Forcing the Sale of Co-Owned Israeli Property (Pirok Shituf)

Two brothers inherit their late mother's apartment in Ramat Gan. One lives in London and wants the money; the other lives in the flat and refuses to sell, refuses to buy his brother out, and stops answering emails. From London it feels hopeless. It is not. Israeli law gives the brother in London a direct remedy, and he can use it without ever setting foot in the Magistrate Court.

The mechanism is called pirok shituf (dissolution of co-ownership), and it is one of the most powerful tools a non-resident owner has. It converts a frozen, deadlocked asset back into cash, over the objection of a co-owner who wants to sit tight. If you are selling a property you own outright, the non-resident seller's guide covers the tax and transfer mechanics; this article is about the harder case, where someone else holds a share and will not cooperate.

Every Co-Owner Has an Exit Right That Cannot Be Vetoed

Israeli co-ownership works on undivided shares. Two people who each own "half" do not own a specific half of the building; each owns an abstract 50% of the whole, and neither can point to a room and call it theirs. That is why deadlock is so common, and why the law had to build in an escape hatch.

Section 37(a) of the Land Law 1969 (Hok HaMekarkin) is that hatch. It says any co-owner may demand the dissolution of the co-ownership at any time. There is no minimum holding period, no need to show a good reason, and no ability for the other owners to block it. A co-owner who refuses to sell is not exercising a veto. They are simply delaying an outcome the court will impose anyway.

For a non-resident, this changes the negotiating position completely. The co-owner sitting in the property often believes that physical possession and silence give them control. They do not. Once a partition claim is filed, the question is no longer whether the co-ownership ends, only how and at what price.

Physical Division First, Forced Sale Second

The court does not jump straight to a sale. Section 39 of the Land Law 1969 gives priority to partition in kind, meaning a physical split of the property so each co-owner walks away with a separate, independent unit matching their share. The court will only depart from this if physical division would cause considerable loss (hefsed nikar) to the value of the asset.

For raw land, agricultural plots, or a large building that can be subdivided, division in kind is realistic. For a single residential apartment it almost never is. You cannot cut a 75-square-metre flat into two functioning homes, and forcing it would destroy value. So in practice, claims over a standard apartment move quickly to the second route.

That route is Section 40. Where physical partition is not practicable, or would cause considerable loss, the court orders the property sold and the net proceeds divided among the co-owners in proportion to their shares. The sale is run not by the feuding owners but by a court-appointed receiver (kones nechasim), usually a lawyer, who markets the property, collects sealed bids or runs an auction, and reports back to the court for approval.

A point that reassures many non-residents: a co-owner is allowed to bid. If the brother in the flat wants to keep it, he can buy it at the sale like any other bidder. What he cannot do is set the price himself or stall indefinitely.

In Practice: Under Section 40 of the Land Law 1969, when a co-owned apartment cannot be physically divided, the Magistrate Court appoints a receiver to sell it, typically by sealed bids or public auction. The receiver's fee is set by the court and usually runs 2% to 6% of the sale price plus VAT. From filing to the receiver distributing the proceeds, an uncontested partition-by-sale generally takes 8 to 14 months.

Which Court, and How You Run It From Abroad

Where you file depends on who the co-owners are. If they are unrelated, or are siblings, cousins, or business partners, the claim goes to the Magistrate Court, which has jurisdiction over the possession and use of land regardless of the property's value under Section 51 of the Courts Law [Consolidated Version] 5744-1984. If the co-owners are spouses or were spouses, the claim belongs in the Family Court under the Family Court Law 5755-1995, where it is usually folded into the wider financial separation.

None of this requires your physical presence. A partition claim is regular civil litigation, so unlike the small claims track, lawyers not only appear but run the whole thing. You grant your Israeli attorney a power of attorney, sign it before a notary in your own country, and have it apostilled. From that point the attorney files, argues, and receives court documents on your behalf. If the judge ever needs to hear from you directly, that can be arranged by video rather than a flight.

The one part that genuinely slows a cross-border case is service. If the co-owner you are suing also lives abroad, they must be served according to the rules for serving proceedings outside Israel, which for many countries runs through the Hague Service Convention and can take a few months. Build that time into your expectations.

