Background
Ofek Sheli Construction and Development Ltd. won a 2015 Israel Land Authority tender to build two 18-unit residential buildings in Beit Shemesh under the government’s “Buyer’s Price” affordable-housing program. The tender generally required sales to eligible buyers without housing and made the developer responsible for applicable municipal fees and levies. In 2017, Ofek Sheli paid building-permit fees totaling NIS 178,608 and received the permits.
Four years later, Ofek Sheli demanded repayment of half the fees. It relied on a regulation exempting the state from half the permit fee for construction performed by it, on its behalf, or at its initiative and intended for specified purposes, including “housing for young couples.” The regulation defines that term as housing intended for young couples “according to the approval of the relevant local authority or according to the approval of the Ministry of Construction and Housing.” The Jerusalem Magistrates’ Court rejected the claim, but the Jerusalem District Court reversed, holding that Buyer’s Price projects served the regulation’s purpose and that a project-specific approval was an unnecessary formality.
The Court’s Holding
The Supreme Court unanimously granted leave to appeal, allowed the appeal, and restored the denial of the requested exemption. Justice Yehiel Kasher, joined by Deputy President Noam Sohlberg and Justice David Mintz, held that the exemption for housing for young couples requires two cumulative conditions: the construction must be performed by the state, on its behalf, or at its initiative; and either the relevant local authority or the Ministry of Construction and Housing must approve the project as housing intended for young couples. The approval requirement is substantive, not merely formal, because the regulation assigns the designated public bodies administrative discretion to determine what qualifies as housing for young couples.
No such approval was issued for Ofek Sheli’s project, so the company was not entitled to repayment of half its building-permit fees. Although unnecessary to the disposition, the Court indicated that this particular project likely was undertaken on behalf of or at the initiative of the state, given the state’s control over buyer eligibility, sale prices, specifications, and contractual terms. It declined, however, to classify all Buyer’s Price projects categorically; state supervision, risk allocation, and the possibility of open-market sales may vary by project. If the committee had already refunded the fees under the District Court’s judgment, Ofek Sheli was ordered to return the refund with lawful indexation and interest.
Key Takeaways
- A Buyer’s Price developer cannot obtain the partial permit-fee exemption for housing for young couples without project-specific approval from the relevant local authority or the Ministry of Construction and Housing.
- General government policy describing an affordable-housing program as assisting young couples does not substitute for the approval expressly required by the regulation.
- Whether a privately built project was undertaken on behalf of or at the initiative of the state requires a project-specific examination of state control, supervision, risk allocation, buyer selection, and market-sale rights.
Why It Matters
The ruling resolves an issue affecting numerous claims by developers and potentially substantial liabilities for local planning committees nationwide. It prevents automatic application of the half-fee exemption across the Buyer’s Price program while preserving the possibility of an exemption where the required approval is obtained and the project’s particular relationship with the state satisfies the regulation.