Construction site damage from a security incident
Oct 18, 2023
By: Itzik Simon
Rocket fire continues relentlessly, reaching many points across the map. Unfortunately, we are also seeing a significant number of direct hits on buildings. In the event of a rocket strike at a construction site, the contractor’s or developer’s recourse is not through their insurance policy, but rather through the Property Tax – the national Compensation Fund established for such cases.
First, it is important to know that the government quickly launched a dedicated section on the Tax Authority’s website, which specifically addresses compensation under Property Tax for victims of “Iron Swords.” The site provides various guides, the option to submit claims online, and details on a wide range of related topics.
Property and construction site tax
A construction site owner who suffers damage from a rocket strike is entitled to file a claim with the Property Tax Compensation Fund. Employees of the Compensation Fund will visit the site, perform an assessment and appraisal, and based on their findings, determine the scope of the compensation.
Inventory and equipment will be compensated according to their market value at the time of the damage, after proof of ownership. The claimant is required to present a list of inventory and equipment, relevant documents, financial statements, tax certificates, bank account authorizations, and more. Note that according to the Tax Authority website, “equipment, inventory, waste, or any other items located on the business premises may not be removed without prior coordination with an appraiser appointed by the Compensation Fund.”
Important: The construction site owner is allowed to present an independent appraisal and is indeed encouraged to do so. Experience shows that a private appraisal commissioned by the damaged party can faithfully represent their interests to the Property Tax appraiser and may influence the final outcome.
Some numbers: As of October 15, according to the Property Tax Compensation Fund, approximately 6,400 buildings in Israel have been damaged since the start of the war. Around 80 appraisal teams are deployed in the field, about 20 of them in the central region, with the remainder in the south. In the Tel Aviv metropolitan area alone, around 2,100 buildings have been damaged so far.
Is the contractor/developer entitled to indirect damages?
Under Israeli law, it is possible to be entitled to compensation for indirect damages if the claimant can prove a causal link between the damage suffered and the acts of war. While the Property Tax Regulations allow this only for outlying communities, experience shows that the state sometimes extends eligibility specifically to other areas. In this case, it seems highly likely that the state will step in and compensate businesses for operational disruptions and lost income caused by the situation.
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