Commercial Property Dispute: Court Rules on Land Use Fees in Netanya

A commercial complex in Netanya's Poleg industrial zone, adjacent to an IKEA store, which houses businesses including a Tiv Ta'am supermarket, fashion store, Arcafe, and Max Stock, has been the subject of a legal battle over land use. The Israel Land Authority (ILA) demanded 53 million shekels in usage fees from the lessees, arguing that the commercial activity violated the original lease agreement intended for industrial purposes. The lessees, who acquired the lease rights and subsequently sold half to Migdal Group, had sought to register the transactions. However, the ILA refused, claiming the commercial use was a breach of contract. The companies sued to enforce the registration, leading the ILA to file a counterclaim for usage fees and to halt commercial operations.

Central District Court Vice President Hana Kitzis ruled that the companies would receive the registration but must pay for the commercial use. The court accepted the ILA's argument that the term "commercial establishment" in the original lease was a technical error from a standard contract and that the agreed-upon purpose was solely industrial, according to the prevailing plan at the time. Therefore, the companies did not have an acquired right to use the land commercially without additional payments.

However, the judge also found that the ILA was aware of the commercial activity from early on. An ILA inspector reported a supermarket, and internal memos indicated knowledge of the commercial nature of the spaces. The court stated that the ILA's actions, including signing mortgage deeds and sublease agreements without raising the issue of usage fees, constituted "actual knowledge" and that the authority was estopped from demanding payment as a condition for registration. The court rejected the demand to cease commercial activity, ruling that the ILA could only require a tripartite agreement according to its rules.

The court dismissed the claim against Arad HaGalil Investments, as it had sold its share and no income from the property during the disputed period was proven. The ILA was ordered to pay Arad HaGalil 40,000 shekels in expenses. The dispute over the amount of usage fees will continue against Ephraim Rogovin and the Migdal companies. The ILA's appraiser estimated the fees at approximately 46.9 million shekels over seven years, while the companies' appraiser valued them at only 2.4 million shekels. The judge found both valuations inadequate and appointed appraiser Ehud Danus as a court-appointed expert to determine the appropriate amount, with costs to be shared equally.