Monday, October 21, 2019

Ever since the founding of the state of Israel, the country has been in growth mode. Despite the seemingly endless construction nationwide—the joke is that Israel’s national bird is the “crane”—Israel has a shortage of over 100,000 apartments due to the country’s expanding population. Thankfully, a few years ago the Israeli government implemented new systems to expedite its antiquated rezoning and permitting process. Now that the accelerated program is up and running, the government has taken the next step and, on December 20, 2018, implemented new laws to combat illegal construction.

Background

For many years, Israel’s rezoning and development process was truly arduous, and builders would endure a lengthy bureaucratic process to obtain building permits. Because it was so challenging, homeowners who wanted to expand their homes—such as enclosing balconies—usually nixed the drawn-out application process and illegally added the space.

The government lacked the manpower to enforce the laws to curb this illegal activity and, in the few times that the government decided to sue the property owners, the lawsuits took years—sometimes even decades—to complete. Upon conclusion of the suit, the violator would only be penalized up to 15,000 NIS (under $4,000), a mere slap on the wrist. Understandably, it didn’t pay for the government to act, due to the length of litigation and paltry penalty sums.

The only issue that gave buyers pause was financing: The conservative banking industry limited mortgage amounts to the value of the property’s legal space, and the illegal space would not be attributed financial value. This constraint occasionally motivated owners to legalize the space, but the deep-pocketed purchasers who did not require financing were understandably less affected.

New Systems

Over the past few years, as the government has computerized the building-permit process, the building process has been moved online, and it now takes significantly less time to receive building permits. 

In addition, new regulations have been implemented to make enforcement easier. For example, the municipalities can bypass the court system to mete out penalties—to both the builder of the illegal space as well as the apartment owner—and the penalties are large: 1,400 NIS daily fine for up to 90 days, plus up to 300,000 NIS depending on the amount of space illegally constructed.

Takeaway

Before buying a home in Israel, you must do your homework to ensure that the property has no illegalities. Your attorney should retain the services of a zoning and building permits professional to review the building plans and permits, and confirm that the existing space is legal. If there are illegalities, you must ascertain whether they can be legalized, and their accompanying cost. If it cannot be legalized, then your attorney needs to determine how the illegality is expected to be perceived by the municipality: as an acceptable annoyance or as a major irregularity that is subject to a fine, and what the potential liability is.

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