Common Mistake: A co-owner abroad is served with a partition claim and decides that ignoring it is a form of resistance, or assumes an Israeli court cannot reach them overseas. It can. The court proceeds in their absence, appoints a receiver, and the property is sold, sometimes at an auction price below what an engaged co-owner could have negotiated. Silence does not defend the asset; it forfeits the chance to shape the sale, insist on a proper valuation, or bid to keep the property.

The Tax Bill Depends on Whether Anyone Actually "Sells"

This is where non-residents lose money they did not need to lose, because the tax result turns on a distinction that is easy to miss.

A genuine partition, where the co-owners simply divide what they already own without money changing hands, is not treated as a sale at all. Section 67 of the Real Estate Taxation (Betterment and Purchase) Law 1963 recognises that co-owners separating their holdings are not carrying out a commercial transaction, so no betterment tax (mas shevach) and no purchase tax arise, provided each takes their proportionate share and there is no equalisation payment (tashlumei izun) beyond it.

The moment real money moves, the picture changes. If one co-owner buys out the others, the portion they acquire above their own share is a taxable purchase for the buyer and a taxable sale for the sellers. And a Section 40 forced sale to an outside buyer is a full disposal for everyone: each selling co-owner pays mas shevach at 25% on their real, inflation-adjusted gain, and must obtain a tax clearance before the receiver can release their slice of the proceeds.

For a non-resident seller there is an added layer. Under Section 15 of the Real Estate Taxation Law 1963, the buyer must withhold tax on account of the seller's mas shevach and remit it to the Israel Tax Authority; where the seller is a non-resident the default withholding is 7.5% of the sale price, not of the gain, unless the Israel Tax Authority issues a reduced-withholding or exemption certificate first. Recovering an over-withheld amount later means filing and waiting, so the sensible move is to apply for the certificate before completion, not after.

In Practice: Under Section 67 of the Real Estate Taxation Law 1963, a partition within existing shares with no equalisation payment triggers no mas shevach. But on a forced sale under Section 40, each selling co-owner declares the disposal to the Israel Tax Authority within 30 days and pays 25% on the real gain; for a non-resident seller the buyer withholds 7.5% of the price under Section 15 until a reduced-withholding certificate is issued, and the clearance needed before proceeds are released typically takes 4 to 10 weeks.

Whatever you net in Israel is not the end of the story. Money repatriated to your home country may carry its own reporting duty, and your local tax authority may treat the Israeli gain as taxable with a credit for the Israeli tax paid. Coordinate the two sides before you sign anything, because a step that is efficient in Israel can be expensive at home.

When the Sale Can Be Delayed or Blocked

The exit right is strong, but it is not absolute. Two limits matter for non-residents.

First, the family home. Section 40A of the Land Law 1969 allows the court to refuse or postpone the sale of a residential apartment that serves as the home of the family, unless a suitable alternative housing arrangement is secured for a spouse and the minor children living there. This protects a household, not an investment. An adult sibling occupying an inherited flat, or a co-owner who simply likes the asset, gets no shelter from it.

Second, an agreement not to partition. Co-owners can contractually agree to keep a property undivided for a limited period, and such an agreement can bind for up to three years and, if renewed, longer. If you signed a co-ownership or shareholders-style agreement when you bought together, read it before you file, because it may push back the date on which your Section 37 right becomes exercisable.

Neither limit lets a co-owner freeze you out permanently. They shift timing, not the ultimate result.

Practical Checklist

• Pull a current nesach tabu (Land Registry extract) to confirm the exact ownership shares before you do anything; the split on the register controls the split of the money.
• Check for any co-ownership or "no partition" agreement that could delay your Section 37 right.
• Appoint an Israeli real estate litigator and give them a notarised, apostilled power of attorney so you never have to travel for procedural steps.
• If the co-owner you are suing also lives abroad, plan for a few extra months for cross-border service.
• Get an independent valuation early, so you can judge whether an auction price is fair or whether you should bid yourself.
• Apply to the Israel Tax Authority for a reduced-withholding certificate under Section 15 before completion, not after.
• Confirm your home-country reporting and tax position on the repatriated proceeds before signing.

Speak With an Israeli Attorney

A partition claim is the difference between an asset that is stuck and one that pays out, but the leverage lies in filing correctly, valuing the property properly, and structuring the sale so the tax does not swallow the gain. If a co-owner in Israel is blocking a sale you want, an Israeli real estate litigator can assess your register, serve the claim, and run the case from start to finish while you stay abroad.

Contact us for a confidential initial consultation.