The Unique Nature of Land Purchases in Israel

Post date: Aug 13, 2015 6:34:2 PM

The Unique Nature of Land Purchases in Israel

The Israel Land Administration, or as it now called the Israel Land Authority, has possession of most of Israel's lands. In fact, it controls over 92% of them.

Other entities, for example the Jewish National Fund (JNF-KKL), municipalities, and public housing companies such as Amidar, also own lands in Israel, received from the state for purposes of construction and housing. In addition, some lands are privately owned and were acquired long ago, whether through possession of a house built on the land or even by possession of agricultural land. Such private lands are found mainly in the older cities such as Tel Aviv-Jaffa, Jerusalem, and Haifa, and in the Sharon region. This situation, where most of the lands belong to the state, including unarable rocky tracts, sand dunes, and urban lots or agricultural plots, is unique to Israel and has historical antecedents. In the 19th and early 20th centuries, Jewish benefactors bought land from local residents and settled Jews on these plots. In time the lands reverted to the state when their registration was first recorded and after the War of 1948, once the state was established.

After another war in 1967, the Six Day War, the Israel Lands Administration experienced a change. The occupation of the West Bank, the Golan Heights, and areas around Jerusalem added to the state's holdings a tremendous amount of dunams, expanding the land owned.

How does the Israel Lands Authority sell its property?

Land ownership by the state seems to have no meaning, but this ownership has proved to be the source of exceptional bureaucratic complications and in many cases has also delayed operations necessary for the purpose of advancing construction and developing the land. The main cause of these bureaucratic complications is the special manner in which the land is sold to developers and/or private owners.

Thus, it is evident that the lessee does not become the owner of the land despite acquiring lease rights from the state. The state's ownership of the land may be reduced by capitalization of the lease.

What is capitalization?

Capitalization is a mathematical formula that calculates the monthly lease fee for the lease period in terms of immediate payment. Notably, capitalization does not award the lessee full ownership of the property, rather only of 91% of its value. 9% still belongs to the state.

Some claim that in this way, when the state retains 9% of the ownership it is protecting itself from the sale of state lands to foreign nationals.

Whatever the reason, since the state leases the land for a set time, at the end of this period the partial owners lose their possession of the land. When renewing the lease it will usually be necessary to reassess the land. If its value has increased the lessees will have to pay the balance of their purchase rights in order to renew the lease. If they do not pay or do not renew the lease they lose possession of the land.

In conclusion, despite all the above Israel has a lively trade in land and construction is among the most extensive in the world. The Israel Lands Administration, or the Israel Lands Authority, is subject to strict regulations and the state's ownership of at least 9% of the land does not play a significant role when closing deals. Land and plots change hands, banks provide mortgages, and the Land Registration Offices keep very accurate records.

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This article was written by Mr. Avi Sidi, RE/MAX Israel