The amazing maze of Israeli property – part 2

A guide for understanding the differences between the Israel Land Registry, Israel Lands Administration.

By HAIM KATZ, SAM KATZ
telaviv_1 370 (photo credit: SHMUEL BAR-AM)
telaviv_1 370
(photo credit: SHMUEL BAR-AM)
In our previous column, we started navigating the maze of property ownership in Israel. We discussed the Tabo, the Israel Land Registry, which is the government database for property rights in Israel. We also mentioned the Minhal (Israel Lands Administration), the governmental body that manages all of the land owned by the State of Israel, which consists of over 90 percent of the country’s land. The land owned by the state, which is most of the country, is officially termed “Israel Lands” and often called “Minhal property.”
The need for the Minhal stems from the Basic Law: Israel Lands, which declares that all state-owned lands will remain such and will not be sold or given to others.
Therefore, a mechanism was set up by which the State of Israel (via the Minhal) leases its land for long-term periods (usually for a period of 49 or 99 years).
The result is that today, most “homeowners” in Israel don’t actually own their home outright, but rather they lease it long-term. At the end of the lease period, the lease contract must be renewed. This is done by filing a request to renew with the Minhal. The complexity, cost and duration of the renewal process can vary, depending on the type of property owned, as well as the nature of the lease terms.
Long-term leasing feels like ownership (and it is a lot like ownership). However, there are various fees to be paid to the Minhal in such types of transactions, including lease fees, permission fees for transfer of the property rights to another and permit fees for additional construction. Navigating these correctly can save a lot of money. For this reason, an apartment that is privately owned and registered in the Tabo will be more highly valued than a similar apartment registered with the Minhal.
When purchasing a “Minhal property,” one must register his or her leasing rights both in the Tabo (if possible) and in the Minhal. The Tabo registration will record the lessee’s (the buyer’s) name and I.D. or passport number, as well as the length of the lease term. Sometimes, upon a purchase it could be worthwhile to capitalize the lease fees. This is called hivun in Hebrew, and it means the lease fees have been paid in full for the entire lease term and/or that the Minhal’s permission is not needed for transactions on that particular property. Very often you can negotiate with the Minhal and pay off the hivun for a lot less than the fees you would pay over the ensuing terms of the lease.
Over the years, the Minhal has begun to attract more and more public criticism due to the increasing bureaucracy, the heavy costs levied on the buyers and sellers and the difficulty and uncertainty one has had to face when trying to navigate through the Minhal’s requirements. As a result, a reform of the Minhal is under way in an effort to remove red tape and cut costs for homeowners.
This reform began in 2009, but it is taking an inordinate amount of time. As part of the reform, ownership of 800,000 homes would be transferred to their private “owners” (who until now were leasing their homes from the state), and the long-term leases on these properties would be voided. The ownership property rights would be registered directly in the Tabo, under the names of the individual homeowners.
So far, approximately 200,000 homes have completed the process. At this rate another decade will pass before we can see a real difference.
Another significant part of the reform in progress is a complete bureaucratic overhaul of the Minhal, transforming it into a more efficient and user-friendly system to be called The Israel Lands Authority – not a very big change from the current Israel Lands Administration. So, what’s in a name? Not much really, and the differences on the ground are not yet so significant.
One welcome step toward greater clarity and certainty was recently announced by the Minhal. A new codex, or compilation of regulations, has been created that summarizes and organizes all decisions given by the Israel Land Council (a council authorized to make decisions regarding Minhal property). The new codex is organized by topic (with chapters and subchapters). The creators of the codex aimed not only to collect the decisions given over the years, but also to make them available to the public, rewrite any unclear decisions and regulations and resolve any contradicting decisions. The codex was launched via the Minhal’s website about two months ago and is currently in a trial run.
There is still much to be done, and the reform is far from being complete. However, it is a major step in the right direction.
In this series we are attempting to provide readers with a basic understanding of the Israeli structure for property ownership. Indeed, the road to owning property in Israel can be fraught with various legal pitfalls. That said, when navigating the maze with the guidance of professional experts, you will likely emerge from the maze unscathed, as well as the proud owner of your own share in the Land of Israel.
In upcoming columns we will look at the difference between land held by the Keren Kayemeth LeIsrael-Jewish National Fund (KKL-JNF), the Minhal and the vaguely named Development Authority (Reshut Hapituach). Who are these organizations and bodies? Are they governmental or private? Do they owe you a legal duty, or do they work to maximize their income? How do they impact upon your ownership and thus the value of your property purchase? We will also look at the standing of real estate leased on church land. Some of these leases are close to running out.
If you are a leaseholder in one of these, should you be worried? Hopefully all we be made clear in subsequent columns.
This column is meant to provide general information and is not to be seen as legal advice. We highly recommend you consult a lawyer before engaging in any real-estate transactions.
israelaw@netvision.net.il Dr. Haim Katz is a senior partner in a law firm with offices in Tel Aviv and Jerusalem that specializes in real estate, international trusts and family, inheritance and corporate law. Sam Katz is a jurist who lives in Jerusalem.