1 The borderline between the categories is not always dear-cut. A practice that seems legally permissible may be discovered, on further examination, to be undesirable. Consequently, we shall attempt to prevent it using existing legal rules, or recommend that it be prohibited by changing the rules. In other words, a practice that seems on first thought legal, might be viewed, by the end of our discussion, as illegal (at least according to the ideal rules). The opposite situation is possible as well: An uncom- pensated injury prohibited by current legal rules may be desirable and justifiable, and therefore we shall recommend that it be permitted. Nevertheless, a distinction between actions that are clearly illegal and those which are seemingly within the confines of the law, is a useful point of departure for our discussion. It separates general questions pertaining to the authority's actions legality from questions that are specifically and directly relevant to the issue of uncompensated injury to land by use of agreements and conditions.

2 It does not follow that no intervention is necessary if the land owner who agreed to grant benefits to the public beyond those required by law is an experienced developer, with sufficient knowledge of planning law and all relevant facts. Intervention might be justified due to the agreement's external effect on third parties, or by distributive considerations that oppose transfer of a substantial portion of the developer's profit to the authority. See ch. E.3.(b) infra.

3 See Altarman, R., Vitek, M., From Expropriations to Agreements: Methods for Obtaining Land for Public Purposes (Haifa, 1991) chs. 8–13.Google Scholar

4 Sections 197 & 200 of the Planning and Building Law, 1965 (19 L.S.I. 330). Hereinafter — The Planning Law.

5 See Alterman & Vitek, supra n. 3, at 83, 115–116; Henry, D., “Planning by Agreement: A Local Survey” (1984) JP.&Envt.L. 395, at 399.Google Scholar

6 Special and different considerations apply to a land owner's undertaking to compensate for injuries caused to other parcels by a plan that benefits his land. See D. Lewinsohn-Zamir, “Indirect Injuries to Land by Plans — Transferring the Burden of Compensation from the Public to the Private Purse” (forthcoming in Studies in Law in Memory of Prof. Tedeschi), Part III.

7 See Municipality of Tel-Aviv-Jaffa v. Abu-Daya, (1966) 20(iv) P.D. 522, at 533–546; Feitzer v. The Local Planning and Building Commiesion of Ramat-Gan, (1981) 35(iii) P.D. 645, at 656; Kamar, A., Law of Land Expropriation (Tel-Aviv, 4th ed., 1990) 9–10Google Scholar; Orgel, L., Valuation Under the Law of Eminent Domain (2nd ed., 1963) vol. 1, 1–5Google Scholar; Nichol's On Eminent Domain (New York, 3rd ed., 1990) vol. 3, secs. 8.1–8.1[2]. Basic Law: Human Dignity and Freedom (S.H. 1992, p. 160; for an English translation of the Law see (1992) 26 Ia.L.R. 248) recognizes property rights as basic rights by stating in sec. 3 that “A person's property shall not be infringed”. The right to compensation for injuries to property is not mentioned in the basic law. Prof. Weisman suggests that this right be seen as included in sec. 8 of the Basic Law, according to which injuries to property should be to an extent that does not exceed what is necessary: Weisman, J., Law of Property: General Part (Jerusalem, 1993) sec. 1.12.1, note 3.Google Scholar Section 8 of the Basic Law, which authorizes courts to invalidate legislation which injures property more than is necessary, does not apply retroactively to preexisting legislation (sec. 10 of the Basic Law). The legislation analyzed in this article was enacted before 1992, and therefore is not subjected to the test set forth in the Basic Law. Nevertheless, existing legislation should be interpreted in a way that protects the property of individuals to the greatest possible extent, according to the spirit and purpose of the Basic Law. Such an interpretive approach underlies the analysis and proposals in this article.

8 Kamar, id., at 231–233; State of Israel v. Lichter, (1983) 37(i) P.D. 214, at 218; Commercial Center v. Israel Land Authority, (1986) 40(iv) P.D. 154, at 157; Minister of Finance v. Zilberstein, (1980) 34(iii) P.D. 225, at 231; Todd, E.C.E., The Law of Expropriation and Compensation in Canada (Toronto, 1976) 120–121, 124–128Google Scholar; Brown, D., Land Acquisition: An Examination of the Principles of Law Governing the Compulsory Acquisition or Resumption of Land in Australia and New Zealand (Sydney, 3rd ed., 1991) 100–102, 169–174Google Scholar; Nichols, id., vol. 4 secs. 12.02[1], 12.02[3], 12B.12. 12B.14; Orgel, id., secs. 28–31.

9 In this respect, a planning injury differs from an injury caused by progressive taxation or the imposition of stricter tortious product liability. The latter injuries to property owners are intentional and are based on certain goals and policy considerations: in other words, they were meant to achieve the wealth transfer that occurred. Compensating for the injury or mitigating its magnitude (such as by phased implementation of the new legislation) might frustrate or impede the attainment of the desired goal (we assume, of course, that the changes are desirable according to the principles of justice, fairness or efficiency we choose to adopt).

10 This assumption is supported by empirical research. For example, Alterman and Na'aim examined the compensation claims that were submitted to Israeli planning authorities. They found that almost 80% of them were submitted by private individuals. Approximately two-thirds of the claims were concerned with an injury to a small, single parcel of land. That is to say, most of the claimants were ordinary citizens, owning a relatively small piece of land for future development or investment: Alterman, R., Na'aim, O., Compensation for Value Reductions of Land (Haifa, 1992) 136–137, 143, 166.Google Scholar

11 See Michelman, F.I., “Property, Utility and Fairness: Comments on the Ethical Foundations of Just Compensation Law”, (1967) 80 Harv. L.R. 1165Google Scholar; Ellickson, R.C., “Suburban Growth Controls: An Economic and Legal Analysis”, (1977) 86 Yale L.J. 385Google Scholar; Berger, L., “A Policy Analysis of the Taking Problem”, (1974) 49 N.Y. U.L.R. 165Google Scholar; Fischel, W.A., The Economics of Zoning Laws: A Property Rights Approach to American Land Use Controls (Baltimore, 1985) ch. 8.Google Scholar

12 On the importance of compensation as a means of internalizing the costs of an action and restraining the behavior of authorities, see Posner, R.A., Economic Analysis of Law (Boston & Toronto, 3rd ed., 1986) 51Google Scholar; Berger, id., at 185; Blume, L. & Rubinfeld, D.L., “Compensation for Takings: An Economic Analysis”, (1984) 72 Calif. L.R. 569, at 620–622.Google Scholar

13 However, it is not always easy to identify all the people who have rights in the expropriated land. Such is the case, for example, when the land belongs to many heirs, whose identity is unknown. The law contains provisions that assist the authority in these circumstances. For example, it may pay the compensation into court: secs. 9, 10 & 16 of the Lands (Acquisition for Public Purposes) Ordinance, 1943 (P.G., 1st supp., at 44; hereinafter — the Acquisition Ordinance); The Acquisition for Public Purposes (Deposit of Compensation with the General Custodian) Regulations, 1981 (K.T., at 908).

14 On the much more restricted possibility of acquiring land without compensation in other countries, see ch. E.2. infra.

15 See secs. 188–196 of the Planning Law, Alterman, R. & Vitek, M., Alternative Ways of Acquiring Land for Public Services (Haifa, 1988) 29.Google Scholar Sec. 190 of the Planning Law refers to the general statute dealing with expropriations — the Acquisition Ordinance — to supplement its provisions. Our discussion shall be based, therefore, on these two statutes. Additional powers of expropriation without compensation are found in sec. 7 of the Roads (Construction and Improvement) (Defence) Ordinance, 1943 (P.G., 1st supp., 55); and sec. 5(3) of the Roads (Width and Alignment) Ordinance, 1926 (The Lawa of Palestine, R.H. Drayton ed., vol. II, 1933, at 1307). These 17 two last ordinances restrict expropriation without compensation to the purposes mentioned in their title and expropriation is limited to 25% of the land. Our analysis of expropriation without compensation according to the Planning Law applies, to a great extent, to expropriations according to these ordinances.

