The Marker, Adi Cohen, 05.07.2020

New thinking that is expected to take effect in the hundreds of thousands of shekels will soon take into account the cost of transferring ownership of large residential land in the center of the country - and will mainly affect land-linked buildings. The new consideration was revealed in an opinion sent last week by Deputy Attorney General Erez Kaminitz to the Chief Government Appraiser, Ohad Eini - on arranging the payment for land in transactions where lessees ask to transfer ownership of municipal land.

According to the opinion, the details of which are now first disclosed, the existing method of calculating land value in these transactions will be amended, from which the demand for payment to the Israel Lands Authority (RMI) is derived so that in the future the future improvement levy that the purchaser is expected to pay will not be deducted.

Until the publication of the opinion, a lessee who sought to acquire prime ownership rights in such transactions was required to pay 31% of the gap between the value of his leasehold rights - and the estimated value of the rights in the land, less 50% of their potential for improvement. The purpose is to "align" with private market transactions - where it is customary to offset the purchase levy if the buyer is required to realize the full potential of the land.

However, Kaminitz's new opinion shows that the deduction of the levy from the land valuation has so far created a 'double benefit' situation for lessees - who in any case pay a reduced price for ownership rights in these transactions. "In fact, one of the reasons for determining a reduced rate of 31% of the value of the transferred rights lies in the fact that it also takes into account the payment of the improvement levy by the lessee expected to be paid by the lessee with an event of redemption. In the ownership deal, ”Kaminitz wrote.

These deals primarily concern landlords holding land-linked land on large plots in the center of the country, but are also expected to affect tenants holding employment and industrial complexes in the center of the country - where the gap may be millions of shekels per transaction.

For example, if in a plot of 1.1 dunam in Herzliya, where there are rights to a single unit of land adjacent to an estimated value of NIS 5 million, the lessee can build five additional housing units on three floors (total of six apartments) in the future. , The new value of the lot will be NIS 11 million, and in such a situation, the surcharge that the lessee is required to fulfill his rights will be approximately NIS 3 million (50% of the value of the improvement).

According to the previous method, if the lessee wanted to transfer the rights on the lot to his ownership - he would have to pay 31% of the gap between the existing rights (about NIS 5 million) and the potential for improvement - less the expected levy (NIS 8 million). That is, the payment requirement of 31% was derived from the sum of only NIS 3 million - about NIS 1 million. According to the new calculation, the same lessee will now be required to pay 31% of the gap between existing rights (NIS 5 million) and the full potential for improvement (NIS 11 million) - ie from a gap of NIS 6 million - and the payment will be about NIS 2 million.

A dispute between the Chief of Staff and the Chief Appraiser

In formulating the Israel Land Authority reform in 2013, RPM is working to encourage the acquisition of ownership of state landlords - to reduce the existing friction between RPM and lessees, streamline the authority's work, and stimulate economic activity in the economy. Now, in light of the increase that is expected to take effect on these deals - the viability of private lessees to acquire state ownership rights in the center of the country - will be significantly reduced.

Kaminitz published the opinion in light of an ongoing dispute between the Israel Lands Authority and the chief government appraiser, Eini, which in recent months has brought a complete halt to all ownership purchases. Sources at the PM who we spoke to testified that, until the publication of the opinion, the method of calculation that calculated the improvement levy calculated the value of the transactions was impaired, according to estimates, tens of millions of shekels from the PA.

Real estate appraiser Danny Trashansky, of Camille-Trashansky Raphael's office, says the situation will have a significant impact on the market. "The current opinion may undermine the viability of state land acquisition for the development of land-linked housing units across the country," he said. "Eliminating the improvement levy from future plans and calculating the value of the land in a comprehensive way will actually incur significant monetary costs to the purchaser already at the time of purchase, when it will later be required to pay an additional improvement levy to the local authority when the plans are realized. %, Between the previous calculation method and the current calculation method. "

Tershansky criticizes the new decision, saying that "this is a collection of funds for the potential for additional rights that may be approved and may never be. It is precisely on such days when the principal's burden of certainty is burdensome and creates double taxation or collection for a component that may or may not be exercised at all."

The change will affect industrial complexes

Experts in the industry explain that apart from land-linked plots, the change in the existing method will also affect industrial and employment complexes in the center of the country, where most of the potential for improvement lies, along with the possibility of zoning changes that improve the value of the land. As for industrial, employment and commercial complexes - where the scope of rights and the potential for improvement is far greater - ownership transfer transactions are expected to increase in millions and even tens of millions of shekels.

High-tech complex in Herzliya. Changing the existing method will also affect industrial and employment complexes in the center of the country

Photo: Tomer Applebaum

Sources at the Chief of Staff said that the subdivision of the Judea and Samaria Council, on the one hand, would facilitate the transfer of ownership transfers in accordance with the policy of the Israel Lands Council. On the other hand, no double discount will be given at the expense of the public fund.

According to them, Israeli land policy on the issue of transfer of ownership states that only 31%, and not 91%, should be charged for the gap between the original contractual right of the leasehold land and its future contractual right, following a change of designation. This reduced rate is set to encourage transfer of ownership and there is no economic justification for offsetting this improvement over the levy and giving lessees additional benefit over the one they have already received.