Splitting an Israeli House Into Two Units From Abroad

A retired couple in Toronto own a large single-storey house in Ra'anana that has stood half-empty since their children left. On paper it is an obvious candidate: 190 square metres of built area, a generous plot, and a rental market crying out for smaller units. The question they bring is always the same. Can they carve out a self-contained flat and let it, without flying in and without selling the family home? The answer changed on 7 August 2024, and it changed in a way that rewards owners who check the rules before they hire anyone.

Israel has run this experiment twice. An earlier temporary measure, Amendment 117, allowed ground-attached homes to be split into two units and then lapsed. Amendment 155 to the Planning and Building Law 5725-1965 brought the route back with tighter conditions and a reduced levy. For a non-resident, the statute is only half the story. The harder half is executing a planning application in an Israeli local committee from another continent, and that is where most of the practical work sits.

What Amendment 155 Actually Allows

The route applies to a ground-attached dwelling, the kind of detached or semi-detached house common in the older parts of Ra'anana, Kfar Saba, Rishon LeZion and hundreds of smaller towns. It does not apply to an apartment inside a registered condominium building, which is governed by a different set of rules entirely and which we cover in the guide to Israel's condominium law for non-resident owners.

The conditions are cumulative. A local planning and building committee will refuse the application if any single one fails:

• The existing unit must be at least 120 square metres.
• The new unit must be at least 45 square metres.
• After the split, the plot may not exceed four units per dunam.
• The original plan for the plot must have been approved before 7 August 2017.
• The property must sit outside the influence zones of the planned Dan metro stations.

That last condition surprises people. The metro influence zones are drawn by radius around planned stations, not by street, and they cover a wide band of Gush Dan. A house that meets every dimensional test can still be refused because it happens to fall inside one. This is the first thing to check, before an architect is paid to draw anything, because location is the one condition no amount of design can fix.

Parking is handled more pragmatically than owners expect. No parking space is required for a unit under 60 square metres, although the local committee may ask for a payment in lieu rather than a physical bay. That single concession is often what makes a tight urban plot workable at all.

The Levy Is the Real Number

The financial hook is the betterment levy (hetel hashbacha), the charge a municipality raises when a planning decision increases a property's value. A normal betterment levy runs at 50% of the assessed increase. Amendment 155 cuts it to 34% for the added unit, which is the incentive at the centre of the whole scheme.

The levy is assessed by the local committee's appointed assessor, and it is collected in two bites: partly when the permit issues and partly when the rights are later realised, typically on a sale or a further planning step. Development levies to the municipality and charges from the regional water corporation sit on top of it and are calculated separately, so the 34% is the headline, not the total.

In Practice: Amendment 155 to the Planning and Building Law 5725-1965, published on 7 August 2024, permits splitting a ground-attached home where the existing unit is at least 120 square metres and the new unit at least 45 square metres, subject to a maximum of four units per dunam and an original plan approved before 7 August 2017. The permit is issued by the local planning and building committee, and the added unit carries a reduced betterment levy of 34% rather than 50%, so an assessed betterment of NIS 300,000 produces a levy of roughly NIS 102,000 before development levies. Because the applicant abroad cannot sign in person, a notarised and apostilled power of attorney, which takes about two weeks to prepare, must be in place before the architect files.

Running the Permit Application From Abroad

Here is where the geographic distance stops being an inconvenience and becomes the main constraint. The application is filed with the local planning and building committee for the town where the property sits. It is prepared and submitted by a licensed architect or engineer acting as the orech bakasha, the person responsible for the application, and it needs the registered owner's signature.

For an owner in Toronto, Melbourne or Marseille, that signature means a power of attorney signed before a local notary and then apostilled under the Hague Apostille Convention so that Israeli authorities will accept it. The power of attorney has to be specific enough to authorise a planning application and any consents the committee later demands, because a generic property power of attorney is often rejected as too vague for planning purposes. Building the right instrument at the outset saves a second round of notarisation weeks later.

