Only 7% of the country's area is under private ownership. The remaining 93% are defined as Israel Lands. This category includes land belonging to the State, Development Authority lands, and Jewish National Fund (Keren Kayemet) lands. The body charged with administering Israel Lands is the Israel Lands Administration (ILA).
The Basic Law: Israel Lands establishes that ownership of Israel Lands will not be transferred. Therefore, it is not possible to purchase ownership of Israel Lands, but only to lease them; that is, to lease them for a long term. Urban land, as opposed to agricultural land, is usually leased for a period of 49 years with the option of extending the lease period for an additional 49 years.
The leasing fees payable to the ILA, as a condition for receiving land leasing rights, are as follows:
Initial Leasing Fee -This is a one-time payment at a rate between 40% and 80% of the value of the land, payable at the time of purchasing the Leasing rights.
Annual Leasing Fee -This is paid at a rate of 5% of the remainder of the value of the land. If, for example, 60% of the value of the land was paid at the beginning of the Leasing period, the Lessee will pay an annual Leasing Fee at a rate of 5% a year of the remainder of the value of the unpaid component of the lands value (40%); that is, an additional 2% a year.
Capitalization, Agreement Fees and Permit Fees- Beginning in 1973, the policy of the Israel Lands Administration was changed with regard to urban lands. Instead of paying an initial Leasing Fee and an Annual Leasing Fee, a one-time Capitalized Leasing Fee is collected, representing payment in advance for the entire Leasing period. Since 1973, the Lessee pays 91% of the value of the land at the beginning of the Leasing period. However, it is also possible to capitalize the Lease for properties that were leased prior to 1973, which are in the middle of the Leasing period.
The payment of Capitalized Leasing Fees also exempts the Lessee from the payment of Agreement Fees upon transfer of the Leasing rights. In the absence of capitalization, Leasing rights for ILA real estate may not be transferred without agreement of the ILA, which involves payment of an Agreement Fee at a rate of one third of the amount that the value of the land has increased in the period from the start of the Lease until the date on which the rights were transferred. The Agreement Fees are paid only for the unpaid balance of the Leasing Fees.
Permit Fees -There are situations in which the Lessee submits a request to change the propertys designated usage, to change the percentage of built area or to request splitting the property into two separate units, along with the related planning requests for the relevant building and planning authorities.
If the requests are approved, the Leasing Agreement between the Lessee and the ILA must be changed accordingly. In such cases, the ILA is also authorized to collect a Permit Fee from the Lessee for the change in utilization of the property rights as compared to those rights originally leased by the Lessee; after all, following approval of the planning request, the Lessee is actually leasing an improved property. The Permit Fee amount is set by an adjustor, who evaluates the degree of improvement to the property resulting from approval of the request.