Israel: Severance Of A Joint Ownership In Real-Estate Properties

Background

The Land Law, 5729-1969 (hereinafter: "the Land Law") enables a situation where there is joint ownership of one land/property. This may be expressed in the framework of shared ownership of a plot, a residential apartment or a structure with another designation, or several of those.

The joint ownership between the owners may be the result of an agreement or a voluntary connection, or by way which was forced on the owners such as inheritance or transactions which a partner has done vis-a-vis a third party.

The shared ownership in land/property may include different interests for each of the owners, at different points of time, and sometimes there is no choice but to sever it.

The existence of joint ownership relationships, where the partners are in dispute, is not desirable, whereas the ability of the legal system to provide peace between partners in dispute, or to force them to cooperate, is limited. The severance of the joint ownership is also perceived as encouraging a more effective utilization of the land, while the shared ownership which has a tent of bad relationship burdens the development of the property and damages its tradability.¹

Article 37(a) of the Land Law provides that "any partner in a shared land is entitled at any time to request the severance of the joint ownership" (under certain conditions). When the partner requests to end the joint ownership, he does not have to provide reasons and he is not under any limitation of time whatsoever, since this is continuous ownership and an inherent right to realize the property as any sole owner is entitled to do. This right is not conditioned upon the scope of the share of the partner or his seniority as owner of the land with regards to the other partners. The more intriguing question is the manner in which the joint ownership will be severed.

The Manner of Severing the Ownership

The default of the Land Law on this matter is the consent of the partners. Namely, in as much as the partners have decided in advance on the manner in which the joint ownership shall be severed, it must be implemented under the limitations set forth in the law (Article 38a of the law). In the absence of an agreement, the court shall sever the joint ownership in accordance with the following options:

1. Division in kind, namely dividing the land into parts, which creates separate ownership for each partner, subject to feasibility of planning aspects. In as much as balance payments are required, the court is entitled to impose these payments on the partners (Article 39 of the law).

2. Severance by way of turning the land into a condominium, when the primary part of the land is a house which is appropriate for registering as a condominium. In this case, the apartments shall be allocated to the partners in accordance with their share of the land and even in this case, the court is entitled to charge balance payments (Article 42 of the law).

3. Severance by way of sale, in case, as was mentioned previously, the land cannot be divided or in case a division in kind shall cause a significant loss to the partners, in whole or in part. In this case, the land shall be sold to the highest bidder and the revenue shall be divided between the partners.

In this context it should be mentioned that as a rule, the court shall aspire to perform the severance of the joint ownership by way of division in kind. This is the rule and the solution by way of sale is the exception. This is stated in the provision of Article 39(a) of the law: "in land which can be divided there shall be a severance of the joint ownership by way of division in kind". One of the reasons for this is that since the resource of land is limited and unique, the Law grants special weight to the desire of a person to continue holding even a part of the land he was a partner in, in parts. In addition, the burden of proof lies with the person arguing that the land cannot be divided, or that division in kind shall cause any of the partners a significant loss.²

Defining the Land as Land which Cannot be Divided in Kind

Division in kind means that each of the partners is granted independent and separate ownership. If it is possible to split the land into parts, where each of them is able to separately bear ownership for rights and transactions, then the land can be divided. It is not necessary that the shared ownership is not kept in a certain part, such as: easements, shared right between the fixtures created as a result of dividing the land, shared areas and such.

The necessity is to separate between the right of ownership of each partner.

As was stated previously, division in kind has material planning aspects. The provisions of Article 38 of the Land Law show, that even in case of a division in kind which was set forth in an agreement, it still requires the approval of the supervisor that the division is consistent with the provisions of the Planning and Construction Law and any other legislation on the matter. Article 143 of the Planning and Construction Law³ provides that no division of land shall be registered in the land books unless it is in accordance with an approved blueprint. No judgment shall be given to a division of land between its shared owners unless it is in accordance with a blueprint and an approval as stated, and no validity shall be given to any registration done contrary to this article.

Therefore, and prior to the court giving an order to sever the joint ownership by way of division in kind, it is required that an approval is received in accordance with a blueprint by the relevant planning authorities in accordance with the Planning and Construction Law. Practically, the approval of the planning authorities is requested only after formulating an offer of division which is agreed by the parties or approved by the court.

Division Which Causes a Significant Loss to the Partners

The other condition for performing a severance of the joint ownership in land in the best way is when the severance in this way will cause a significant loss. In accordance with the provisions of Article 40(a) of the Land Law: "if the court has realized that a division in kind shall cause a significant loss to the partners, in whole or in part, the severance of the joint ownership shall be by way of selling the land and dividing the revenue".

It is important to state in this context that these are not future profit or loss calculations, and a regular loss is not sufficient. In order to avoid a route of severing a joint ownership by way of division, the loss must be considered a significant loss.

When examining whether we are dealing with a loss, it must be remembered that the question of loss is not evident from the very proceeding of the severance of the joint ownership , but rather in the specific route of division in kind. Namely, the starting point is that the proceeding of severance of the joint ownership by its nature causes a loss to the owners, and the question is that assuming the joint ownership in the land is intended to be severed, with the manner of severance by way of division in kind cause a significant loss to either of the partners. Will dividing the whole to its pieces provide us with parts with an aggregate value less than the value of the whole.⁴

The question is not how it is possible to fully utilize the business potential engrossed in the land property or which way is better from an economic point of view. The subject is the direct damage which shall be caused from the division itself.

It was ruled that: "the person requesting the severance of a joint ownership must limit himself, as much as possible, to the framework of the property ownership. And if he wishes to turn the land into a source for profit, he shall take the appropriate ways to do so. The matter of the severance of a land joint ownership is not the designation of it."⁵

Summary

When there are disputes which cannot be bridged between partners in land/property, each partner has the right to request the severance of the joint ownership, at any time. Apart from extreme exceptions where the objection to the very severance of the joint ownership shall be accepted (such as the existence of an agreement which limits this temporarily or in light of lack of good faith or abuse of a right), the debate shall revolve around the way by which the joint ownership shall be severed.

The legislator has ruled that the best way to sever the jpint ownership shall be by way of division in kind. In case where the division is impossible from planning aspects set forth in the Planning and Construction Act, or alternatively, the division in kind is possible, but the very division shall cause a significant loss to either of the partners, it is entitled to instruct the severance of the joint ownership by way of selling the land and dividing the revenue.

Footnotes

1. Civil Leave for Appeal 1497/09 Owners of Rights in Plot 10 in Block 6684 vs. Weissman (published on Nevo, 27/05/2010).

2. Civil Leave for Appeal 1017/97 Ridlevitch vs. Modai (published no Nevo 25/10/1998) (hereinafter: "the Ridlevitch Case").

3. The Planning and Construction Law, 5725-1965.

4. The Ridlevitch Case.

5. The Ridlevitch Case.

Originally published February, 2020

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.