Expect the committee to want municipal clearances before it issues the permit, and expect the process to run in Israeli time zones and in Hebrew. A non-resident owner who tries to manage the correspondence directly will lose weeks to the seven-hour or ten-hour gap alone. This is the same coordination problem that affects every remote owner, and the discipline that works for it is the same discipline set out in the guide to managing an Israeli rental property from abroad: one local professional holds the file, and the owner signs properly drafted instruments once rather than improvising fixes later.

The Tax and Arnona Consequences People Forget

Two units means two arnona accounts. Once the split is registered, the local authority re-cuts the arnona (municipal property tax) file into two separate dwellings, which raises the total annual bill because arnona is charged per unit and often on a banded rate that resets. Owners who model the rental yield on the old single-dwelling arnona overstate their return.

The income tax picture also shifts. Rent from an Israeli property is Israeli-source income for a non-resident wherever you live, and it is taxed in Israel first. A second let can push your total annual rent past the exemption ceiling for residential rent, or change the arithmetic of the 10% flat track under Section 122 of the Income Tax Ordinance, which taxes gross residential rent at a flat 10% with no deductions. The relative merits of the exemption track, the 10% track and the marginal track are set out in the guide to Israeli rental income tax tracks for non-residents, and the right answer changes once a second unit is in the picture.

In Practice: A non-resident letting the new unit can elect the 10% flat track under Section 122 of the Income Tax Ordinance 1961, paying 10% of gross residential rent with no deductions, reported and paid to the Israel Tax Authority within 30 days of the tax year end, by 30 January. On a second unit let at NIS 5,000 a month, that is NIS 60,000 of annual rent and NIS 6,000 of tax, but the same NIS 60,000 stacked on top of existing rent can also tip a landlord over the residential-rent exemption ceiling, so the two units have to be modelled together rather than in isolation.

When the Split Blocks Your Estate Plan

The most important limitation is easy to miss because it is a restriction on the future, not the present. The added unit may be let or occupied by a close relative, but its ownership may not be transferred separately from the main house. You cannot sell the flat on its own, and you cannot leave it to one child while leaving the house to another. The two remain a single registered property.

That collides directly with how many non-resident families think about Israeli assets. A parent abroad often creates a second unit precisely in order to give one child a foothold in Israel, then writes a will splitting the house from the flat. Under Amendment 155 that will cannot be carried out as drafted, because the Land Registry (Tabu) will not register a stand-alone transfer of the added unit.

Common Mistake: Building the second unit in order to sell it or leave it to a specific heir. Because Amendment 155 forbids separate transfer of the added unit, the Land Registry (Tabu) will refuse to register a stand-alone sale or a will clause that gives the flat to a different beneficiary, and the family discovers this only after the levy has been paid and the unit built. The fix is not a document but a rethink: the flat can be let or lent to a relative, but any plan that depends on selling or bequeathing it separately has to be abandoned before the money is spent.

The Window May Not Stay Open

Amendment 155 is a temporary provision with a defined application window, which the Interior Minister may extend in stages, with the current horizon running toward the end of 2028. Because it is temporary, the first question in any file is whether the window is still open in that particular local committee at the moment you apply. A route that was live when a neighbour used it last year may have moved on. Confirm the current status before spending anything on plans, and treat any secondhand account of "how my cousin did it" as a starting point, not a rule.

Practical Checklist

• Confirm the house is ground-attached and outside every Dan metro influence zone before hiring anyone
• Check the original plan for the plot was approved before 7 August 2017
• Verify the 120 sqm existing unit and 45 sqm new unit thresholds against the actual measured areas, not the estimated ones
• Instruct a local architect or engineer to act as the orech bakasha and to confirm the application window is currently open
• Have a specific, notarised and apostilled power of attorney drawn for the planning application, not a generic property power
• Model the after-tax yield using two arnona accounts and the correct rental tax track, not the single-dwelling figures
• Abandon any plan to sell or separately bequeath the new unit, and redraft the will accordingly

Speak With an Israeli Attorney

The split route rewards owners who confirm eligibility before they commission a single drawing, and it punishes those who do it the other way round. We check that the plot qualifies and sits outside the excluded zones, quantify the 34% levy and the after-tax rental position, and put the powers of attorney in place so the permit can be pursued without you flying in.

Contact us for a confidential initial consultation.