16 Section 188 lists the following public services: “[…] roads, parks, recreation or sports areas, nature reserves, antiquities sites, parking areas, airports, ports, docks, railroad stations, bus stations, markets, slaughter houses, cemeteries, buildings for educational, religious and cultural purposes, community centers, hospitals, clinics, public shelters, sewerage facilities, solid waste sites, water supply installations and any other public purpose approved by the Minister of Interior for the purposes of this section”. The Minister of Interior added to this list services such as taxi-cab stations, housing for the elderly, and fire stations. See Alterman, R., “Exactions of Land for Public Services — Toward a Reevaluation”, (1985) 15 Mishpatim 179, at 196.Google Scholar

17 Section 20(2) of the Acquisition Ordinance.

18 Secs. 190(a)(1) and 188(a) of the Planning Law. Special provisions apply to reparcellation of land: secs. 120–128 of the Planning Law and sec. 4(1) of the Acquisition for Public Purposes (Amendment of Provisions) Law, 1964 (18 L.S.L 116; hereinafter — the Acquisition for Public Purposes Amendment Law). These provisions allow, in certain circumstances, for expropriation without compensation of even more than 40% of the land. This result is a product of both problematic legislation and very broad interpretation given to the legislation by courts and commentators. Discussion of this complex issue is beyond the scope of the article.

19 The betterment rationale was used in some cases as a reason to prohibit expropriation without compensation. In those cases, the authority expropriated the entire parcel and wished to deduct from the compensation sums the maximum statutory extent of expropriation without compensation. It was held that since no land remained in the hands of the owner to enjoy the public development in the land taken, expropriation without compensation is impermissible. See The Estate of Khayat v. The Local Planning Commission of Haifa, (1977) 31(iii) P.D. 785, at 792; Pardes Yanay Co. v. The Municipality ofRamat-Gan, (1952) 6 P.M. 380, at 388–389. Further support of the betterment rationale is found in an obiter dictum of Justice Shamgar in The Local Planning and Building Commission of Rishon Le'Zion v. Hamami, (1987) 41(iii) P.D. 370, at 384.

20 In the explanatory notes to the Planning Bills of 1959 and 1962, the betterment rationale was offered as a reason for raising the permitted extent of expropriation without compensation above 25% (the limit existing before the passage of the Planning Law). See H.H. 1959, at 314–316 and H.H 1962, at 56. The betterment rationale was also mentioned during the parliamentary debates surrounding enactment of the Planning Bill: Divrei HaKnesset, vol. 37 (1963), at 1843, 1884; vol. 43 (1966), at 2419.

22 See also Feitzer, supra n. 7, at 651–652. It seems that the Planning Law cannot be interpreted as limiting expropriation without compensation to cases in which buildings for educational, sports, health and cultural services increase the value of the remainder held by the individual. Such an interpretation would prevent, in practice, the possibility of expropriating without compensation for these purposes, and is therefore unsatisfactory.

22 See the cases cited in n. 19, supra.

23 For discussion of this problem, see Alterman, supra n. 16, at 209, 217–219.

24 See, for example, Goldenberg v. The Local Planning and Building Commission of the Tel-Aviv District, (1979) 33(iii) P.D. 122 (a private passage between two buildings was expropriated for a public road. No compensation was given because less than 40% of the land was expropriated. The remainder enjoyed no betterment: the passage was available for the private use of its owners even before the expropriation, and its conveyance into a public road caused noise damage); Valero v. The Local Planning and Building Commission of Jerusalem, (1978)(i) P.M. 187 (part of a parcel was designated in a plan for expansion of a main road. The court assumed without hesitation that when the expropriation shall be executed, the authority may deduct 40% from the compensation payments. Expropriation for the purpose of expanding a main road will not increase the value of the remainder. Indeed, the private owners claimed that the road would adversely affect the value of the remainder of their land). See also Michkashvili v. The State of Israel, (1974) 28(i) P.D. 533; Salim Buildings v. The Ministry of Jerusalem, (1983) 37(iii) P.D. 216.

25 The court relied on various language-oriented reasons to justify its rejection of the betterment rationale. See Feitzer, supra n. 7, at 651, 653, 656–657.

26 Alterman, supra n. 16, at 220–225.

27 See The Estate of Shanti v. The Local Planning and Building Commission of Tel-Aviv, (1986) 40(i) P.D. 348, at 369–360; Kirshtein v. The Municipality of Haifa, (1985) 39(i) P.D. 272, at 274–276; The Municipality of Haifa v. Ha'Galil Winery, (1987) 41(iii)P.D 711, at 723–724. Doubts as to the Feitzer rule were raised only in a obiter dictum by Justice Shamgar in the Hamami case (supra, n. 19). However, the other judges preferred not to comment on this issue, and Justice Sh. Levin even hinted that he does not share Justice Shamgar's doubts (id. at 384–385). Justice Levin repeated his comment in Luft v. The Minister of Interior, (1988) 42(ii) P.D 157, at 165.

28 Feitzer, supra n. 7, at 651.

29 The six parcels expropriated were located in an existing residential neighborhood. In the past, parts of them — as well as parts from other parcels in the neighborhood — were transferred to the authority without compensation and without a formal expropriation process, as part of the subdivision of the area (see the description of the facts in Luft, supra n. 27, which.is a later chapter in this case). Years later, the authority wished to use the six parcels (that remained undeveloped) for the construction of a school. The other land owners in the neighborhood did not participate in this additional burden. Justice Landau approved this practice by giving a broad interpretation to the list of public purposes for expropriation without compensation: The expression “educational buildings” includes schools, and “health buildings” includes a hospital (id. at 662). Consequently, there is nothing to prevent the authority from requiring a few individuals to finance the costs of public services needed by the entire community.

30 See also Alternan & Vitek, supra n. 3, at 36–37; Alterman, R., “From Expropriations to Development Agreements: Developer Obligations for Public Services in Israel”, (1990) 24 Is.L.R. 28, at 42–43.Google Scholar The advantages and disadvantages of property taxes are beyond the scope of our discussion. We shall only note that there is much criticism of these taxes, that are not necessarily based on the individual's payment ability. See, for example, Aronson, J.R., Public Finance (1986) 482Google Scholaret seq. Therefore, the fact that property taxes exist is not a sufficient reason for adding an additional tax, that may reach 40% of the land's value. True, the “expropriation without compensation tax” is easy and cheap to collect. However, this advantage is overshadowed by fairness considerations against its imposition.

31 In contrast, traditional property taxes are imposed equally on all land owners who fall into a certain category. Even the exemptions and concessions included in them are a product of a comprehensive policy decision that certain groups should receive special consideration (see, for example, sec. 19 of the third schedule of the Planning Law; secs. 49–49H of the Land Appreciation Tax Law, 1963 (17 L.S.I. 193).

32 Compare with the powers of expropriation without compensation in the following legislation: sec. 24 of the Town Planning Ordinance, 1921 (Laws of Palestine, vol. 2, 1437); sec. 22 of the Land (Expropriation) Ordinance, 1926 (Laws of Palestine, vol. 2, 837); sec. 27 of the Town Planning Ordinance, 1936 (P.G., 1st supp., 157).

33 Alterman, R., Transferring the Burden of Supplying Public Services to Developers: Legal Aspects and Social Policy (Haifa, 1990) 7, 19Google Scholar; Grant, M., Urban Planning Law (London, 1982, with 1990 supp.) 333–334Google Scholar; Netzer, D., “Exactions in the Public Finance Context”, in Private Supply of Public Services: Evaluation of Real Estate Exactions, Linkage and Alternative Land Policies (Alterman, R. ed., New York, 1988) 36.Google Scholar

34 The question of whether public services should be directly financed by land owners or publicly financed through general taxation, is not discussed. One can claim that certain public services (such as education and health facilities) should be provided by the state, in order to assure their supply to everyone and that their supply does not depend on the ability to pay for them. At least in some cases, the burden imposed on land developers will be transferred to the consumers (buyers or tenants of housing units) through the price mechanism. See Ellickson, supra n. 11, at 425–434.

35 This category includes the prohibition on using the right of ownership to harm others, the duty to use one's property rights in good faith, the inability to bar passage through the airspace above the land, denial of the right to cause a nuisance, the non-recognition of private ownership in minerals and antiquities found in private land, etc. See also Tedeschi, G., “Servitudes in Gross”, (1977) 7 Mishpatim 456, at 483–484.Google Scholar

36 The principle of equal contribution will have general application if every individual wishing to develop his land will have to give his relative share in the land needed for certain public services. This principle will be reflected, indirectly, even in cases where a parcel is expropriated in its entirety (before it was developed) or for a purpose that is not included in the list of uses that allow expropriation without compensation. See text accompanying nn. 38–39 infra.

