Court Ruling on Urban Renewal Levies Continues to Shake Up Real Estate Sector
A court decision from over a year ago continues to significantly impact how betterment levies are calculated for "pinui binui" (demolition and reconstruction) urban renewal projects in Israel, leading to disputes over millions of shekels. Recent rulings by district appeal committees in Netanya and Ramat Gan highlight the potential discrepancies arising from the "Noa Lev ruling," while also showing the committees' efforts to assess the reasonableness of the calculated outcomes.
The original ruling was issued in June 2025 by Judge Gilad Has of the Tel Aviv Administrative Affairs Court. It stemmed from an appeal by the Tel Aviv-Jaffa Local Planning and Building Committee concerning Noa Lev, a homeowner in a "pinui binui" project who sold her apartment after the plan's approval. The court noted the decision's broad implications for calculating betterment levies in urban renewal projects.
The issue reached the Supreme Court via a request for leave to appeal filed by the Association of Contractors and Builders in Israel. However, the Supreme Court dismissed the request on procedural grounds, stating the association lacked the necessary standing. The court clarified that the "Noa Lev ruling" could be challenged in future cases where a developer or contractor is a direct party. Consequently, the administrative court's decision remains in effect, with its principles being further shaped by decisions from arbitrators and appeal committees, potentially involving millions of shekels per project.
The "Noa Lev ruling" introduced a significant change in how the impact of time is factored into the value of new rights. In "pinui binui" projects, where construction cannot commence immediately, a deduction is made to reflect the waiting period. The court determined this deduction should only apply to the value of the future construction rights, not the original land value.
Recent cases illustrate the ongoing complexities. In Netanya, a project involving the demolition of 65 apartments for 205 new units initially had an estimated betterment levy of approximately 9.6 million shekels. However, a subsequent arbitration determined the levy to be nearly 18.6 million shekels. An appeal committee partially accepted the developer's appeal, ruling that while the initial estimate isn't binding, significant deviations require explanation, thus intervening in the arbitration's outcome.
In Ramat Gan, a project replacing 24 old apartments with 72 new ones saw the local committee issue a levy of about 10.85 million shekels. The developer countered with an estimate of only 1 million shekels. An arbitrator set the levy at approximately 5.19 million shekels. The local committee appealed this, seeking an additional 1.5 million shekels, but the appeal committee rejected the request, upholding the arbitrator's decision. This resulted in a final levy significantly lower than the committee's initial demand.
Experts suggest these ongoing disputes, stemming from the "Noa Lev ruling," could slow down urban renewal, impacting homeowners in older buildings and potentially delaying much-needed housing supply. Legal professionals anticipate further challenges reaching the Supreme Court.
