committee was given as part of a hearing on an appeal filed by Magorit in respect of an improvement assessment given by the Holon Local Committee and following a decision by a decisive appraiser given in its wake. The appraisal on behalf of Magorit was carried out by Paz Economics and Engineering, owned by Daniela Paz-Erez, and the company was represented on the appeals committee by attorney Dafna Tamir, a partner in the firm of Anat Biran.
The final appraiser expressly stated that the value of a square meter of a building limited by the terms of the lease (in this case limited to a long-term lease), is significantly lower than the value of a square meter built in the free market. At the same time, he also stated that for the purpose of calculating the improvement levy, the value of the ownership of the land will be according to the value of the residential land which is higher than the value of the land for rent. This decision was appealed by Magorit, arguing that the limitations facing the tenant – the obligation to designate the apartments for long-term rent – should not be taken into account and should not be compared to ordinary residential apartments sold on the free market. It was argued that the value of the land should be calculated according to the actual designation of the land (housing for rent).
The Appeals Committee accepted Magorit’s claims and held that the limitations on the lessee should be taken into account when determining the levy. The committee was based on a previous ruling according to which a situation in which theoretical values are attributed to the property in isolation from the unique conditions arising from their marketing (as part of rental tenders), and ignoring the committed discount (supervised rent, for 20 years), sinful for the purpose of improvement levy It was also determined that the limitations of the rental project are intertwined in the planning process and constituted a reason for approving the relief of the addition of the housing units and therefore should not be ignored when calculating the levy.
The Holon local committee requested that the hearing be returned to the final appraiser, but the appeals committee did not agree and determined that there was no defect in the appraiser’s decision regarding the value of the land determined, which requires the intervention of the appeals committee.
According to Daniela Paz-Erez, owner and CEO of Paz Economics and Engineering, “Neutralizing the obligation to designate the apartments for rent when calculating the levy, led to an unrealistic charge of the actual improvement. The developer builds the project for rent, while the charge for the improvement levy is in accordance with the project for sale, whose income is substantially high – and thus in fact the charge did not correctly reflect the entrepreneurial profit! We are pleased that the Appeals Committee has accepted our claims on the matter. “
According to Adv. Anat Biran, “This is a principled and important decision of the Appeals Committee, which explicitly states that an improvement improvement project cannot be demanded and the real purpose of the land and the project cannot be taken into account, especially if it is a government-initiated project. The long-term rental market is expected to develop in the coming years as a suitable alternative to living in owner-occupied apartments, and more and more projects like this will be implemented, hence the high importance of the Appeals Committee’s decision outlining the way for future cases.