New Rules to Govern ‘Investments’ in Agricultural Lands

One of the biggest come-ons in Israel’s hot real estate market is set to come to an end in the near future. Finance Minister Moshe Kachlon has for the first time instituted rules governing the sale of agricultural land that is set to be rezoned for residential use.

Under the new rules, a seller of land who promises or implies that a parcel will be rezoned as a condition of rezoning will have to present an official opinion of a licensed land assessor who will evaluate the likelihood of that happening and when it might take place. The assessor will also list the costs of that zoning change, such as lawyers’ fees and other relevant information. Any sale that is not predicated on such a document will not be recognized as legal and a buyer of land that is not made on the basis of the document will have a right to full refund.

As Israel’s urban population has grown, cities have found themselves expanding into areas that just a few years ago were strictly farmland. Zoning laws in Israel require that land parcels be used for specific purposes – residential, commercial, industrial, or agricultural. In order for housing or businesses to be built on agricultural land, zoning and planning boards must meet to approve changes.

The process can take years and, naturally, the value of land jumps overnight when such a change is made. The possibility of that happening is a powerful marketing tool and many ads abound offering agricultural land on the outskirts of cities that are “scheduled” to have their zoning changed, “any day now.”

The problem is that the process can take years and over the years large numbers of investors have found themselves stuck with properties that slick salespeople promised would have their zoning changed at some point in the near future. In one recent scandal, dozens of people were sold land in a project that was “guaranteed” to have its land zoning changed, with customers losing all their money when the company CEO absconded abroad with their cash.

Under the new rules, which were approved by Kachlon, any ads for agricultural lands that is not ready for construction must say so clearly. If it is not, the assessor’s document must be attached to the contract of sale in order for the sale to be valid. With the new rules, Kachlon said, “transparency will finally come to a sector that has been open for abuse in the past.”