"A real estate assessment, as its name implies, is an assessment and not a theory. A real estate appraisal is a professional description of facts concerning the behavior of individuals and institutions that sell, buy, rent and rent properties in the real estate market. This description focuses on a real exchange and a real willingness – not normative, not hypothetical or theoretical – of a buyer or tenant to pay a certain amount of money for a purchase [...] of a real estate asset at the given time. Such a description is based on the economic principle of 'talking money'" (see: Civil Appeal 8717/17 State of Israel Israel Israel Land Authority v. Estate of the late Ismail Muhammad Ismail Ahmad, paragraph 32 of the [Nevo] judgment (July 23, 2019)); Emphasis added – A.S.).
- In her arguments, the Attorney General noted that her position that the contribution of TAMA 38 to the value of specific real estate should not be neutralized does not prevent taking into account the contribution of TAMA to price increases in the real estate market as a whole. In view of the conclusion I have reached, I do not see the need to make this distinction.
- The appellants also claimed the existence of a practical appraiser-difficulty in assessing the value of conditional rights by virtue of TAMA 38. As for myself, I do not see this as a great difficulty given the fact that the accepted method of valuation is the method of comparison through similar transactions, the price of which in any case embodies the value of these conditional rights. In any event, this appraiser is not able to change the result required by law, since "the assessment follows the law. The normative principles must be determined by the court, and from this the calculation will be derived" (see: The Deli Dalia case, paragraph 4 of the judgment of Justice Vogelman; emphasis added – A.S.).
The Lusternik Matter
- Another judgment to which the parties referred at length was the judgment in the Lusternik In the Lusternik case, the "neutralization rule" was established, according to which from the totality of the objective data that affect the market value of the real estate "in the previous state", the increase in value caused by the yen of expectations for the approval of the betterment plan for which the levy was collected must be excluded (see also: Femini case, at paragraph 8; Civil Appeal 8736/04 Cohen v. Ra'anana Local Planning and Building Committee, para. 4 [Nevo] (January 24, 2006)). As stated, Justice Levy distinguished between a general expectation of a planning change (for example, an expectation that derives from the potential inherent in the type or location of the property) and a specific expectation for the approval of a certain plan – which must be neutralized from the value of the land "in the previous state".
- Justice Levy explained his conclusion that the specific expectation should be neutralized as follows:
"By their nature, many of the planning stages are exhausting, and therefore they take a considerable amount of time. This fact causes the knowledge of the existence of the planning procedures to become common to many, and as a result, there is an expectation and even a willingness to invest among those interested in it, and from here to the increase in land prices, the road is short. The approval of the plan, which makes the expectation a reality, causes a further increase in the value of the land, although it seems that the bulk of the increase occurred already in the stages of anticipation of the plan's approval. From this it is clear that if, for the purpose of assessing the value of the land prior to the approval of the plan, the same price increase caused by the betterment plan and the proceedings that were involved therein is taken into account, it will disappear as if not all the appreciation expected from this plan existed, and thus the purpose for which the betterment levy was intended will be completely thwarted" (see: Lusternik, at p. 537).
- In our case, it was argued that the neutralization rule established in the Lusternik case should be applied to any expectation that derives from a regulatory planning action, and not only to a planning expectation that relates to the concrete betterment plan as it is a "maturing" plan. I am of the opinion that the attempt to learn an equal decree from Lusternnik for our purposes is doomed to The rationale underlying the rule of neutralization is the close connection between those specific expectations that must be neutralized and the betterment plan, in terms of expectation and its realization. On the other hand, expectations that arise as a result of TAMA 38 are more similar in essence to the general expectation of a planning change, which, according to the Lusternik rule, should not be neutralized.
Thwarting the purpose of the levy – is it true?
- Towards the end, I would like to briefly address the concern expressed by the appellants and the consultant that the implementation of the inclusion approach may lead to the thwarting of the purpose of the levy and harm to the public coffers due to the complete overlap between the "previous situation" (which includes the increase in value that has already arisen following the approval of TAMA 38) and the "new situation" (after the approval of the other plan). This is a situation in which the other plan did indeed improve the land in relation to its original condition (prior to the application of TAMA 38), but its value did not increase in relation to their situation after the application of TAMA 38 (this is the case that occurred in the Kalmanovich case, the subject of the application for leave to appeal in this case). In such a case, according to the inclusion approach, a betterment levy will not be collected and the expenses of the local committee that worked on the preparation of the other plan will not be returned to its coffers.
