A New Law to Protect Real Estate Investors
Many times I see advertisements for the sale of land. Usually this is land that is not yet zoned for building. The idea is that changes in the zoning laws of the area will enhance the worth of the land thereby causing the investor to make a hefty profit. However, how can the investor make an informed decision as to the risk of the transaction? How can he attempt to know what the chances, if any, of the change of zoning being accepted and what the value of the land will be after this happens?
A change in the law governing appraisers attempts to solve this problem. An appraiser giving as estimate as to the worth of the land must only appraise the land at its current status and in accordance with the current zoning law for the area, as if the new zoning plans will not be passed. Then he can assess the worth of the land, should the new zoning law to be proposed pass, if he thinks that the new zoning law will pass. In this case the appraiser must set out in his report an exact description of the process of the change in the zoning and how long this process may take. If he does not believe that the change in zoning is obtainable he must say so in his report.
This is important in a case where the land being sold is land that cannot be built on at present due to the zoning law of the area. An example of this can be agricultural land. This land cannot be built on until a change in the zoning is enacted, changing the possible use of the land from agricultural to residential or commercial. Only when this change in the zoning passes can the land developer begin to think of applying for building permits. At this point the worth of the land is greatly enhanced.
One downside of the law is that it does not require the person marketing the land to provide this appraisal. The purchaser will have to obtain it on his own. Howeve, the marketer of the land has an obligation to notify the purchaser of the new law so that he can obtain the appraiser’s report himself. Should the marketer not do this he will be liable for a fine of up to 204,000 NIS.