Court Rules TAMA 38 Combination Deals Subject to MAMAD Betterment Levy
The Central District Court ruled that property owners signing combination deals under TAMA 38/2 must pay betterment levies on MAMAD security rooms, overturning a previous exemption.
Property owners who signed a combination deal with a developer under the TAMA 38/2 urban renewal framework will be required to pay betterment levy (heytel hashbacha) on reinforced security rooms (MAMAD), unlike standard TAMA 38 projects or independent security room additions. This landmark decision was issued by the Central District Court, sitting as the Administrative Affairs Court, in a ruling that overturned a previous decision by the District Appeals Committee for Compensation and Betterment Levy, thereby accepting an appeal filed by the Rishon LeZion Local Planning and Building Committee.
A combination deal is a transaction in which landowners transfer a portion of their property rights to a developer in exchange for apartments or spaces in the newly constructed project. The dispute over the betterment levy involves a building in Rishon LeZion, where apartment owners signed a combination agreement with a development company. Under the deal, the developer received a building permit to add 70 new housing units in the Alef compound in Rishon LeZion, in exchange for reinforcing the existing building, expanding current apartments, and adding security rooms.
District Court Ruling on Betterment Levy
The municipal appraiser set the betterment levy at approximately 2.2 million shekels, after already deducting the MAMAD areas included in the project, assuming this space was exempt from the levy similarly to standard MAMAD construction. The apartment owners appealed the levy amount, and the District Appeals Committee fully accepted their position, ruling that the exemption applies even to the portion of the levy relating to rights sold to the developer as part of the combination deal—meaning a full exemption from betterment levy on the entire MAMAD component.
The Local Committee, represented by attorney Yaakov Bracha, appealed the committee's decision to the court. Judge Moti Firer rejected the arguments of the Appeals Committee, ruling that there is no basis for the committee's determination that building rights for MAMADs are not categorically "betterment"—these are real estate rights for all intents and purposes, whose value may rise as a result of plan approval, exactly like any other building rights.
"The exemption is granted for the actual construction of a protected space pursuant to a building permit, and does not apply to the realization of rights through sale, even when the sale is part of a track that ultimately results in the physical construction of protected spaces," ruled Judge Moti Firer.
Significance for Local Committees Nationwide
This means that the betterment levy exemption on MAMAD rights reverts to its original scope—applying only when the apartment owner builds the MAMAD themselves pursuant to a permit issued to them personally, rather than when they sell the right to a developer under a combination deal.
For local committees across the country, this is a significant ruling that may substantially increase the tax base collectible from apartment owners who sell their rights to a developer, and halt previous attempts that had already gained momentum in various appeals committees to expand the scope of the exemption. At the same time, the apartment owners may appeal to the Supreme Court and attempt to reverse the decision once again.
