Ramat Gan Imposes Substantial Betterment Tax on Sale of Old Apartments

Homeowners in Ramat Gan selling older apartments may face unexpectedly high betterment tax charges due to a new municipal plan enacted in January 2026. This plan legally formalizes previously granted building rights as statutory entitlements, enabling the city to levy a betterment tax even when properties are sold in their current condition without any construction permits requested. Several sellers have already been charged this tax and have appealed, with outcomes potentially influencing other municipalities.

The betterment tax typically amounts to 50% of the property value increase attributed to approved plans or zoning relaxations. For example, if a property’s value rises by 400,000 shekels due to the plan, the tax could reach 200,000 shekels plus statutory adjustments. This represents a significant cost for sellers. The reform follows a nationwide shift from flexible local building relaxations to detailed statutory plans, aiming to reduce licensing delays and disputes.

Ramat Gan’s approach anchors certain previously informal building rights into its official plan, creating planning certainty but also triggering betterment tax liabilities upon sale. Controversy arises because owners may be taxed on rights not yet exercised or dependent on complex conditions such as co-owner consent or economic feasibility. The valuation of these rights versus market value will be central in upcoming legal challenges.

This development coincides with a Supreme Court ruling limiting betterment tax claims where prior urban renewal programs have already increased property values, as seen in the "Leviathan" case. Despite this, there is concern other cities might adopt similar measures to secure betterment tax revenues, a key funding source for public infrastructure.

Sellers in Ramat Gan are advised to verify applicable plans and obtain professional appraisals to assess potential tax liabilities. Appeals against tax assessments must be filed within 45 days of notification. The situation remains under legal and administrative review, with broader implications for urban property transactions across Israel.