War Damages to Property: Claiming Compensation

Security escalations, military operations, or even war are not uncommon in Israel. 2023 exemplified the potential for devastating scenarios. Less discussed are the substantial damages to property and businesses. Surprisingly, many are unaware of their entitlements and, more specifically, who is responsible for compensation.

This article outlines basic definitions and rights to help minimize losses should such events occur. How can one obtain compensation for vehicle, property, or other asset damage? Is court action necessary? How does this relate to the real estate market? This article provides answers to these questions and more.

What Constitutes War Damage?

War damage is defined as damage to an “asset” resulting from: (Section 35 of the Property Tax and Compensation Fund Law, 1961)

1. Military actions by the enemy’s regular armies; or-
2. Other hostile actions against the State of Israel; or-
3. Military actions undertaken by the Israel Defense Forces.

The question arises: What constitutes an “asset”?

For compensation purposes, an “asset” includes: land; agricultural land including crops; buildings; structures under construction; orchards; inventory and equipment located within the State; and vessels and aircraft registered in Israel (or required to be registered in Israel, even if not located within the State).

Note: The law also recognizes “indirect damage,” but only within “frontier settlements.” These are settlements designated as such by the Minister of Finance during emergencies, with specific compensation provisions.

Does All War Damage Qualify for Compensation?

According to the law, compensation can only be claimed for “actual damage.” As per Section 1 of the Regulations, actual damage is the lesser of two amounts: (1) the difference between the asset’s value before and immediately after the damage; or – (2) all costs of repairing the damage.

In cases of indirect damage (as mentioned, only in frontier settlements), actual damage also includes loss or deprivation of profit that the claimant could not reasonably have prevented. Additionally, expenditures to mitigate damage should be added to the “actual damage.” These are expenses incurred by the claimant to reduce the extent of the damage and were reasonably necessary.

Who Pays Compensation for War Damage?

Israeli law mandates that the State maintain a dedicated fund for the payment of war damage compensation. This fund is financed from an unexpected source – real estate transactions. To clarify:

Unless exempt, purchasing or owning land involves tax payments: buyers pay purchase tax, and landowners pay property tax. A percentage of these taxes is annually allocated to a special fund called the “Compensation Fund.” As of 2023, 25% of property tax and 15% of purchase tax is allocated to the Compensation Fund. (Section 2A of the Property Tax and Compensation Fund Law, 1961).

In cases of war damage to property, real estate, agricultural produce, employers (due to salary payments), etc., the tax authorities will pay compensation from the Compensation Fund.

Property Tax Rejected a Compensation Claim – Can I Appeal?

Individuals who believe they have been unfairly treated by a Property Tax decision may file an appeal with the Property Tax Appeals Committee within 30 days of receiving the decision.

If a legal issue arises in the committee’s decision, an appeal can be filed with the District Court in the relevant jurisdiction within 30 days of receiving the committee’s decision.

What is the Amount of Compensation for War Damage?

The law distinguishes between two types of assets: (Section 1 of the Annex to the Property Tax and Compensation Fund (Payment of Compensation) (War Damage and Indirect Damage) Regulations, 1973).

1. Aircraft (compensation of 50% of the asset’s value);
2. All other assets (compensation of 100% of the asset’s value).

According to the regulations, the “asset’s value” is the amount that would have been received for the asset in a free market sale on the day the damage occurred.

In the case of war damage to a residential dwelling rendering it uninhabitable, the tax authority may also grant entitlement to alternative housing or fund alternative housing.

A Rocket Hit My Car, Am I Entitled to Compensation?

According to the law, notification of the damage must be submitted to the Property Tax authorities within two weeks of the incident, and a compensation claim must be filed within one month of the incident. (Section 5 of the Property Tax and Compensation Fund (Payment of Compensation) (War Damage and Indirect Damage) Regulations, 1973).

In the case of vehicle damage, a police report signed by a police officer is required. Prior approval from the Property Tax authorities must be obtained before vehicle repairs are undertaken. If professional assessment of the damage is required, the Property Tax authorities will send an appraiser.

To file an online claim for property damage compensation on the Property Tax website, click here.

A Rocket Hit My House, How Can I Receive Compensation?

The law requires notification to the Property Tax authorities within two weeks of the incident; and a claim can be filed within one month. However, in the case of a residential dwelling, prompt action is advised. Since damage assessment requires several professionals, notification to the Property Tax authorities should be made as soon as possible, ideally shortly after the incident.

If professional assessment is required, the Property Tax authorities will send representatives after receiving notification. “Professional” refers to an engineer or appraiser.

Regarding compensation from the insurance company (structure or contents), check your policy terms. War damage and acts of hostility are typically excluded from building or property insurance policies. However, Property Tax usually provides insurance coverage for household contents up to a certain limit that varies from time to time.