37 See text accompanying nn. 8–10 supra. Furthermore, in so far as an expropriation complying with the principle of equal contribution is a common practice, applicable to all land owners, the injury will be internalized in the price of the land.

38 See Alterman & Vitek, supra n. 3, at 64–66, 136–137; Elon, J. “The Relation Between the Ratio of Land for Public Services and the Density of Residential Areas”, (1976) 3 City and Region 76Google Scholar; Ziv, Y., “Land Expropriation for Public Uses in Israel”, (1977) 13 Karka (Land) 16Google Scholar; Ben-Elool, D., Yavin, Sh., Public Spaces in Suburban Planning (Tel-Aviv, 1976)Google Scholar; Alterman, R., Hill, M., Guidebooks to Planning Public Services (Haifa, 1977–1985).Google Scholar

39 This assumption may be based, for instance, on the provisions of the plan that preceded the plan designating the land for expropriation, or on the land uses that exist in similar parcels in the area.

40 In addition, there is need for reform in the Acquisition for Public Purposes Amendment Law. This law deals with recurring expropriations without compensation from the same parcel. Today, it provides a mechanical rule, that all the acquisitions without compensation made under different statutes should be added up, and that the total area taken cannot surpass the maximum extent set in any of the statutes. If among the acquisitions there was, for instance, an expropriation according to the Planning Law, the total area taken without compensation under all the acquisitions together may not exceed 40% of the original parcel. We propose that the mechanical consideration of past expropriations be exchanged for a meaningful one. Indeed, the principle of equal contribution also requires consideration of all expropriations without compensation from the same parcel. However, there is no fixed numeric ceiling limiting the extent of such expropriation. After adding up all the areas expropriated without compensation, one should assure that the total extent does not surpass the extent dictated by the principle of equal contribution. The maximum extent will differ from case to case.

41 For example: nature reserves, antiquities sites, airports, ports, docks, railroad stations, markets, slaughter houses, cemeteries and hospitals.

42 See also Alterman, supra n. 16, at 206–207.

43 Assume that the principle of equal contribution allows expropriation without compensation for a neighborhood park, but restricts the extent of land to be taken from a certain land owner to 25% (the figure reflecting the relative contribution of the land owner to the need for public services). In such circumstances, only 25% of the parcel may be expropriated without compensation. If the authority expropriates 40% of the parcel, it must pay for the remaining 15%. Similarly, the provisions of expropriation without compensation do not apply when the purpose of the expropriation itself does not comply with the principle of equal contribution (for instance, if the expropriation is meant to serve a large area, or if the remaining land owners who benefit from it are not required to give a similar contribution), or when the parcel is expropriated in its entirety.

44 For example, sec. 202(a) of the American Model Eminent Domain Code (U.L.A.) vol. 13 (St. Paul, 1986) requires that the condemnor make “[…] every reasonable and diligent effort to acquire property by negotiation”. Secs. 202(b) & 203 specify the procedure for such negotiations with the property owner (these provisions are an adaptation of the rules of the Federal Acquisition Policies Act; see the comment to sec. 202). In Israel, the Attorney General has issued guidelines on this subject: every request for the expropriation of land must state the reasons for its non-purchase by negotiation with the owner. In addition, the committee advising the Minister of Finance whether to grant a request for expropriation must consider, among other things, if an attempt to acquire the land by agreement was made. See the Attorney General Guidelines on the subject “Rules for Dealing With Expropriation Procedure” (no. 60.116) of September 1st, 1970. See also text accompanying nn. 57–59 infra.

45 In Haifa, for example, most of the lands were acquired by agreements: Alterman & Vitek, supra n. 3, at 116; Alterman, supra n. 30, at 66.

46 Mentel v. City of Petach-Tikva, (1968) 61 P.M. 361, at 366–368; Municipality of Petach-Tikva v. Mentel, (1968) 22(ii) P.D. 902, at 904. In this case, the practice of land dedication without an expropriation process did not receive consideration in calculating the compensation payments, because the land was designated for a cultural center for youth. Such a purpose was not included then in the list of public purposes that permit expropriation without compensation. See also Litvinski Bros. Partnership v. Municipality of Haifa, (1969) 20 P.M. 115, at 141.

47 Shikun Amami Co. v. Municipality of Ramat-Gan, (1981) 35(iii) P.D. 295, at 299–300.

48 In the Shikun Amami decision, land was transferred by agreement for roads and public open space. As part of the agreement, the authority changed the designation of part of the land remaining in private ownership from nature reserves to construction. After many years, the designation of the land transferred to the authority was changed to commercial use, and was sold to private companies for the construction of a diamond stock-exchange. It may be that one of the reasons for the rejection of the land owner's appeal was the courts impression that he suffered no injustice. This is because the agreement provided not only for a dedication of land by the property owner, but included a waiver by the authority of a nature reserve designation and permission to build more densely on the remainder. The court did not examine whether full non-monetary value was indeed given for the land dedicated by agreement (there is no assurance that full consideration was given because the property owner dedicated land above the maximum extent permitted then by the law. It is possible that the change in designation from nature reserves to construction was meant to compensate him only for the increase in the extent of uncompensated taking of land, and that no non-monetary compensation was given for the 25% that were then permitted to expropriate without compensation). If the property owner received full value for the land taken, sec. 196 does not apply at all, but sec. 195 applies (that grants a right of pre-emption, in certain cases, to land owners whose land was expropriated with compensation). However, the court rejected the application of sec. 195 as well, because (among other reasons) the land was acquired without compensation. Be that as it may, the court laid down a general rule denying the application of sec. 196 whenever land is taken without recourse to an expropriation process. For a similar attitude regarding the pre-emption provisions that were included in the Town Planning Ordinance, 1936 see Velman v. The Minieter of Interior, (1962) 16 P.D. 766, at 768–769.

49 However, the courts ruled that though this practice is legally possible, It leads to unacceptable results. Therefore, the discretionary authority to grant “ex gratia” compensation for “hardship”, according to sec. 20(2)(c) of the Acquisition Ordinance, must be employed: Biderman v. The Minister of Transportation, (1961) 15 P.D. 1681, at 1689–1691.

50 See Luft, supra n. 27, at 166. Sec. 190(a)(2) of the Planning Law provides that the authority in the Acquisition Ordinance to grant ex gratia compensation applies to expropriations pursuant to the Planning Law.

51 In the Habani case the court expressed the view that since these are ex gratia payments, the land owner is not entitled, in principal, to indexation of the compensation: Habani v. The State of Israel, (1980) 34(iv) P.D. 169, at 172, 175. In the Luft decision (n. 27 supra), the court ordered the authority to reconsider if the facts of the case require the grant of hardship compensation. The Minister of Interior decided that such compensation was not required, and his decision was challenged in the Supreme Court. The court ruled that the petitioners suffered “hardship” as a result of the taking of part of their land without compensation years before the expropriation, and fixed the amount of compensation according to its discretion, and offerred no explanation for the amount it chose. One cannot know if the measure of compensation was fixed according to the economic damage caused, or if the court awarded some global sum that seemed fair and reasonable to it. See H.C.J. 477/89 Luft v. The Minister of Interior (unpublished).

52 Zlosky v. Director of Land Appreciation Tax, (1977) 31(ii) P.D 403.

53 Ovadia v. Director of Land Appreciation Tax, (1979) 33(iii) P.D. 669, at 671–672.

54 Kamar, supra n. 7, at 86–87; Alterman, supra n. 30, at 66–69.

55 Alterman, supra n. 30, at 66.

56 Sec. 190(a)(1) of the Planning Law, final clause.

57 Sec. 190(a), first clause, of the Planning Law, states that any issue not specifically provided for in the Planning Law shall be governed by the provisions of the Ordinance from 1943.

58 See also form A in the Acquisition Ordinance's schedule, specifying the notice that should be sent to the land owner. The notice states that the land is required for public purposes and that the Minister of Finance “[…] is willing to negotiate for the acquisition of the said lands”.

