Diminished Property Value Claims Under Section 197 of the Planning and Construction Law
If an approved building plan has reduced the value of your property, you may be entitled to compensation under Section 197 of the Planning and Construction Law. This provision allows property owners to file a diminished value claim against the Local Planning and Construction Committee. However, the law limits eligibility to specific types of assets, and Israeli Supreme Court rulings have further narrowed the scope of compensable damages. Given the complexity of these claims, we encourage you to contact our real estate attorneys if you believe a recently approved plan has adversely affected your property.
By Igal Mor, Adv. & Notary
Accuracy in Legal Advice. Excellence in legal support.
Section 197: Compensation for Diminished Property Value
New development and construction projects routinely affect the value of surrounding properties. Section 197 of the Planning and Construction Law addresses this reality by establishing a statutory right to compensation. To qualify, a claimant must meet the following eligibility requirements:
The Local Committee shall compensate any person who, on the date the plan took effect, owned or held a right in real estate located within the plan area or bordering it, to the extent that the property was damaged by the plan—other than through expropriation.
In practice, this means that a property owner may seek compensation for a decrease in property value caused by the approval of a construction plan affecting land in the immediate vicinity or on the property itself. Common examples include the construction of a highway, the erection of a high-rise building, or the establishment of a large commercial center near residential property. As long as the Local Planning and Construction Committee approved a plan that negatively impacts the value of nearby real estate, the affected owner may file a compensation claim.
It is important to note that the law restricts the right to file a claim to owners of land located within the plan area or on adjacent parcels. Consequently, even if a noisy highway is constructed near a property, the landowner cannot claim compensation for diminished value if the property is not within or directly bordering the plan boundaries. Furthermore, the statute limits claims to situations in which approved building plans cause the damage—expropriation proceedings are handled separately under different legal provisions.
Section 200 of the Planning and Construction Law provides an important exception: the Local Committee is not required to pay compensation if the damage falls within a “reasonable scope.” This provision balances the loss suffered by property owners against the public interest in urban development and construction. However, Israeli courts have held that the default presumption favors compensation—the denial of a claim under Section 200 is treated as an exception that must be specifically justified.
Section 200 of the Planning and Construction Law states:
Land shall not be considered damaged if the harm results from any of the following provisions, provided that the damage does not exceed what is reasonable under the circumstances and awarding compensation would not be equitable: (1) A change in zoning designations and land-use conditions; (2) Establishing setback requirements between and around buildings; (3) Limiting the number of buildings within a given area; (4) Regulating the location, size, and height of buildings, or prescribing the form or exterior of buildings; (5) Prohibiting construction, permanently or temporarily, on land where building could create a flood hazard, landslide risk, health hazard, danger to human life, or excessive expenditure of public funds for roads, drainage, water supply, or other public services; (6) Restricting the use of land other than by prohibiting construction, if the restriction is consistent with the zoning designation.
Filing a Diminished Value Claim
Under Section 197, the Local Planning and Construction Committee bears the responsibility for compensating property owners whose real estate has lost value as a result of an approved plan. The compensation is funded primarily through the betterment levy—a charge collected from property owners whose real estate has increased in value due to the same plan change.
The purpose of a diminished value claim is to restore the property to its pre-plan market value. Accordingly, compensation is calculated based solely on the projected harm caused by the approved plan. Direct damages include situations where the plan restricts the use of the property itself—for example, by rezoning land from residential to agricultural use, thereby limiting future construction. However, indirect damages may also be compensable, such as reduced sunlight exposure, increased noise levels, or harm to the surrounding landscape.
Israeli case law establishes that not every harm perceived by the property owner qualifies as compensable damage under the statute. Section 197 applies specifically to damage to real estate—not to personal injury or subjective inconvenience. Courts therefore apply an objective test, evaluating the impact on the property itself rather than the individual circumstances of the owner. This principle was affirmed in the landmark ruling of The Local Committee for Planning and Construction of Jerusalem v. Bareli.
Because the assessment must be objective, a licensed real estate appraiser is required to determine the decrease in property value. The appraiser evaluates the difference between the property’s market value before and after the plan’s approval. Certain types of damage that cannot be quantified through this appraisal methodology may not be eligible for compensation.
It is essential to prove a causal connection between the approved building plan and the decrease in property value. A court will not rely solely on the appraiser’s valuation; the claimant must also present evidence demonstrating that the plan itself caused the loss. Even if the property’s value declined after the plan was approved, compensation will be denied if the owner cannot establish this causal link in court.
Why Legal Representation Is Essential
Obtaining compensation for diminished property value is a challenging process. In some cases, no compensation is available at all. Even when a claim is viable, the proceedings can be prolonged and may ultimately require litigation. Strict procedural requirements apply, including a limited filing window and specific eligibility criteria regarding the identity of the claimant and the affected property. Additionally, even damages that are confirmed by an appraiser and accepted by the court may be deemed to fall within a “reasonable scope” under Section 200, which could prevent the Local Committee from awarding compensation.
Our firm practices extensively in real estate law and planning and construction matters. If you believe that an approved building plan has diminished the value of your property, you may be entitled to compensation from the Local Planning and Construction Committee. Contact us today to schedule a consultation and discuss your potential claim.
The Real Estate, Planning, and Construction Department at Adv. Mor & Co. brings extensive experience in both real estate transactions and planning and construction proceedings. Our attorneys provide professional legal representation designed to achieve the most favorable and efficient outcome for each client. To discuss your real estate matter, contact us by phone at 02-595-3322, via WhatsApp at 050-441-1343, or through the online contact form below.