Israel’s Central District appeals committee has ruled that the exemption from betterment levy for safe rooms also applies to combination real estate transactions, as long as the deal includes a clear and certain path to actual construction. The decision was issued by panel chair Attorney Dvir Segalovich, together with members appraiser Nava Sirkis and regional planning representative Gitta Verdi.
The case involved property owners in Petah Tikva who challenged a betterment tax assessment tied to the approval of development plans in the city’s “Academic Campus” complex. The land was bought in 1973 for agricultural use and later rezoned for commercial and residential development. After the zoning change, the owners signed an option agreement with a contractor for a combination deal, and when the option expired they signed a new agreement describing a sale and a construction-services arrangement. The contractor then received building permits for a 66-unit residential building and for a partially built residential and commercial building with 92 units, along with excavation and shoring permits.
The local committee had granted the safe-room exemption only for 20 percent of the requested apartments and denied it for the rest. The owners, represented by Attorney Tzvi Odom and legal expert Bracha Pfaufer of Herzog Fox & Neeman, argued that the project was being realized through building permits, not through a sale, so the exemption should cover all units. The local planning committee said existing case law limits the exemption to realization by building permit and not by sale, and that a combination agreement does not change that rule.
The appeals panel rejected that formal distinction. Segalovich wrote that the exemption’s purpose is to encourage the construction of protected rooms, and that complex projects should be judged by their substance and economic purpose, not by isolating each contractual step. He said the rule limiting the exemption to sales does not fit where the sale is intertwined with construction in one combined process. At the same time, the panel said the local committee may require a signed undertaking to build in order to prevent abuse of the exemption.
Lawyers said the ruling could save developers and landowners millions of shekels and may affect other complex real estate structures, including urban renewal deals. Odom called it a “dramatic milestone” for the industry and for civilian resilience.