59 In the Luft case, Justice Shamgar did not decide the question if sec. 3(2) of the Acquisition for Public Purposes Amendment Law applies to land transferred by agreement, and if such a consentual dedication should be taken into consideration when determining the maximum area that can be expropriated without compensation. This issue was not decided because Shamgar ruled that even if dedications by agreement are not considered expropriations, they are relevant to the decision of whether a recurring taking from the same land should entitle their owner to ex gratia compensation for “hardship”. As we explained above, this question ehould be answered in the afilrmative. An affirmative answer is important not only for the applicability of the Acquisition for Public Purposes Amendment Law (that deals with recurring expropriations without compensation), but also for all the other protections and rights granted in various statutes to people whose land was taken for public purposes.

60 Our conclusions can be easily implemented as regards the legislation dealing with acquisition for public purposes. However, the relevant tax legislation may need to be amended so that the tax credits and exemptions can apply to land that was not acquired through a formal expropriation process. Sec. 48C of the Land Appreciation Tax Law explicitly speaks of a “sale of a right in land by way of expropriation”. Sec. 65 deals with “an exchange of land pursuant to an order of a competent authority made under any law”. In the first case, one may claim that the expression “expropriation” be interpreted according to the acquisition laws that, as explained, apply to acquisitions by agreement as well. In the second case, it is harder to claim that a contract for an exchange of land is a transfer “pursuant to an order of a competent authority”. In so far as there is justification for tax concessions when land is formally expropriated, such justification exists in the absence of a formal process as well.

61 This adverse impact may be expressed in terms of requirements for new public services, imposition of an additional burden on existing facilities (more traffic in roads, more congestion in kindergartens), or other negative externalities (such as more noise and air pollution).

62 It is not always efficient or possible in practice to eliminate the damage. This idea is rooted in nuisance law, which protects only against damage that is above a certain threshold that every person in society must bear, and may award compensation instead of an order to cease the harmful activity.

63 The loosest connection between the conditions in the building permit and the public needs of the development is required in the State of Californie. For example, a developer may be required to widen existing roads outside his land, even if this improvement is based on the anticipated future needs of the city (such as estimated future population growth), and although the widening will benefit the whole city and not only the burdened development: Ayers v. City of Los Angeles, 207 P2d 1, 7–8 (1949). The developer may be requested to bear a burden that exceeds his relative share in the demand for the public use (Associated Home Builden v. City of Walnut Creek, 484 P2d 606, 610–613 (1971)). Nevertheless, even California does not dispose of the condition that the burdened land contribute to some extent to the need for additional public services. See Falik, W.A. & Shimko, A.C., “The Taking Nexus: The Supreme Court Forges a New Direction in Land-Use Jurisprudence”, (1988) 23 Real Property Probate & Trust J. 1, at 25–27.Google Scholar The most stringent standard is required in the State of Illinois. The burden on the developer must be a result of a need for public uses that is specifically and uniquely attributable to his project only: Pioneer Trust & Sav. Bank v. Village of Mount Proepect, 176 NE2d 799, 801–802 (1961). See also Frank Ansuini lne. v. City of Cranston, 264 A2d 910, 913–914 (1970). In other states, such as Florida, there is a requirement of rational or substantial connection between the burden on the developer and the anticipated needs of his development. According to this standard, land owners should not be required to contribute beyond their relative share in the public services that they are required to subsidise, and should not bear the costs of benefits that others will enjoy: Contractors and Builders Assoc. v. City of Dunedin, 329 So2d 314, 320–321 (1976); Callies, D.L. & Grant, M., “Paying for Growth and Planning Gain: An Anglo-American Comparison of Development Conditions, Impact Fees and Development Agreements”, (1991) 23 The Urban Lawyer 221, at 233–234.Google Scholar A similar test was adopted in sec. 2–103(3)(a) of the Model Land Development Code, Complete Text and Commentary, (Washington, 1976); hereinafter MLDC), that states that the burdens must be “[…] of a quality and quantity no more than reasonably necessary for the proposed development”. For a survey of the nexus requirement in different American states see also Smith, R.M., “From Subdivision Improvement Requirements to Community Benefit Assessments and Linkage Payments: A Brief History of Land Development Exactions”, (1978) 50 Law & Cont. Prob. 6, at 11–14.Google Scholar

64 Nollan v. California Coastal Commission, 107 S.Ct. 3141, 3147–3149 (1987).

65 The Fifth Amendment states as follows: “[…] nor shall private property be taken for public use, without just compensation”.

66 Loretta v. Teleprompter Manhattan CATV Co., 102 S.Ct 3164, 3176–3178 (1982).

67 Michelman, F., “Takings, 1987”, (1988) 88 Colum. L.R. 1600, at 1606–1614CrossRefGoogle Scholar; Note, “Municipal Development Exactions, the Rational Nexus Test, and the Federal Constitution”, (1989) 102 Harv. Lit. 992.

68 Heyman, I.M. & Gilhool, T.K., “The Constitutionality of Imposing Increased Community Costs on New Suburban Residents Through Subdivision Exactions”, (1964) 73 Yale L.J. 1119, at 1130–1131, 1134–1140.CrossRefGoogle Scholar The Nollan decision has adopted, in fact, the intermediate nexus standard of states such as Florida, and rejected the less restrictive and generous standard of the state of California (see n. 63 supra).

69 For a survey of the historical development in America, see Alterman, R., “Exactions American Style: The Context for Evaluation”, in Private Supply of Public Services, supra n. 33, at 3, 4–8Google Scholar; J.C. Jurgensmeyer, “The Legal Issues of Capital Facilities Funding”, in Private Supply of Public Services, id., at 61.

70 Callies & Grant, supra n. 63, at 236–237. There are economic and sociological studies that negate the existence of a connection between the construction of office buildings and changes in the housing market. See Porter, D.R., “Pain Before Gain: Developer Views on Housing Linkage Programs”, in Private Supply of Public Services, supra n. 33, at 163, 157.Google Scholar

71 Smith, supra n. 63, at 14–24; Callies & Grant, supra n. 63, at 234; sec. 2–103(3)(b) of the MLDC. On ways to calculate the relative monetary burden of each individual in the funding of the public service, see J.C. Nicholas, “Designing Proportionate-Share Impact Fees”, in Priuate Supply of Public Services, supra n. 33, at 127.

72 Of course, the condition in the building permit might also be a product of negotiations and agreement between the land owner and the planning authority. For a possible practical consequence of the distinction between the two cases, see text accompanying nn. 148–150 infra.

73 This type of legislation is especially developed in California, but is found in other states as well, such as Florida, Hawai, and Nevada. A central reason for the formation of these contracts is the legislation's provision that, subject to certain exceptions, future changes in planning and zoning laws will not affect the agreed upon development. In this way, individuals are immune from future changes that restrict the development possibilities of their land, and in exchange they agree to grant benefits to the public. This immunity from changes in land-use regulations bears much importance, since in states like California the right to compensation for injuries to development rights is very limited. In addition, the usual rule is that only when the project reaches a relatively advanced stage of implementation, the developer has a vested right preventing changes. In contrast, the new legislation grants protection against changes from the time of the contract's formation. See Cowart, R.H., “Negotiating Exactions Through Development Agreements”, in Private Supply of Public Services, supra n. 33, at 219, 220–223, 227–228Google Scholar; Williams, , American Planning Law — Land Use and the Police Power (vol. 5, 1990), ch. 154AGoogle Scholar; Callies & Grant, supra n. 63, at 239–241.

74 Cowart, id. at 219–220, 226.

75 Secs. 70 & 106 of the 1990 law have replaced secs. 29 & 52 of the Town and Country Planning Act, 1971. The formulation of the new sections is similar to the former sections, and therefore one can still rely on their interpretation by courts and commentators in analyzing the new sections. Sec. 106 has been amended in the Planning and Compensation Act, 1991. This amendment allows developers not only to enter into contracts with planning authorities, but to undertake unilateral obligations regarding the land as well. Both techniques are called “Planning Obligations”. The amended section (together with secs. 106A–106B) contains much more details and provisions as to the content of planning obligations, the procedure for creating them, and the way to enforce, modify or discharge them. The amendment has made the content of planning obligations, to some extent, broader and more flexible. However, it seems that the amendment has brought about no change in the basic conception of the limits of planning agreements.

76 See Newbury District Council v. Secratery of State for the Environment, [1981] A.C. 578, 599–600, 626–627; Callies & Grant, supra n. 63, at 226–227.

