What is expropriation compensation? Expropriation compensation is the payment made to private owners of real estate that was expropriated by a public body to serve public needs.
Under Supreme Court case law, the purpose of expropriation compensation is to put the person harmed by the expropriation in the position he would have been in had the expropriation never taken place. The compensation is not meant to improve his situation, and certainly not to leave him with damage or loss, but simply to restore what he had.
How is expropriation compensation calculated?
As a general rule, the calculation in each case follows the provisions of the specific law under which the expropriation was carried out.
In Israel there are currently over 20 different laws dealing with land expropriation. Each of them authorizes certain public bodies to expropriate land for specific public purposes, and each also defines how the compensation due to the private owners of the expropriated land is calculated.
The two main expropriation laws currently in force in Israel are the Lands (Acquisition for Public Purposes) Ordinance 1943 and the Planning and Building Law, 5725-1965. The Land Ordinance places the power to expropriate in the hands of the Minister of Finance, while the Planning and Building Law gives that power to the local planning and building committees.
To know which method of calculation applies in a given case, you must therefore first establish which law the expropriation was carried out under and how that law defines the calculation of the compensation.
By way of illustration, here is how expropriation compensation is calculated under the Planning and Building Law.
How expropriation compensation is calculated under the Planning and Building Law
Section 190 of the Planning and Building Law provides, in general terms, that compensation granted under it must be calculated in accordance with Section 20 of the Land Ordinance.
Section 20 of the Land Ordinance provides that no compensation need be paid where the expropriated area does not exceed 40% of the total plot area.
On its face this rule seems unfair, so the Supreme Court clarified the circumstances in which it should apply, in the Holtzman and Masri rules (CA 5546/97 Kiryat Ata Local Planning and Building Committee v. Holtzman; CA 6407/14 Karmiel Local Planning and Building Committee v. Ahmed Masri).
The Holtzman rule, issued in 2009, distinguished between two expropriation situations: where only part of the plot is expropriated, and where the entire plot is expropriated.
Where only part of the plot is expropriated, and the expropriation improves and increases the value of the portion that was not expropriated and remains in the owner’s hands, no compensation need be paid for an expropriation of up to 40% of the plot area, since the owner is compensated in effect by the rise in value of what remains his. Where the entire plot is expropriated, the owner must be paid full compensation, at 100% of the value of the expropriated land.
The Holtzman rule did not, however, settle what compensation is due where only part of the plot is expropriated but the expropriation did not improve the portion that was not expropriated and remained with the owner.
In 2012 the Rothman ruling addressed a similar question, in relation to an expropriation carried out under the Roads and Railways (Defence and Development) Ordinance 1943, which authorized the Minister of Transportation to expropriate land for building roads and railways (that ordinance was repealed in 2010, so no new expropriations can be carried out under it, but expropriations carried out under it before the repeal remain valid).
The Roads Ordinance provided that no compensation was payable for up to 25% of the land area expropriated under it. The Rothman rule held, however, that where only part of a plot is expropriated, and in circumstances where the expropriation did not improve the portion that remained with the owner, the owner must be paid full compensation for the expropriated land, because of the harm the expropriation causes him.
The Rothman rule, as noted, dealt with expropriation under the Roads Ordinance only, so it did not apply directly to expropriations carried out under the Planning and Building Law in similar circumstances. Its rationale was, however, adopted in the Masri rule, issued in 2018, which held that where only part of a plot is expropriated under the Planning and Building Law, and in circumstances where the expropriation did not improve the portion that was not expropriated and remained with the owner, the owner must in that case too be paid full compensation, at 100% of the expropriated land, for the harm caused to him, subject to certain exceptional cases.
How can the amount of expropriation compensation be challenged?
Typically, the public body that expropriated the land estimates its value through an appraisal prepared by a certified appraiser on its behalf, and sends it to the landowner.
Naturally, that body’s interest is to pay as little compensation as possible, so each case must be examined on its own merits to determine whether there are grounds to object to the amount of compensation the public body has set, and how, in accordance with the law under which the expropriation was carried out.
For example, where the expropriation was carried out under the Land Ordinance, an objection can be filed with the Objections Committee for Expropriation Compensation or before a decisive appraiser.
The Objections Committee and the decisive appraiser have parallel authority over the same issues, and the rights holder may choose whether to file the objection with the Objections Committee or before the decisive appraiser, within 90 days from the date the valuation was brought to the attention of the owners whose land was expropriated. Please note: a hearing before a decisive appraiser requires that all claimants under the same expropriation notice request the decisive appraiser’s decision. If not all rights holders apply to the decisive appraiser, only the Objections Committee will have authority.
Filing an objection with the Objections Committee
The Objections Committee is authorized to decide only on expropriations carried out under the Land Ordinance, in disputes over the amount of expropriation compensation or in financial disputes arising from the cancellation of an expropriation, in the framework of the right of restitution or the right of repurchase.
The Objections Committee is therefore not authorized to decide on expropriations carried out under laws other than the Land Ordinance, on older expropriations for which notice was published under the Land Ordinance before February 15, 2010, or on disputes that are not about the amount of compensation (such as disputes over the legality of the expropriation itself or over the rights in the land).
The Objections Committee’s decision can be appealed to the Administrative Court.
Objection before a decisive appraiser
A decisive appraiser is a real estate appraiser included in the list of decisive appraisers selected by the Minister of Justice to hear and decide various disputes over real estate valuations between citizens and the authorities.
The decisive appraiser is authorized to decide only disputes over the amount of expropriation compensation.
The decisive appraiser’s decision can be appealed to the Appeals Committee for Compensation and Betterment Levy.
The Appeals Committee’s decision can be appealed to the Administrative Court.
