Betterment levy: what it is, how it is calculated and who pays

What is a betterment levy?

A betterment levy is a payment to the local planning and building committee on an increase in the value of land caused by approval of a plan, the grant of a variance or permission for a non-conforming use. The rate is half of the increase, and it is paid at the time of "realization of rights", usually on a sale or when a building permit is issued.

The idea is simple: when a planning decision by the authority raises the value of your property, for example a plan that adds building rights, the public receives part of the increase. The levy is paid by the owner of the land, or by the long-term lessee where the land is leased. A levy following a plan applies only to land within the plan area or adjoining it.

How is a betterment levy calculated?

The calculation has two stages:

1. Determining the betterment. A licensed real estate appraiser determines the difference between the property's value before approval of the plan, variance or non-conforming use and its value afterwards, as if sold on the open market. Where several plans were approved one after another and no levy was paid on any of them, the betterment is the difference between the value before the first plan and the value after the last.
2. The rate. As a rule, the levy is half of the betterment.

• Indexation: the amount is updated until payment according to the lower rate of increase of the consumer price index and the construction inputs index.
• Timing of the assessment: the committee may make the assessment soon after approval of the plan, or defer it until realization. The owner may demand at any time that the assessment be made, and it is then made within 90 days of the demand.
• Special rates: in certain urban renewal plans the rate is reduced, for example a quarter of the betterment in an evacuation and reconstruction plan, subject to the local authority's decisions. See TAMA 38 and urban renewal.

When is it paid? "Realization of rights"

The levy is not paid on the day the plan is approved, but when the rights are realized. The law lists three situations:

1. A building or use permit that could not have been granted without the plan, variance or non-conforming use.
2. Actual commencement of use as first permitted following the plan.
3. Transfer of rights: a sale, a transfer of a long-term lease or the grant of a right requiring registration, for consideration or without it.

Not every transfer counts as realization. The law excludes, among others, a transfer by operation of law (such as inheritance), a transfer without consideration to a relative, and a transfer between spouses on separation under a judgment. A "relative" for this purpose is a spouse, parent, grandparent, descendant, descendant of a spouse, sibling, and their spouses.

Who pays the betterment levy on a sale?

By law, the liable party is the owner at the time of realization, which on a sale is the seller. The sale agreement may allocate it differently, so the question should be addressed in it explicitly. The usual allocation is that the seller bears the levy for plans approved up to the date of signing, and the buyer bears the levy for plans approved afterwards.

This allocation sounds simple, but it has some sensitive points:

• A plan that has been deposited but not yet approved. If it is approved after signing, the levy for it may fall on the buyer when he sells or applies for a permit in the future. It is worth checking the planning status of the area in advance.
• An assessment deferred until realization. A levy for an old plan may not yet have been calculated. A seller who undertakes to bear it should know this before setting a price.
• A sale that will not be registered without approval. If the levy has not been paid, the municipal certificate will not be issued and the transaction will not be registered. The agreement should therefore also set when the levy is paid and against what.

On the seller's side, see also Selling an apartment and 12 checks before signing.

What exemptions apply to a residential apartment?

The Third Schedule to the Planning and Building Law contains a long list of exemptions. These are the most relevant for apartment owners:

• Building or extending for own use up to 140 m²: building or extending a residential apartment, where the holder or his relative applied for a permit in order to live in it, is not a realization of rights, as long as the total area after building does not exceed 140 m². A proportional levy is paid on any area above that.
• Sale after four years of residence: transferring an apartment built or extended in that way is not a realization if the holder or his relative lived in it for at least four years from completion of the building until the sale.
• Protected space: betterment due to building a safe room (mamad), within the area set under the Civil Defence Law.
• Accessibility: betterment due to additional service areas for accessibility adjustments, including a lift.
• TAMA 38: a full or partial exemption on a permit to build or extend a residential apartment under the plan for strengthening buildings.
• Rehabilitation neighbourhoods: betterment in residential land in a neighbourhood declared a rehabilitation neighbourhood, while the declaration is in force.

Each exemption has precise conditions, and the full list is longer. It is worth checking whether they apply before committing to an amount in the agreement.

What if you disagree with the assessment?

A betterment levy assessment can be challenged before a deciding appraiser or by appeal to the appeals committee for compensation and betterment levy, depending on the type of dispute and within the time limits set by law. The time limits are short, so it is advisable to consult a real estate appraiser soon after receiving the demand.

Betterment levy, capital gains tax and purchase tax: what is the difference?

What does the law say?

The local committee collects a betterment levy under the Third Schedule to the Planning and Building Law (section 196A). The rate is half of the betterment, and it is paid when the rights are realized.

• Definitions: "betterment", "realization of rights" and "relative" (section 1 of the Third Schedule, Hebrew).
• Liability: the owner, and in a long-term lease the lessee; a levy following a plan applies to land within the plan or adjoining it (section 2).
• Rate: half of the betterment (section 3); a special rate in an evacuation and reconstruction plan (section 3A).
• Assessment: by a real estate appraiser, soon after approval or deferred until realization (section 4).
• Indexation: by the lower increase of the consumer price index and the construction inputs index (section 9).
• Enforcement: no registration of a realization of rights without a certificate of payment or security; registration of a mortgage does not require a certificate (section 10).
• Exemptions: section 19 of the Third Schedule.

Sources

• Planning and Building Law, 5725-1965: section 196A; Third Schedule: section 1, section 2, section 3, section 4, section 9, section 10, section 19. Hebrew.

The statutory text was checked on 14 November 2026.