77 D.O.E. Circular No. 1/85, para. 11; Grant, supra n. 33, at 334–336; Scarse, A.J., “Planning Conditions—The Law and the Policy Context”, (1987) J.P.& Envt. L. 333.Google Scholar

78 A condition will be regarded as “necessary” if planning permission would have to be refused if that condition were not imposed. In such a case, the condition is obviously very closely related to the requested development and is intended to solve a real problem that the development creates. If the condition is not necessary in this sense, special and precise justification for its imposition must be given. In addition, the condition must be tailored to solve the planning problem and the authority may not impose a burden that exceeds that necessary (para. 12–13 of the 1985 guidelines). A condition will be struck down for irrelevance to planning if it is intended to achieve a non-planning purpose, or ifit is not within the planning authority's powers (Grant, supra n. 33, at 337–338). The requirement that the condition be precise and that it be enforceable are related to one another: a very general or vague condition, that does not state the specific burdens imposed on the developer is not clear and is therefore difficult to enforce. For example, a condition that the developer “improve the access roads to the land if the growth of traffic will make it desirable” is this type of condition (see para. 22–28 of the 1985 guidelines).

79 Pyx Granite Co. Ltd. v. Ministry of Housing and Local Government, [1958] 1 Q.B. 554, 572; Fawcett Properties Ltd. v. Buckingham County Council, [1961] A.C. 636, 674, 678–679, 685; Grant, supra n. 33, at 338–342; para. 20–21, 29–35 of the 1985 guidelines; D.O.E. Circular No. 22/83, para. 4–8.

80 Grant, supra n. 33, at 342–346; Cailles & Grant, supra n. 63, at 227; M. Loughlin, “Planning Gain: Law, Policy and Practice”, (1981) 1 Oxford J.L. Stad. 61, at 95–96. For the striking down of a condition requiring a developer to construct a road because it was intended for the use of other lands as well, see Hall & Co. Ltd. v. Shoreham-by-Sea U.D.C., [1964] 1 All E.R. 1, 7–10, 17–18. See also City of Bradford Metropolitan Council v. Secretary of State for the Environment, [1986] J.P.L. 598, at 600–601; M.J. Shanley Ltd. v. Secretary of State for the Environment, [1982] J.P.L. 380–382.

81 Britannia (Cheltenham) Ltd. v. Secretary of State for the Environment, [1978] J.P.L. 554, 557–558.

82 Grant, supra n. 33, at 344–345, 347–348, and pp. 106–109 of the 1990 supp.; para. 34 of the 1985 guidelines.

83 The court stated in Bradford that there is no significance to the fact that the developer consented to the condition in the permit. If the condition was beyond the powers of the planning authority to impose it, then the developer's agreement cannot give the needed authorization (However, the fact that the developer agreed to the condition or even initiated it can serve as evidence to its not being unreasonable). See supra n. 80, at 599–600. A similar statement is included in para. 35 of the 1985 guidelines, and is explained by the fact that the conditions run with the land, and therefore bind the successors to the land owners who agreed to them.

84 Grant, supra n. 33, at 367, 374–377, and pp. 112–115 to the 1990 supp.; Callies & Grant, supra n. 63, at 245–248.

85 Bradford, supra n. 80. In this decision, the court invalidated a condition in a permit requiring the developer to widen existing roads, because the traffic problem had already existed prior to his project. The court also examined the question of whether such a requirement could have been included in an agreement, and answered in the negative. It is not possible, even by agreement, to impose all the costs on one developer. See also, R. v. Westminster City Council, ex parte Monahan, [1989] 2 All E.R. 74, at 100. There is also case law stating that the restrictions on permit conditions do not apply to development agreements. See the cases cited in Grant, supra n. 33, at 116 of the 1990 su pp.; Callies & Grant, supra n. 63, at 247. However, these cases did not directly address the question of whether the nexus requirement may be totally dispensed with.

86 Alder, J., “Planning Agreements and Planning Powers”, (1990) J.P. & Envt. L. 880, 882–884, 886–887Google Scholar; Redman, M., “Planning Gain and Obligations”, (1991) J.P. Envt. L. 203.Google Scholar The Department of the Environment published in 1991 guidelines concerning sec. 106 (in its new wording). These guidelines show that even if the amendment to sec. 106 has somewhat broadened the possible content of planning agreements, it has not brought about a change in the basic concept requiring a nexus between the burden and the development, and that the extent of the burden be reasonably related to the needs or impacts of the development: see Department of the Environment, Circular No. 16/91, especially para. B1, B7–B9. Similar restrictions apply to unilateral obligations by the developer. The latter instrument is needed when negotiations with the authority have failed, or when it demands unreasonable requirements. The individual may submit a unilateral offer of his own containing burdens that will enable him to receive a building permit (id., para. B11–B12). However, the guidelines clarify that the burdens considered necessary to the development include not only “physical” needs (such as access roads or parking places), but also “social” needs (such as supplying the educational, cultural or recreational needs of the project's residents. See para. B8, sub-sec. (3) & (5)). To sum up, the guidelines give more freedom as to the matters that can be included in planning agreements, but do not dispense with the requirement of a substantial nexus between the burden and the development. For preliminary discussion of the 1991 amendment and the guidelines concerning it, see Lichfield, N., “From Planning Obligations to Community Benefit”, (1992) J.P. & Envt. L. 1103, at 1104–1106Google Scholar; Purdue, M., Healey, P., Ennis, F., “Planning Gain and the Grant of Planning Permission: Is the United States' Test of national Nexus' the Appropriate Solution?”, (1992) J.P. & Envt. L. 1012, at 1016–1020.Google Scholar

87 See the following empirical studies: Jowell, J., “Bargaining in Development Control”, (1977) J.P. & Envt. L. 414Google Scholar; Hawke, J.N., “Planning Agreements in Practice”, (1981) J.P. & Envt. L. 5Google Scholar; and the examples in Lichfield, N., “From Planning Gain to Community Benefit”, (1989) J.P. & Envt. L. 68, at 68–69.Google Scholar For different findings, see Henry, supra n. 5.

88 Fischel, W.A., “Introduction: Utilitarian Balancing andFormalism in Takings”, (1988) 88 Colum. L.R. 1581, at 1687–1688.Google Scholar

89 Some scholars distinguish between express contracts and conditions in permits, and allow a deviation from the nexus requirement only in the first case (see for example Grant, supra n. 33, at 367). As we explained before, there is no room for a sharp distinction betweon agreements and conditions as regards the degree of voluntarmesa involved in them. In both cases, the burdens are formulated against the background of the authority's monopolistic power to grant or deny building permits. In many cases, negotiations between the parties determine the content of the burdens, even in the cases where they are eventually embodied in a condition in a permit. For a possible practical consequence of the distinction between conditions and agreements, see text accompanying nn. 148–160 infra.

90 Alterman & Vitek, supra n. 3, at 116–117, 124, 153–159; Alterman, supra n. 30, at 63–64. There are a wide variety of non-monetary benefits that are granted by planning authorities: Authorization of plans that increase the value of the land, grant of planning concessions and permits for non-conforming use, waiver of expropriations, taxes or penalties for building offenses, and more: Alterman & Vitek, id., at 80, 88–114.

91 Heap, D., “The British Experience”, (1987) 50 L. & Cont. Prob. 31, at 37.CrossRefGoogle Scholar The article was written as part of a symposium on the subject of “Exactions: A Controversial New Source for Municipal Funds”, to which that issue of the law review was dedicated.

92 A higher cost would render the project unprofitable for the developer.

93 Fiechel, W.A., “The Economics of Land Use Exactions: A Property Rights Analysis”, (1987) 50 L. & Cont. Prob. 101, at 101–103.Google Scholar

94 Almost every construction causes some negative impact to its surroundings, by increasing to some extent congestion, noise, air pollution, etc. However, it is obviously not desirable or possible to prevent all negative effects. For instance, the costs of preventing relatively small injuries that are a common part of life in an urban society, might exceed the benefits of their eradication. When we say that the development has a detrimental impact on its surroundings, we assume an injury that is not included in the above category, that is to say, damage that should be prevented or mitigated. Construction that causes damage that is below this threshold, will not be considered for the purposes of this article as creating an adverse impact that justifies refusal or restriction of planning permission. In Ch. E.3.(b)(2) infra, we adress the question whether to permit a grant of benefits to the public when the development causes no such adverse effects.

