Israel Land Authority — Leasehold Explained
Long-Term Leasehold in Israel
Ownership vs ILA Leasehold
Approximately 93% of land in Israel is state-owned and held through the Israel Land Authority. Understanding the difference between leasehold and freehold — and whether to redeem your lease — can have significant financial and legal consequences.
What Is ILA Long-Term Leasehold
Approximately 93% of the land in Israel is owned by the state and managed by the Israel Land Authority (רשות מקרקעי ישראל, formerly the Israel Lands Administration). This means that most residential properties — apartments, houses, and plots — are not held in freehold ownership but rather under long-term leasehold arrangements, typically for periods of 49 or 98 years.
The lease certificate (חוזה חכירה) issued by the ILA defines the rights of the leaseholder: the term, the permitted uses, and any restrictions on the property. In everyday life, this arrangement is largely invisible — you live in, renovate, and sell your apartment just as a freehold owner would. But the legal distinctions matter in specific transactions and planning decisions.
Historically, leaseholders paid annual lease fees to the ILA. In practice, the vast majority of residential leaseholders were exempted from ongoing fees through a process called capitalization (היוון), under which a one-time lump sum was paid — either explicitly or as part of the original purchase price — in exchange for release from annual obligations. Most apartments purchased in recent decades are already fully capitalized.
If you are unsure of the status of your property, the land registry extract (נסח טאבו) and the ILA's own records will indicate whether your lease is capitalized and what obligations, if any, remain. An attorney can review these documents and explain their implications clearly.
Redeeming the Lease to Freehold
The ILA offers eligible leaseholders the option to redeem (לפדות) their leasehold and convert it to full freehold ownership. The redemption fee is typically 3.75% to 5.5% of the recognized land value, depending on whether the lease has already been capitalized and the specific property classification. For a fully capitalized lease the fee is lower; for a non-capitalized lease it is higher.
Who should consider redemption? Owners who plan to carry out substantial renovation or construction, who wish to subdivide or consolidate plots, or who are selling to a buyer who requires freehold title as a condition of the transaction. Redemption can also simplify estate planning and eliminate any future ILA-related complications for heirs.
Tax implications: Redemption is treated as a disposal of the leasehold interest for capital gains tax (מס שבח) purposes in certain circumstances. Whether land appreciation tax applies depends on the date and terms of the original lease, any prior exemptions used, and how the redemption is structured. This is an area where professional advice before applying is essential.
Mortgage implications: Banks generally treat leasehold and freehold properties similarly for mortgage purposes, provided the remaining lease term is sufficient. However, lenders may require redemption — or at least confirmation of capitalization — as a condition for certain loan products. Check with your mortgage adviser before committing to a purchase that involves non-capitalized leasehold.
To apply for redemption, the leaseholder submits a request to the relevant ILA regional office together with the lease certificate, land registry documents, and a valuation. An attorney experienced in ILA transactions can manage the process on your behalf and ensure the documentation is complete and accurate.
Frequently Asked Questions — ILA Leasehold in Israel
Answers to the most common questions about long-term leasehold and lease redemption
Questions About Your Leasehold Property?
Free Initial Consultation — Real Estate Law
ILA leasehold, redemption, purchase tax, and all real estate transactions