Israel Real Estate Law

Due to the housing shortage which was one of the causes of the widespread tent protests this past summer, the government has taken steps to encourage investors to sell their properties and to discourage them from buying more properties by increasing the purchase tax and eliminating the capital gains on sales of residential properties if it is not the seller's main residence.

The purchase tax rates are as follows: for a purchase price up to 1,350,000 NIS- 0%, 1,350,000 NIS to 1,601,210 NIS- 3.5%, above 1,601,210 NIS– 5%.

Under Section 49B of the Land Tax Law, the sale of a residential property may be eligible for an exemption from the capital gains tax if one of the following conditions are met:

1. the seller has not sold a tax-exempt property within the last 4 years (but starting January 1, 2013 until January 1, 2021, for the last 8 years;
2. the property being sold is the seller's only residential property in Israel and he has not sold a tax-exempt property within the last 18 months, and in the last 4 years he has not owned more than one residential property at a time.
3. a beneficiary of a relative's will (a parent, parent-in-law, or spouse) is entitled to the exemption if the deceased person would have been entitled to it were he still alive.

The law in effect now give sellers in the year 2011 an exemption on the capital gains tax for residential properties up to a value of 2.2 million shekels. And sellers can use this exemption up to two times in the calendar year.

Furthermore, the law also reduced the betterment tax imposed at the time of issuance of a building permit or the sale of properties whose value has risen due to changes in the rights or zoning of the property. The maximum rate was reduced from 45 to 20 percent.

For a Hebrew article on this, see here.

For an English article see here.

The Bar Gets Higher: Record Low Bar Passage Rate in Israel

News outlets are reporting that preliminary results show that only about 50% of those who took the Israeli Bar Exam last week successfully passed the test. (See the hebrew article at The Marker here.) The average score was a 64 out of 100, and the passing grade is a 65.

Is this the Bar Association's way of thinning the herd and dealing with the problem of too many lawyers?

Does an overly difficult exam violate students' basic right to freedom of occupation?

The students who took the exam are weighing their options, including appealing the fairness of some of the question, suing the Bar Association, and protesting.

There are other countries with harder exams. The bar passage rate last year in Japan was 25% and two law schools in that country reported that none of their graduates passed the exam. See the article from the ABA Journal here. And I've seen some people writing that Brazil's bar passage rate is even lower but I didn't see a reliable source for that claim.

Tips for Litigation Meetings with Clients: Answering a Complaint

I recently sat in a meeting with a client regarding ongoing litigation and noticed the gap that exists between lawyers and other professionals when a lawsuit is pending.

Imagine a client that is being sued for millions of dollars regarding a dispute about a construction project gone awry. The plaintiff's complaint is about 30 pages long with over 200 numbered paragraphs full of dollar amounts and references to hundreds of attached pages of exhibits. The client needs to prepare an answer to the plaintiff's complaint. He spent the first weeks/months gathering the information to respond to the complaint and now it needs to be organized and written up. But the client's project team is not composed of lawyers and they don't have experience with drafting answers to complaints. The clients have the information but the lawyers have the drafting experience. What the client needs is direction.

Tip #1: Break the complaint up into sections. Answering a complaint with hundreds of paragraphs could be overwhelming for a client. Like any other task, breaking it into smaller pieces should help. Usually there are natural section breaks in the complaint. The beginning of the complaint consists of general introductory facts about who the parties are and their relationship to one another. After that it gets more specific and if written well it will have headings for each claim with the supporting claims below. Walking a client through the different sections in the claim can make it less intimidating.

Israel Company Formation and Registration

The following is a translation from the instructions on the website of the Registrar of Companies of how to register a company in Israel:

In order to register a company in Israel, you must submit to the Registrar of Companies, the following documents:

1.       Company bylaws (Article 8 of the Companies Law)

A.     The bylaws shall include the following information (Article 18):

                                                                 i.      The company name - A company may register any name in accordance with paragraphs 26 to 31 of the Companies Law.

a.       If the name is invalid and must be changed, it cannot be changed by simply updating the bylaws.

Catch and Release- Israel Style

In a few hours the government of Israel is going to release the first batch of hundreds of convicted terrorists in exchange for captured soldier Gilad Shalit, with the release of hundreds more in a few days. Gilad Shalit's parents single-handedly waged a battle to get their son back. They did what any parent would do but it has been questioned whether the government was inordinately swayed by a vocal minority. But in fact, Israelis are generally supportive of the exchange. The most vocal opposition to the trade are the families of victims of terror attacks who don't want to see their loved ones' killers be released before serving their time. Needless to say, this is a complicated issue. I am most interested to hear from Gilad Shalit (when he is ready to talk about this whole episode) about whether he thinks the government did the right thing in agreeing to this exchange.
This reminds me of a review of the movie Saving Private Ryan by Mark Steyn:

Now Accepting Guest Bloggers

I am looking for Guest Bloggers to write articles about the Israeli law scene. Comparative analysis of Israeli law versus other systems especially Jewish law are most welcome, as well as in depth pieces on current issues before the courts. If you have something you'd like to post, please send me an email.

Thanks

2 Class Actions Against PelePhone Certified by District Court

The Tel Aviv District Court recently approved a class action lawsuit filed against cellular phone provider Pelephone for charging customers a fee of 85 NIS in order to unlock their phones for use with SIM cards from other providers. The complainant claimed that such fees were against the Communications Law and violated the terms of PelePhone operating license.

PelePhone argued that it did nothing wrong.

Another class action against PelePhone was also certified around the same time. This one had to do with PelePhone option for customers to pay for music to be played to callers to their numbers in place of a standard ring. Customers paid 6.93 NIS for the service. Before the music was played to callers, they heard a 5.6 second message saying, "Do you like this song? If so, press * two times and it will be sent to your cellphone, for a fee." The lawsuit claimed that PelePhone did not have the customers' permission to solicit these purchases on time that was ostensibly paid for by the customers for the transmission of music.The lawsuit claimed the PelePhone breached its agreement and was unjustly enriched on the backs of its customers.

PelePhone claimed that it provided discounted songs to customers and because of that benefit, the class action did not accurately represent all of its customers and was against their interests. Further they claimed that most of their customers knew about the messages and so implicitly agreed and furthermore, it was easy to cancel the service and the messages by speaking with a PelePhone representative.

The Court rejected PelePhone's claims saying that it was not clear that customers knew about the messages and that they could cancel the messages. The Court also rejected the argument that the service benefited customers because it was still a source of revenue for PelePhone and appears to be a breach of the contract. PelePhone used the paid-for time of its customers without their permission.

Both of those decisions only permit the class action to proceed; there will be further decisions about the substantive issues at a later date unless the parties reach a settlement.