- Indeed, the importance of the purpose underlying the collection of betterment levy should not be underestimated. However, this purpose, as important as it may be, should not be realized at any cost, and certainly the limits of the law should not be exceeded for this purpose. When the local planning body acts and invests resources in approving a plan, but, unfortunately, its efforts do not bear fruit and do not improve the taxpayer's property (beyond the betterment that has already arisen for him by virtue of the conditional rights under TAMA 38) – the local committee should not be entitled to the levy. On the contrary, it appears that the collection of betterment levy on betterment that arose in a causal connection with TAMA 38 is the one that does not fit the purpose of the levy, since the approval of a national outline plan does not involve the investment of resources by the local committee, but rather by the central government, which for its own reasons chose not to charge the levy for it.
- With regard to the purpose underlying the collection of betterment levy, it was stated that "the local committee gave – the local committee will take" (see: additional discussion of the citizens of Beit HaKerem, at paragraph 63). In accordance with the same principle, they said from now on: The local committee did not give - the local committee will not take.
From the general to the individual
- The plans that are the subject of our discussion – the Quarter 3 plan (the Leviathan case) and the 9988 plan (the Kalmanovich case) – are detailed plans, and therefore they fall within the scope of the planning actions listed in section 1(a) of the addendum, which may establish a betterment levy charge. In addition, these plans grant granted rights (Quarter 3) and quasi-granted rights (Plan 9988). In order to complete the formulation of the betterment levy charge, the element of enrichment must be examined in relation to each of the plans, on the basis of a comparison between the "previous situation" and the "new situation", while isolating the betterment that arose in a direct causal connection to the said plans, and where the assessment of the "previous situation" should include the contribution of TAMA 38 to the value of the land, if any.
- This method of calculation is what guided the district courts: the Tel Aviv-Jaffa District Court in the Levitan case instructed the consulting appraiser to conduct the assessment, inter alia, in accordance with the aforesaid; and the Jerusalem District Court in the Kalmanovich case found that given the aforesaid – when the contribution of TAMA 38 to the value of the land "in the previous state" is included – the element of enrichment is not fulfilled and there is no separate betterment by virtue of Plan 9988. In ruling so, the district courts were right – each in his own way.
- The consultant argued that the fact that the Quarter 3 plan is a plan in accordance with section 23 shows that we are dealing with one planning process, to which the "neutralization rule" set in the Lusternik case should be applied and the expectations deriving from TAMA 38 should be neutralized as they are related to the betterment plan itself. I think otherwise. In my view, the fact that the "other plan" is a plan under section 23 does not change my conclusions. In any event, in the trial judgment, the Tel Aviv-Jaffa District Court held, as a factual finding, that TAMA 38 does not constitute part of the planning proceedings following which the Quarter 3 plan was prepared (see: paragraph 72 of the judgment; and in this context, see also a similar determination in the decision of the Jerusalem Appeals Committee in the Kalmanovich case: Appeal (Jerusalem) 403/17 Barak v. Jerusalem Local Planning and Building Committee, paragraph 88 [Nevo] (September 5, 2022)).
- I will reiterate that the method of calculation that was determined in the judgments of the first instance was determined in accordance with the law. As to the factual determinations relating to the nature of the plans, there is no room to intervene in findings of this kind "in a "third incarnation"; and in any event, permission to appeal with respect to them was not granted (see, of many: Civil Appeals Authority 28427-10-24 Anonymous v. El-Kiyan, para. 7 [Nevo] (November 19, 2024)).
Conclusion
- I am of the opinion that when assessing the "previous situation" of real estate for the purpose of collecting betterment levy, there is no reason to deduct from the market value of the land the contribution of TAMA 38 to the values, if there is such a thing according to the appraiser's decision. The increase in value that derives from TAMA 38 as such, without the issuance of a building permit, does not constitute a tax event defined in the law as betterment levy. Accordingly, its inclusion in the assessment of the "previous situation" does not lead to the enrichment that the landowner must share with the public. The opposite is true: the neutralization of the effect deriving by virtue of the approval of TAMA 38 on the value of the land, in a manner that entails a charge of betterment levy in respect of this increase in value, is what exceeds the limits of the law in view of the absence of a causal connection between the landowner's enrichment and the betterment plan.
- Therefore, I suggest to my colleagues that we consider the applications before us as appeals and dismiss the appeals on their merits. In the totality of the circumstances and taking into account the contribution of the litigants to the clarification of the important legal issue, which was discussed and decided in our judgment, no order for costs was made.
Alex SteinJudge
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