Israel Land Authority Fined Over $600,000 for Construction Permit Delays

A decade-long dispute over a construction permit has concluded with a Haifa court ordering the Israel Land Authority (ILA) to pay over 2.3 million shekels (approximately $615,000) in damages. The court found the ILA acted with "sluggishness, complacency, and indifference" towards the plaintiff, D.A. Afek (Health Products), a long-term lessee of land in Haifa.

D.A. Afek initiated a change in the property's zoning from residential and office to commercial and office in 2014, paying 1.86 million shekels in betterment levies. The plan was approved in 2016, and the company began seeking a building permit from the Haifa Municipality in 2017. However, the permit required the ILA's signature as the landowner, a process that took years.

Starting in 2018, D.A. Afek submitted multiple requests to the ILA, receiving inconsistent and vague demands. The ILA's representatives requested various documents and original signatures, without clear explanations for what was missing. In 2019, the company signed an agreement to sell the property for 11.7 million shekels plus VAT, with a clause stipulating a 2 million shekel reduction plus VAT if the permit wasn't obtained within 24 months. The permit was not secured in time, and the price was reduced accordingly in 2021.

The turning point came with the testimony of an ILA expert, architect Victor Pilersky, who stated he could have prepared his crucial assessment in January 2021, indicating the ILA possessed the necessary data years earlier. The court also noted the ILA's failure to present key decision-makers for testimony, which worked against them. The judge ruled that the ILA could not claim privilege over settlement negotiations while using related documents as evidence against the company.

Despite the ILA's significant fault, the court assigned 25% of the blame to D.A. Afek for setting an unrealistic 24-month deadline for the permit, given the ongoing delays, and for not actively pursuing the matter for six months. Ultimately, the ILA was ordered to pay D.A. Afek 2,338,000 shekels, representing 75% of the contractual compensation reduction, plus interest, court costs, and attorney fees. The ILA was also ordered to sign documents transferring the leasehold rights for a specific sub-parcel, the transfer of which had been delayed for years.