95 This is a common argument in favor of waiving a strict nexus requirement: Fischel, supra n. 93, at 102–104; Alder, supra n. 86, at 886–387; Jewell, supra n. 87, at 429–430.

96 Grant, supra n. 33, at 376; Jewell, supra n. 87, at 432; Loughlin, supra n. 80, at 90–91; Ward, A.J., “Planning Bargaining: Where Do We Stand?”, (1982) J.P. & Envt. L. 74, 81, 83.Google Scholar

97 Cowart, supra n. 73, at 231; Heap, D. & Ward, A.J., “Planning Bargaining — The Pros and the Cons: or, How Much Can the System Stand?” (1980) J.P. & Envt. L. 631, at 636–637.Google Scholar For case law demonstrating that this problem exists in Israel as well, see ch. E.6.(c)(2) infra.

98 Lichfield, D., “Planning Gain — In Search of a Concept”, a paper presented in a conference titled Planning Gain After the Covent Garden Opera House (Henry Stewart Conference Studies, January, 1989).Google Scholar Most scholars do not mention or require this condition and suffice with the belief that the benefit graated by the developer will indeed equal the burden created by the development.

99 Ch. E.4. infra.

100 The assumption that the authority will not sufficiently consider the negative effects of the construction on its surroundings is based on a certain model of planning authorities' behavior. In relatively large cities, where the number of issues on the agenda of voters and politicians are many, or when the home-owner group is large, heterogenous and unorganized, there is a tendency of planning authorities to favor developers. In such circumstances, third parties might be injured from over-development of land. As we explained above, a nexus requirement prevents this distortion. In contrast, in relatively small cities or suburbs there is a bias in favor of existing home-owners who are the local voters, that are interested in exclusion and over-restriction of construction on undeveloped land. In these circumstances, the distortion operates in the opposite direction and harms developers of land. The nexus requirement succeeds in overcoming this problem as well. See ch. E.3.(b)(3) infra. For discussion of the various models as regards planning authorities' behavior, see Ellickson, supra n. 11, at 404–410; Fischel, supra n. 11, ch. 10. For a general theory of regulation, based on the assumption that the regulator is interested in maximizing political support, and therefore operates in favor of the group that grants him the most support, see Jarrel, G.A., “The Demand for State Regulation of the Electric Utility Industry”, (1978) 21 J.L. & Econ. 269.CrossRefGoogle Scholar

101 See, for example, Hirsch, W.Z., Law and Economics: An Introductory Analysis (New York, 1979) 36–37, 74–76Google Scholar; Freeman, A.D., “Give and Take: Distributing Local Environmental Control Through Land-Use Regulation”, (1976) 60 Minn. L.R. 883, at 887–892, 909, 951–962Google Scholar; Henderson, A., “Land Use Controls in Houston: What Protection for Owners of Restricted Property?”, (1987) 29 South Texas L.R. 131Google Scholar; Mixon, J., “Neighborhood Zoning for Houston”, (1990) 31 South Texas L.R. 1Google Scholar; Costonis, J. J., “Fair Compensation and the Accommodation Power Antidotes for the Taking Impasse in Land Use Controversies”, (1975) 75 Colum. L.R. 1021Google Scholar, at 1028–1031.

102 The examples brought by Fischel to prove the inefficiency of the nexus requirement and the preferability of free negotiation between the parties are unconvincing and tendentious. For instance, Fischel assumes that the developer will be required to give less benefits to the public in the absence of a nexus requirement, than if he is forced to solve the problem created by his construction. (Fischel, supra n. 93, at 104–106). Why should we assume that the authority shall suffice with benefits of a lesser value than the damage caused by the developer? The law permits the authority to refuse building permission for constructions that injure their surroundings. Therefore, it is reasonable to assume that the authority shall demand an unrelated benefit that at least equals in value to the adverse impact of the development (up to the full amount of the developer's profit). Indeed, there will be cases in which the authority — knowingly or negligently — shall suffice with a benefit that is smaller than the detrimental impact caused by the construction (though this should not be assumed to be the usual case). However, in such cases the authority abuses its public duties, because it neglects the interests of third parties. As explained above, we define “detrimental impact” as an injury that considerations of fairness or efficiency require preventing or mitigating. If the damage does not cross this threshold, the nexus requirement will also not demand its prevention or mitigation. We believe that the nexus requirement affords better protection for the interests of all parties. On the one hand, it assures that an excessive burden is not imposed on the developers, and on the other hand, it protects third parties against injury.

103 Many examples show that litigation of excessive development burdens is un-profit-able for the developer. Instructive testimony was offered by a Californian developer. The authority required him to pay for the replacement of an old bridge with a new one. The bridge had no relation to his project, and the authority admitted that it was deficient and would have been replaced at public expense in a couple of years. Despite these facts, the developer agreed to finance a new bridge and did not try to challenge this demand. He explained his decision by the fact that it would have taken him six months to exhaust his administrative remedies, and approximately two more years until the end of the appeal process in court. He estimated that his case would have won, but the delay would have “killed” his project. He claimed that the payment required by the authority was about equal to the costs of a six-month delay in the project… See E.A. Deakin, “The Politics of Exactions”, in Private Supply of Publie Goods, supra n. 33, at 96, 106. In England as well, authorities customarily use assessors to estimate the project's profits in order to determine the extent of its participation in these profits. See Laughlin, supra n. 80, at 72. See also Reade, E.J., “Section 62 and Corporatism in Planning” (1982) J.P. & Envt. L. 8Google Scholar, at 14; Porter, supra n. 70, at 154; Ward, supra n. 96, at 83; Grant, supra n. 33, at 376.

104 See Morosoff, N.V., “Take My Beach Pleasel: Nollan v. California Coastal Commission and a Rational Nexus Constitutional Analysis of Development Exactions”, (1989) 69 Boston U.L.R. 823Google Scholar, at 858–860; Susskind, L. & McMahon, G., “Refraining the Rationale for Downtown Linkage Programs”, in Private Supply of Public Services, supra n. 33, 203, at 211–212Google Scholar; Alder, supra n. 86 at 881; Ellickson, supra n. 11, at 428–429, 432–434. Ellickson explains the circumstances in which the authority will tend to favor home-owners against developers who are not residents-voters in the local elections. In these circumstances, the authority will impose excessive restrictions on development and condition their removal on the grant of benefits to the public by the developer. In different circumstances, the developers will be the ones to enjoy the possibility of shifting authorities' decisions in their favor (id., at 404–410).

105 See ch. E.3.(b)(3) infra.

106 See Grant, supra n. 33, at 106 of the 1990 supp. There are writers who emphasize that it is prohibited to require a benefit when the development does not adversely affect its surroundings. A developer burden may not be imposed when it is possible to grant on unrestricted or unconditioned building permit: Alder, supra n. 86, at 887; Jowell, supra n. 87, at 429. They do not require an equally strict rule in the case were a development causes some detrimental impact, but the benefits required from the developer exceed the value ofthat impact. In our opinion, it is desirable in both cases to prevent the imposition of excessive burdens for the benefit of the public.

107 Alterman & Vitek, supra n. 3, at 147–148; Alterman, R. & Gil, I., Betterment Taxation in Israel (Haifa, 1990) 18Google Scholar; Laughlin, supra n. 80, at 95–96.

108 Heap & Ward, supra n. 97; Reade, supra n. 103; Susskind & McMahon, supra n. 104.

109 See text accompanying nn. 9–10 supra; Denman, D.R., The Place of Property (London, 1978) 133–134Google Scholar; Michelman, supra n. 11, at 1182–1183; Ellickson, supra n. 11, at 420–421, 428–430, 438–440; Fischel, supra n. 11, at 13.

110 Susskind & McMahon, supra n. 104, at 208, 216; Reade, supra n. 103, at 14.

111 The costs of granting the benefits will be divided between developers and consumers according to the elasticity of demand for the units constructed (this depends, for instance, on the availability of close substitutes for the residential area in question and the extent of consumer mobility). The more the demand is inelastic, the more the cost will be passed on to purchasers: Ellickson, supra n. 11, at 399–403, 425–427, 430–431.

