Verdict: The property tax in public areas in malls will apply to the management company, and not to the stores.
Guess who wins
The ruling will enrich the authorities at the expense of business owners
Photography:
Envato Elements
Produced by the Department of Special Supplements
A precedent-setting PSD, recently rendered by the Supreme Court, states that the taxpayer in respect of public areas in the mall is the management company and not the tenants - the stores (BR 2462/19, the director of property taxes in the Tel Aviv Municipality v. Ramat Aviv Mall).
For years, the Tel Aviv Municipality has been waging a struggle against historic legislation, which prevents it from collecting property taxes on common public areas.
The ruling gave her a victory in everything related to common areas in the mall.
This means that the management company owns the public areas, and they cannot be seen as common areas that are exempt from property taxes.
It is not inconceivable that this meaning will also apply to public areas in office buildings and other commercial buildings.
Allegedly, the Tel Aviv municipality was supposed to be indifferent to the identity of the debtor - the store or the management company.
However, it chose to conduct proceedings until the final instance, so that a decision could be made that according to the property tax law, the owners of the shops in whose possession the public areas were not handed over in practice, and they could not use the public areas as they wished, did not hold.
In accordance with the "test of the closest connection to the property", the management company maintains the maximum number of connections, and is subject to the obligation to pay the property tax.
In its ruling, the Supreme Court ruled that the customary contractual arrangement between the owners of the mall and the stores, according to which the property tax will apply to the stores, cannot override the law.
It is not the duty of the municipality to act in accordance with the lease agreements, hence its implication to all other local authorities.
Local authorities will have to re-arrange the property tax assessments in the malls, in such a way that the charge required from the store owners will be made only for the main area (the store area), without loading.
The property tax charge for all other public areas will apply to the management company.
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Deepening the crisis
This is not a purely technical change.
Unlike the Tel Aviv Municipality, most local authorities are also required to pay for public areas, but in accordance with the provisions of the law, they had to set reduced rates for congested common areas.
Now that these are imposed on the management company and they are no longer common areas, the local authority will be able to collect full property tax for them.
Even before the store owners rejoice in the city streets, it will be remembered that the lease agreements in the malls establish a contractual obligation that rolls the charge back to them.
In some cases, when the management fee is fixed using the cost + method, the property tax will increase at a higher rate than that paid so far.
In conclusion, once again we come across a verdict that seeks to ostensibly do justice, but “wanted to bless and came out cursing,” bringing about the enrichment of local authorities at the expense of business owners.
And hes to mention that we are in a special period, in which both the malls and the stores are in a deep crisis.
Such a verdict worsened their situation.
Produced by the Department of Special Supplements
