Court ruling9/24/2026

Court: Expensive Renovation Does Not Turn a New Apartment Into a “Shell”

Arieh and Efrat Tusia-Cohen sought to prove that the apartment they purchased in Ramat Hasharon was unfit for habitation and therefore should be taxed as a building. The Appeals Committee attached to the Central District Court dismissed the appeal: unfinished work and the subsequent renovation, which cost more than NIS 580,000, did not change the property's status as a residential apartment.

Key facts

•Court: Central District Court
•Purchase: December 20, 2022
•Price: approximately NIS 9.4 million
•Renovation: more than NIS 580,000
•Tax rates in dispute: 6% versus 8%–10%
•Case number: not stated in the original source

The Purchase and the Tax Dispute

On December 20, 2022, the couple signed an agreement to purchase a property on the second floor of the house at 24 HaBroshim Street, Ramat Hasharon, together with a balcony, roof and two parking spaces. The price was approximately NIS 9.4 million, and delivery of the property was scheduled for March 15, 2023. In their self-assessment, the purchasers stated that they had bought a “shell apartment” that was unfit for habitation, which should be regarded as a building and subject to purchase tax at a rate of 6%.

The Tax Authority’s Position

The Netanya Real Estate Taxation Director recognized the property as a residential apartment. Because it was not the couple’s only apartment, the director applied rates of 8% and 10% pursuant to Section 9(c1v)(1) of the Real Estate Taxation (Appreciation and Purchase) Law. The couple’s objection was rejected, after which they applied to the Appeals Committee.

Why the Apartment Was Classified as a Residential Apartment

The committee chair, Judge Shmuel Bornstein, real estate appraiser Gidi Gabai and accountant Shabtai Biran unanimously dismissed the appeal. The committee applied two cumulative tests: the property’s objective potential to serve as a residence and the purchaser’s subjective intention to use it as a residence. The couple’s intention was undisputed—they moved into the apartment in October 2023; its objective suitability for habitation was supported by a residential building permit, Forms 4 and 5, connection to utilities, residential planning, a kitchen, sanitary fixtures, doors, parquet flooring and air-conditioning systems.

The Renovation Did Not Change the Classification

The couple argued that they had been forced to rent other accommodation for about eight months and that completing the work had cost more than NIS 580,000. However, the committee ruled that purchasing the property “as is,” construction defects and some unfinished work do not in themselves turn the apartment into a “shell.” A different approach would mean that, for tax purposes, every apartment undergoing extensive renovation becomes a building and qualifies for a 6% rate instead of 8%–10%—an outcome the committee found unreasonable.

The Legal Context

The dispute was adjudicated under the Real Estate Taxation (Appreciation and Purchase) Law and the Purchase Tax Regulations. The Economic Plan Law for the 2023–2024 Budget Years expanded the definition of a residential apartment: a shell apartment intended for residential use is also subject to purchase tax as a residential apartment. The case number and the full date of the judgment were not stated in the original source.

What this means for you

Unfinished work, construction defects and substantial renovation expenses do not necessarily allow a purchased property to be regarded as a “shell apartment.” Classification takes into account both the property’s actual suitability for habitation and the purchaser’s intention to use it as a residence; official permits, utility connections and installed fixtures may be decisive.

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