112 See Ellickson, supra n. 11, at 430–436.

113 Ch. E.3.(b)(l) supra.

114 Ch. E.3.(b)(2) supra.

115 For the limitations of judicial review see Alder, supra n. 86, at 881; Morosoff, supra n. 104, at 860–863.

116 See also Ellickson, supra n. 11, at 404–410.

117 The authority might disregard the injury to third parties when it assumes that financial and organizational obstacles shall prevent them from challenging its actions in court. Similarly, it can require excessive burdens from developers when it estimates that the costs of litigation and the consequent delay in construction are higher than the cost of the burden.

118 The scope of this reduction is unclear, because there will not always be alternative benefits that are preferable to dealing with the adverse effects of the development.

119 Heap & Ward, supra n. 97, at 13–14.

120 A similar argument can be raised as regards compensation by granting development rights (Transferable Development Rights). Seemingly, such non-monetary compensation cannot be legitimate: if the addition of development rights does not harm third parties (for example, because it does not increase congestion beyond that desirable by planning considerations), then the developer has a right, from the outset, to build more densely. Therefore, the addition of development rights cannot serve as compensation for an injury to other rights of the individual and he should be given additional compensation. In contrast, if the addition of development rights exceeds the standards of the area, then it injures third parties and should be prohibited. This argument should be rejected for a similar reason to the one suggested above, that acknowledges the existence of a range of reasonable planning decisions.

121 Similarly, there is fear that a developer required to grant a benefit unrelated to his project, is required in fact to transfer part of his profits to the authority. But it may be that he is not injured at all, because the value of the benefit does not exceed the value of the impact created by his development, or that he received full non-monetary compensation for the excessive benefits.

122 Alterman & Vitek, supra n. 3, at 76–77, 115–120, 130; Laughlin, supra n. 80, at 91–92.

123 However, this indication may be refuted by the facts of the case. One should not assign too much importance to the distinction between a condition in a contract and in a permit. The former is not necessarily a manifestation of free will and the latter not necessarily an example of coercion. See ch. B. supra.

124 Usually, the authority will be the one that has to prove the legality of its actions, but in special cases the onus will be imposed on others. If, for example, the neighbors of the land at issue challenge the proposed construction by claiming that the authority did not require the developer to alleviate its impact on the surroundings, it may well be that the developer (who is interested in the enforcement of the agreement) will have to convince the court that his contract with the authority should be validated.

125 The main difference between our proposal and Lichfield's proposal (text accompanying n. 98 supra) is that we assign more importance to the evidentiary and institutional considerations, and suggest that they be dealt with by shifting the onus of proof.

126 Ch. C.3.(a) supra.

127 The existence of non-monetary compensation militates against full monetary compensation. In such circumstances, full monetary compensation is over-compensation. This idea is expressly adopted in sec. 12(g) of the Acquisition Ordinance.

128 See text accompanying an. 38–39 supra.

129 For discussion of the question whether the expropriation process can be exchanged for a contractual process that complies with all the conditions of the equal contribution principle, see Ch. D. supra. We concluded that such a practice should be permitted, on the condition that the individual enjoy all the protections and rights that the law grants him when an expropriation process is executed. We shall now examine whether contracts and permits can be used to bypass the restrictions on the power of expropriation without compensation.

130 Bracha, B., Administrative Law, vol. 1 (Tel-Aviv, 1987) 35Google Scholar; Barak, D., The Contractual Liability of Public Authorities (Tel-Aviv, 1991) 97.Google Scholar

131 Compare with secs. 7 & 195 of the Municipalities Ordinance [New Version] (1 L.S.I. [N.V.] 247); sec. 10 of the Local Council Ordinance [New Version] (1 L.S.I. [N.V.] 315).

132 See secs. 258, 191, 197 & 263 of the Planning Law.

133 Municipality of Bnei-Brak v. Rotbard, (1991) 45(iv) P.D. 102, at 127–128; Lehavi v. The Local Planning and Building Commission of the Sharon Shore, (1986) 40(iv) P.D. 660, at 664–665 (relying on The Greek Orthodox Patriarchate of Jerusalem v. Municipality of Ramla (1982) 36(iii) P.D. 670, at 673–675).

134 This question was reserved for further study in the Lehavi (id., at 665–666) and Rotbard cases (id., at 128–129). In the Rotbard decision, Justice Barak mentioned a more far reaching possibility; that the planning authority is a legal personality with a general legal capacity to act in the private sphere and therefore can enter into any contract, and not only contracts related to its functions (id., at 128).

135 35 L.S.I. 370. A similar provision appeared in sec. 26 of the Interpretation Ordinance [New Version]. For a view that auxiliary powers include the making of contracts within the scope of authority, see Barak, supra n. 130, at 97–98.

136 See text accompanying an. 57–59 supra.

137 See text accompanying nn. 30–31, 37–38 supra. If our proposals to repeal the 40% ceiling and to determine the extent of expropriation according to the principle of equal contribution are adopted, then there will be no need to use contracte in order to get more land from developers whose participation should exceed 40%. The principle of equal contribution will allow expropriation to the required high extent. The question is, will there remain then any need for recognizing the authority's power to make contracts that deviate from the equal contribution principle? In our opinion, the answer should be affirmative. There is no reason to preclude the flexibility in choosing public goals that contracts permit, so long as it is proven that the interests of the land owner and other people are not injured. See also text infra.

138 That equals the value of the deviation from the burden permitted by the principle of equal contribution.

139 Another condition is that, if an additional part of the land will be expropriated in the future, the informal dedication without compensation shall be taken into consideration. The authority will not be allowed to expropriate additional land without compensation, unless the “quota” dictated by the principle of equal contribution has not yet been filled. The contractual dedication is a substitute for a formal expropriation process, that is restricted by the law to certain purposes. But the restriction regarding the equality of economic burden cannot be bypassed. As explained above, the authority may not use its monopoly in granting building permits to take the developer's profits.

140 For the absence of such general authorization in current Israeli law, see Alternan, supra n. 30, at 69. However, there are specific statutes that empower local authorities to collect money in exchange for rendering certain services. Sec. 17 of the Local Authorities (Sewerage) Law, 1962 (16 L.S.I. 81) permits the enactment of bylaws regarding the collection of a sewerage installation levy from every property owner serviced by it, for coverage of the installation costs. Sec. 18 sets forth rules as to the calculation of the levy according to the size of the land and the buildings on it, that is, it tries to adjust the rates to the extent of the owner's use of the sewer. Sec 37 grants similar powers to collect a fee for the maintenance costs of the sewer. See also Israel Electric Co. v. The Local Municipality of Nesher, (1979) 33(i) P.D. 757, at 762–764; Na'aim v. Municipality of Tel-Aviv-Jaffa, (1989) 43(iv) P.D. 156; Even Sid Industry v. Local Municipality of Nesher, (1979)(i) P.M. 236, at 239–241. A general authorization to collect charges for public services is contained in the Municipalities Ordinance [New Version]. Sec. 250 states that the city council may enact bylaws to assist it in carrying out its functions, and sec. 251(1) permits including in bylaws provisions “for the payment of any fees or levies or contribution by any person […] in connection with such matters as referred to in section 250”. The municipality's many powers are detailed in sec. 249. Among other things, it can build and maintain public buildings and do other public works (sub-sec. 1), provide public parks and gardens (sub-sec. 8), and construct public streets and pavements (sub-secs. 11–12 and sec. 251C of the Ordinance). Sec. 249(29) contains general authorization to “do such acts as may be necessary for the conservancy of the municipal area, preservation of the public health therein and the safety thereof, and, with the permission of the Commissioner, to establish, maintain and contribute towards public health and educational institutions (see also sec. 14 of the Local Councils Ordinance [New Version]).

