I inherited a large apartment in Israel. Can I split it into two units and rent them separately while I live abroad?

The arithmetic is seductive and it is why we get this question so often. A four-room flat in a decent Tel Aviv or Jerusalem street lets for one rent; the same floor area divided into two small units lets for appreciably more than that, and the tenant pool for small units is deeper. The obstacle is not the builder. It is that Israeli law treats the creation of a second dwelling unit as a planning act and a registration act at the same time, and an owner who does the building work and skips both leaves a defect on the property that surfaces at exactly the wrong moment.

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Detailed Answer

Start with the permit. Section 145 of the Planning and Building Law 5725-1965 lists the works and changes of use that may not be carried out without a permit from the local planning and building committee, and adding a dwelling unit falls squarely inside it. The committee looks past the internal walls to the effect on the block and the street: parking provision, load on water and sewerage, refuse, and whether the local plan permits the number of units you are proposing at all. Many older plans fix a maximum unit count for the parcel, and where they do, no amount of internal work makes a second unit lawful. Owners often raise Amendment 117, the so-called apartment splitting law, in the belief that it settles the question. It does not settle it for a flat. That track was written for a land-attached house in an urban locality: the existing home must be at least 120 square metres, the new unit at least 45, each unit needs its own kitchenette, sanitary facilities and separate utility connections, and no more than two units may result. Even for the houses it does cover, uptake has been slight, with the State Comptroller recording that only 71 permits had been issued under it. An apartment in a shared building carries a second requirement on top of the permit. The building is registered as a condominium with a registration order and an attached plan recording each unit and its share of the common property, and turning one registered unit into two means amending that order through the Condominium Registrar at the Ministry of Justice, which engages the other owners because the register of the building is being changed.

For an owner abroad the sequence rather than the substance is what usually goes wrong. The work is commissioned remotely, a contractor puts in a wall and a second kitchen, two tenants move in, and nobody applies for anything. The exposure that builds up is cumulative. Unpermitted work under the Planning and Building Law attracts administrative fines and, at the far end, a demolition order, and none of that is answered by the fact that the owner lives in Melbourne and was not personally on site. The municipality will reassess arnona on the basis of two units once it notices, usually when a second tenant registers for utilities. A property insurer that discovers an unpermitted division after a fire has a real argument for reducing or refusing the claim. And on any future sale the buyer's lawyer will lay the Land Registry extract, the condominium plan and the municipal permit file side by side, find that the flat on the ground does not match the flat on the register, and either walk away or demand a substantial retention. The tax position, by contrast, is straightforward and does not change with the split: residential rent can be taxed under Section 122 of the Income Tax Ordinance at a flat 10% of gross rent, so two units let at NIS 5,000 a month each produce NIS 120,000 a year and about NIS 12,000 of Israeli tax. Doing this properly from abroad means a specific power of attorney to an Israeli lawyer and an architect who can appear before the local committee, and a realistic expectation of six to twelve months for a permit where the plan allows it at all. Our guide on managing an Israeli rental property from abroad covers the letting side once the units exist lawfully. A word for heirs in particular: if you have inherited a flat that somebody already divided years ago without a permit, the defect came with the inheritance, and it is better found now than by a buyer's lawyer.

In Practice: Creating a second dwelling unit needs a permit from the local planning and building committee under Section 145 of the Planning and Building Law 5725-1965. The Amendment 117 splitting track reaches land-attached houses only, requiring an existing home of at least 120 square metres, a new unit of at least 45, separate utilities and a maximum of two units, and the State Comptroller recorded only 71 permits granted under it. A flat in a shared building additionally needs the condominium registration order amended through the Condominium Registrar at the Ministry of Justice. Allow six to twelve months for a permit. Rent from both units can be taxed under Section 122 of the Income Tax Ordinance at a flat 10%, about NIS 12,000 on NIS 120,000 of annual rent.

When to Consult a Lawyer

• The flat you inherited has already been divided and you do not know whether a permit exists. That is a title and enforcement problem sitting on your asset today, and the municipal permit file has to be pulled and compared with the condominium plan before you let either unit.
• The local plan caps the number of units on the parcel. Where it does, the route is a planning application or a relief application rather than a building permit, and the neighbours have objection rights that will be exercised.
• Other owners in the block object to amending the condominium order. Their consent is engaged because the register of the whole building changes, and the way that consent is sought at the outset largely determines whether the amendment is achievable.

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Speak With an Israeli Attorney

We pull the municipal permit file and the condominium plan, tell you whether the local plan permits a second unit at all, and run the permit application and the amendment of the registration order under a power of attorney so you do not need to be in the country.

Contact us for a confidential initial consultation.