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Betterment Levy When Selling an Apartment in Israel: Who Pays

Betterment levy on selling an apartment in Israel: half the value gain from a plan. Who owes it, when it is paid, and how to contest it within 45 days.

By Adv. Kobi Bell11 min readPlanning and Building

The betterment levy when selling an apartment in Israel is imposed on the holder of the rights in the apartment, so in most cases the seller pays it, no later than the date of sale, if during the seller's ownership a plan was approved, a relief was granted, or a nonconforming use was permitted that raised the value of the property. The levy is half of the increase in value; the betterment is appraised as of the date the plan was approved and payment is collected only when the rights are realized, and the sale contract may divide the burden between the parties differently.

Over the past week the levy made headlines from two directions. On November 9, 2026, Adv. Benny Arbiv, chair of the National Council for Planning and Building, said at a conference held by Merkaz HaNadlan that "the state of betterment levies is chaos," and called for a radical amendment proposal to be placed before the next government, although he does not support abolishing the levy. Three days later the same site reported on a decisive appraiser who reduced the levy that a local committee had demanded on a villa in Arsuf, from about NIS 1.38 million to NIS 774,000 before linkage differentials. Between the reform under discussion and the assessment that arrives in the mail stands the person selling an apartment now, and the law that applies to that person is the existing law.

What Turns an Increase in Value into Betterment

The Third Schedule to the Planning and Building Law, 5725-1965, defines betterment narrowly:

"an increase in the value of land as a result of the approval of a plan, the grant of a relief, or the permission of a nonconforming use"

A general rise in apartment prices is not betterment. The liability arises only from a specific planning act: a plan that adds building rights, a relief (hakala) that the local committee granted for the building, or a permit for a use that the plan did not allow (shimush chorg, nonconforming use). Section 2(a) of the Schedule provides that where betterment occurs, "its owner shall pay a betterment levy," and according to the State Comptroller's report on the betterment levy from 2024, the rate is half of the betterment. The betterment itself is appraised as of the date the enhancing plan was approved, but payment is deferred until the rights are realized. An apartment can therefore carry a dormant liability for years, until the day of sale arrives. Readers unfamiliar with terms such as relief, nonconforming use and decisive appraiser will find them in the glossary.

From a public perspective as well, this is a great deal of money. According to the same report, local authorities collected about NIS 8.7 billion in betterment levies in 2021, about NIS 2.6 billion of it under an arrangement with the Israel Land Authority. The levy funds urban development, and the first assessment is made by an appraiser acting for the local committee, that is, by the side doing the collecting.

When the Levy Is Paid: Realization of Rights

The law does not collect the levy on the day the plan is approved but on the day of "realization of rights" (mimush zchuyot). The definition in section 1(a) of the Schedule lists three situations: receiving a permit for construction or use that could not have been granted without the plan; actually beginning a use as first permitted following the plan; and transferring the land or a long-term lease in it, in whole or in part, or granting rights in it. A sale is the clearest case of realization, and the sale of part of an apartment also falls within the definition.

Some transfers are excluded from the definition, among them a transfer by operation of law and a transfer without consideration to a relative, as the Supreme Court noted in a judgment given in March of this year. In these cases the liability is not erased; it waits for the next realization. On the other hand, even a transaction that looks like a family matter may be treated as a transfer for consideration. In February, the Tel Aviv Magistrates' Court held a brother and sister liable for a levy of about NIS 130,000, including linkage and interest, after they divided two apartments they had received from their father so that each transferred to the other his or her share in one apartment. No money changed hands, but each transfer was given in exchange for the other, and the court saw this as a barter transaction.

In practice, a sale cannot be completed without settling the levy. As the Merkaz HaNadlan guide explains, no action involving a realization of rights can be carried out in the land registry while the levy has not been paid, so the buyer and the buyer's attorney will require the local committee's approval before ownership is registered in the Tabu (land registry). Deferring payment does not pay off either, because from the date on which the levy should have been paid it carries linkage and interest. The levy is separate from the tax paid to the Tax Authority on the profit from the sale, and both can apply to the same transaction; the calculation of that tax and its exemptions are explained on the Land Appreciation Tax page.

Who Pays the Betterment Levy When Selling an Apartment: Seller, Buyer and Contract

The law places the liability on the owner of the land, and where the land is leased for the long term, on the lessee. In an ordinary sale this means that the seller bears the levy on betterment created while the apartment was in the seller's ownership: the plan was approved when the property belonged to the seller, and the sale is the moment the dormant liability awakens. A plan approved after the buyer becomes the owner will bind the buyer when the buyer's turn to realize comes.

The sale contract may provide otherwise, and it should do so expressly. The hard case is a plan that has gone part of the way by the signing date but has not yet been approved. Suppose the owner of an apartment in an older building signs a sale contract while the district committee is considering a plan that adds building rights to the entire street, and the plan is approved two months later, before ownership is registered in the buyer's name. Who will pay? If the contract is silent, the parties will argue about an intention that no one put in writing. A clause providing that the levy for plans approved up to the signing date falls on the seller, and that the levy for any later plan falls on the buyer, prevents a dispute that could reach large sums.

Another question arises in buildings covered by TAMA 38 (National Outline Plan 38). According to a report in ynet, in July 2026, the Supreme Court denied requests for a further hearing filed by two local committees and left in place a rule from October 2025: betterment originating in TAMA 38, where no building permit was issued under it, is not included in the levy collected on a sale. Anyone who receives an assessment for an apartment in such a building should check that the appraiser did not build into it rights that none of the owners ever realized.

Knowing the Amount Before Signing

A seller does not have to wait for the local committee to make contact. The owner of the land may demand an assessment, and according to the State Comptroller's report, an assessment requested by the owner must be prepared within 90 days, as provided in section 4(4)(a) of the Schedule. A seller who plans to sell and knows that plans have been approved or reliefs granted in the area in recent years gains by filing the demand before pricing the apartment and before committing in a contract to a delivery date. The assessment then turns from an unknown into a visible component of the negotiation, and there is time left to contest it without the buyer waiting for registration. For an initial order of magnitude, the betterment levy calculator (in Hebrew) can help; it does not replace an assessment, but it illustrates how much the levy may take out of the net proceeds.

The buyer also has reason to look into these matters before signing. A buyer whom the contract does not protect may find that a plan approved close to the date of the transaction has been rolled onto the buyer's doorstep, or that a plan approved after the buyer is registered as owner will bind the buyer on the day the buyer wishes to expand the apartment or sell it. For this reason the buyer's attorney checks with the local committee which plans apply to the property and which are in the approval process, makes sure that the seller presents the committee's approval before the balance of the price is transferred, and anchors the division of the burden in clear language. This check is far shorter than the dispute that may arise without it.

When the Assessment Is Too High: Decisive Appraiser, Appeals Committee and 45 Days

A betterment levy assessment is the opinion of an appraiser acting for the local committee, not a judgment. The Third Schedule distinguishes between two kinds of dispute. When the argument is about value, that is, about the amount, one asks the chair of the Real Estate Appraisers Council to appoint a decisive appraiser (shamai machria), and that appraiser's decision can be appealed to the Appeals Committee for Compensation and Betterment Levy. When the argument is legal, for example whether betterment arose at all, whether the transaction is a realization, or whether an exemption applies, one files an appeal with the appeals committee. Decisions of the appeals committee can be appealed to the Court for Administrative Affairs. The deadline for action is 45 days from receipt of the assessment, as detailed in the guide to betterment levy assessments, and a missed deadline closes doors that are hard to reopen.

The Arsuf case illustrates how wide the gap can be. The committee's appraiser assessed the betterment at about NIS 2.76 million, the owners' appraiser at about NIS 421,000, and the decisive appraiser set it at about NIS 1.55 million. Among other things, the decisive appraiser accepted the argument that rights approved as early as 2017 and not yet used were part of the value before the plan, and so were not new betterment. The decision cut the demand by about 44%, and still left the owners liable for far more than their own appraiser had proposed. The lesson follows: contesting an assessment is not a fight for zero but a component-by-component review of the comparable transactions, the prior planning situation, and the rights that existed before the plan.

The national picture shows that these disputes are not marginal. According to the State Comptroller's report, 15,287 appeals were filed with the district appeals committees from 2018 through 2022, and 6,991 of them, 46%, concerned betterment levy assessments. In the appeals reviewed, the average handling time was 429 days. A seller who discovers the assessment on the eve of signing may end up conducting a long dispute while the buyer waits for registration. A seller who is already in a dispute can ask the local committee for a security arrangement, so that registration is not held up until the decision, and the terms are set with the committee.

Residential Exemption: 140 Square Meters and Four Years

The most familiar exemption for apartment owners is in section 19(c) of the Schedule. Under paragraph (1), construction or expansion of a residential apartment is not treated as a realization of rights where the holder or a relative applied for a permit for construction that will serve as their residence, provided that the total area of the apartment after construction does not exceed 140 square meters; for construction beyond that, a levy is paid in proportion. Under paragraph (2), a transfer of ownership of such an apartment is also not a realization if the apartment was used as a residence from completion of construction until the sale for at least four years.

The Supreme Court explained in March 2026, in LAA 3720/22, that the exemption operates in two stages: first, payment is deferred until the next realization, and only after four years of residence does the deferral become a full exemption. The meaning for a seller is clear. An owner who expanded the apartment and sells it before four years have passed from completion of construction may find that the deferred liability awakens on the day of sale. The same judgment also held that a person who holds only part of an apartment can receive an exemption in proportion to that share, as long as the rights remained in that person's hands. The Schedule lists other exemptions, and each is examined according to its own conditions.

An Apartment in a Building Slated for Pinui Binui

Anyone selling or buying an apartment in a building slated for pinui binui (evacuation and reconstruction) should take into account a change that is approaching. According to a report in Merkaz HaNadlan on November 1, 2026, the Government Authority for Urban Renewal informed local authorities that they must set, by May 1, 2027, the levy rate in pinui binui projects: a full exemption, 25% or 50%. In an authority that does not decide, a uniform rate of 25% will apply to plans submitted from that date. The rate that is set will affect the feasibility of projects, and therefore also the value of apartments in such buildings, even before an agreement with a developer is signed.

The Debate over the Levy's Future, and What It Means for Those Selling Now

Arbiv's remarks were made on a panel devoted to the question of where the betterment levy mechanism is headed, and they reflect a broad sentiment in the industry: the levy, intended to return to the public half of the increase in value created by planning, has become a focal point of protracted disputes. On the same panel it was said that disputes over the levy can delay a project by seven to eight years. Arbiv suggested examining a calculation mechanism that does not rest on comparing the value of the land before and after approval of the plan, but made clear that he is not involved in any concrete proposal.

As long as the Knesset has not changed the Third Schedule, assessments are prepared under the existing rules, and the deadlines for contesting them run as usual. A person selling an apartment in the coming months cannot count on a reform that has not yet been drafted. That person can, however, demand an assessment early, review it thoroughly, and draft a contract that divides the risk clearly.

Every assessment rests on a specific plan, on comparable transactions and on a prior planning situation, and all of them can be checked. A seller who has received an assessment, or who wants to estimate the liability before signing, can contact the firm for a review of the specific case in the area of planning and building and betterment levy: whether there is a liability, on whom it falls under the contract, and whether there is a point in contesting the amount and by which route. The firm represents clients throughout Israel.

Questions and answers

Who pays the betterment levy when an apartment is sold in Israel, the seller or the buyer?

Under the Third Schedule to the Planning and Building Law, the liability rests on the owner of the land, and where the land is leased for the long term, on the lessee. In a sale, therefore, the seller bears the levy on betterment created during the seller's ownership. The sale contract can set a different division, and it should state expressly who pays for plans approved up to the signing date and who pays for plans approved afterward.

When is the betterment levy paid?

The betterment is appraised as of the date the plan, relief or nonconforming use was approved, but the levy is paid only upon realization of rights: receiving a permit that could not have been granted without the plan, beginning a use permitted as a result of it, or transferring rights in the property, including a sale. A transfer by operation of law and a transfer without consideration to a relative are not treated as a realization, and the liability waits for the next realization.

Can a sale be registered in the land registry without paying the betterment levy?

No action involving a realization of rights can be registered in the land registry while the levy has not been paid or settled. When the assessment is disputed, the owner can ask the local committee for a security arrangement so that registration is not held up until the decision. The terms are set with the committee, so it is wise to approach it as early as possible.

How much time is there to contest a betterment levy assessment?

The deadline for action is 45 days from receipt of the assessment. In a dispute over the amount, one asks for the appointment of a decisive appraiser, and the appraiser's decision can be appealed to the Appeals Committee for Compensation and Betterment Levy. In a legal dispute, for example whether an exemption applies or whether the transaction is a realization at all, one files an appeal with the appeals committee.

Can I find out the amount of the levy before signing the sale contract?

Yes. The owner of the land may demand an assessment from the local committee, and according to the State Comptroller's 2024 report, such an assessment must be prepared within 90 days. A demand filed before the apartment is priced allows the levy to be included in the negotiation and the assessment to be contested without delaying the transaction.

What is the difference between the betterment levy and the Land Appreciation Tax?

The betterment levy is paid to the local planning and building committee, and it is half of the increase in value created by a plan, a relief or a nonconforming use. The Land Appreciation Tax (mas shevach) is paid to the Tax Authority on the profit from the sale. These are two separate liabilities, and both can apply to the same sale.

Sources

This article provides general information and is not a substitute for legal advice on your specific matter. More on Planning and Betterment Levy · Contact the firm

First published in Hebrew. Read the Hebrew original

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