The courts have discussed the legality of bylaws enacted under the general authorization in the Municipalities Ordinance mainly in regard to street and pavement charges. They ruled that a distinction should be made between levies and contributions and taxes. The latter is not included in the authorization of the Municipalities Ordinance. A tax is an obligatory payment that is imposed without a direct link to a service given to the individual tax payer. In contrast, levies and contributions are collected for a certain service given by the authority to the payer, and there must be a reasonable connection between the individual's enjoyment and the payment required from him (though the measure of the payment does not have to be equal to the value or cost of the service). See The Municipality of Herzelia v. Reshef, (1983) 37(iv) P.D. 57, at 62–64; Supersol v. Union of Cities of the Ramat Gan, Bnei-Brak and Givaataim District, (1983) 37(iv) P.D. 403, at 406–408; Werner v. Municipality of Natanya, (1968) 22(ii) P.D. 201; Municipality of Jerusalem v. Lerman, (1979)(i) P.M. 309; Golan v. Municipality of Natanya, (1988) 42(iv) P.D. 12. It is highly doubtful if the provisions of the Municipalities Ordinance can be used to enact bylaws permitting the exchange of expropriation of land in-kind with an equivalent monetary fee. The expropriation power is granted in other statutes and to different authorities. In addition, it is hard to see how these bylaws can be formulated in order to exempt from payment individuals whose land was expropriated in-kind without compensation. Parenthetically, we note that the intensity of nexus required by the above charges and the extent of nexus that should be required in planning agreements or conditions in building permits are not identical. True, these charges reveal that the legislature saw fit to demand a certain connection between the service given to an individual and the measure of the levy or contribution that he must pay. But these payments include a tax component, because they do not only reflect the price of the service. Imposition of payments that have a tax component can be made only with the express authorization of the legislature. Such authorization was given, for example, in sec. 261 of the Municipalities Ordinance. In other words, a stricter nexus should be required for conditions and agreements that are not made according to an authorization similar to that in sec. 251.

141 Sec. 190(a)(1), final clause, of the Planning Law prohibits the expropriation of part of the land only (even with compensation) if, consequently, the value of the remainder will be reduced. The planning authority must expropriate the parcel in its entirety, abandon the expropriation, or amend the plan so that the partial expropriation shall not damage the value of the remainder.

142 This problem will not arise if large areas of land are in the hands of one person or body, and usually this will be the State. In other cases, the problem can be overcome by a reparcellation process according to secs. 120–128 of the Planning Law. However, these solutions are not available or sufficient in all cases.

143 Compare with Alterman, supra n. 30, at 69, who apparently thinks that contracts for monetary payments are not legally valid in Israel.

144 In America, for instance, the case law requires a rational nexus between the burden created by the proposed construction and the size of the monetary fee and the designation of the sums collected. See Callies & Grant, supra n. 63, at 234; and our discussion in Ch. E.2.(a) supra.

145 K.T., at 1841.

146 The regulation mentions matters such as the quality of building materials, the external appearance of the building, its air raid shelter, preservation of security measures throughout construction, and so forth.

147 It seems that this is also the opinion of Alterman & Vitek (supra n. 3, at 93–94).

148 Sec. 20 of the Acquisition Ordinance and sec. 190(a)(1) of the Planning Law. An exception to this is expropriations that are part of a reparcellation process. As explained before (n. 18 supra), discussion of this special process is beyond the scope of the article.

149 Sec. 8 of the Land Law, , 1969 (23 L.S.I. 283)Google Scholar; sec. 5(a) of the Gift Law, 1968 (22 L.S.I. 113).

150 During the years, the elements necessary for fulfilment of the writing requirement have been eroded. Today, the signature of the seller or gift giver is not necessary. However, it can be claimed that the document must include the land owner's contractual undertaking to transfer title to the authority. See Tedeschi, G., “Irrevocable Power of Attorney to Execute a Gift to a Third Party”, (1989) 19 Mishpatim 205Google Scholar, at 209–211 (compare with Justjce Bach's opinion in Tukan v. Alnashashibi, (1991) 45(v) P.D. 410, at 423, that it is sufficient that the document clearly testifies to the existence of an undertaking to transact. The other Justices did not comment on this issue). A similar problem exists when the dedication of land is embodied in the plan only (the situation may be different in the case of a detailed plan that was initiated and submitted by the land owner himself). On the writing requirement see also Shalev, G., The Law of Contract (Jerusalem, 1990) 289–290Google Scholar; Friedmann, D. & Cohen, N., Contracts, vol. 1 (Jerusalem, 1991) 433–434Google Scholar, 448–451, 456; Rabello, M.A., The Gift Law in Commentary on Laws Relating to Contracts, Tedeschi, G. ed., (Jerusalem, 1979) 103–105.Google Scholar

151 See the empirical study of Alterman & Vitek, supra n. 3, at 152–159.

152 See text accompanying nn. 100–101, 102–104 supra.

153 Meller v. Hatzoizra, (1971) 74 P.M. 250.

154 The facts of the case are not clear on the question whether the land dedicated exceeded the maximum extent permitted by the law for expropriation without compensation (although it is clear that additional areas were already given for roads). In addition, we do not know if the value of the additional development rights granted to the developer and the extent of cost saving as a result of the permission to build one building instead of two (as the prevailing plan required), equal the value of the land dedicated without compensation. Nevertheless, the impression from reading the decision is that the developer received full value for the land transferred.

155 Meller, supra n. 153, at 260–262. However, the court concluded that the residente failed to prove that the kindergarten constituted a nuisance (id., at 258). This may explain why the court rejected the residents's request to invalidate the lease contract between the authority and the developer.

156 For instance, if the prevailing plan was flexible and granted discretion to increase development rights in certain circumstances, or if the authority would have amended the existing plan.

157 See text accompanying nn. 96–99 supra.

158 Halperin v. Koochinski, (1961) 15 P.D. 705.

159 Shneider v. The Local Planning and Building Commission of Jerusalem, (1978)(i) P.M. 210.

160 Halperin, supra n. 158, at 711–714. The court was willing to assume that the applicable plan gave discretion to allow nonresidential uses in the neighborhood, and therefore examined the authority's discretion itself. The residente had no difficulty in proving the flaw in the authority's discretion: one of its officials explicitly admitted that the needs of the neighborhood residents did not include a cinema, that the cinema was authorized not for planning reasons but to prevent economic loss to the developer, and that a cinema is an exceptional use in that area (id., at 711–712). Usually, there will not be such a clear confession by the authority that its arrangement with the developer ignores the interests of third parties. One should not conclude from the Halperin case that economic considerations affecting the profitability of the project to the developer are always impermissible. As long as the development fulfills a planning purpose or is compatible with its surroundings, it is legitimate to have regard for such considerations, because the project will not be executed otherwise. See Volchevinski v. Offer, (1967) 21(ii) P.D. 36, at 40–42.

161 Shneider, supra n. 159, at 217–220.

162 There are other cases in which agreements with developers injured third parties. In some of these cases, the injury was revealed not by the challenge of the injured people themselves, but by other administrative authorities. See Knei Batim v. Municipality of Natanya, (1986)(iii) P.M. 50, at 53–55 (The District Commission stopped construction to an illegal height that was authorized by the local commission. This illegal benefit was given in exchange for payments by the developers); State of Israel v. Paldior, (1981)(ii) P.M. 408 (criminal conviction of a contractor that illegaly received additional development rights); Mizrachi v. The Local Planning and Building Commission of Jerusalem, (1971) 25(i) P.D. 182 (invalidation of a practice according to which the authority withdrew a demolition order for a building illegaly built in an area designated for parking, in return for a “betterment tax” in an amount determined by the local authority); Eyal v. Fooksman, (1977) 31(iii) P.D. 349 (an agreement between the land owner and the authority according to which the former shall build an underground public shelter for the residents of Tiberias on his parcel, and in exchange will receive permission to build a higher building than allowed in the area and tax concessions. The neighbors injured from the high construction were a different group from the individuals who would have enjoyed the shelter. The court did not discuss the planning agreement but rather the damage created when the construction of the shelter caused the collapse of a neighboring building).

163 Shikun Amami, supra n. 47.

164 For criticism of this case, see text accompanying nn. 47–48 supra; Alterman, supra n. 30, at 65–66.

165 See part D. supra.

166 See The Lituinski Brothers Partnership, supra n. 46, at 141; Mentel, supra n. 46, at 366–368.

167 See text accompanying nn. 102–104 supra.

168 Alterman & Vitek, supra n. 3, at 61. On the powers of the Committee for the Protection of Agricultural Land, see Revital, Sh., On the Planning and Building Law (Tel-Aviv, 10th ed., 1993) 184–192.Google Scholar

169 See the empirical study conducted by Alterman & Vitek, supra n. 3, at 124.

170 Barletzki v. Director of Land Appreciation Tax (1967) 68 P.M. 225.

171 Id., at 228. This and other decisions demonstrate the courts' distaste for the trade in development rights, and especially for the planning authorities' practice of increasing development rights as a substitute for monetary compensation (see also the following cases: Meller, supra n. 153, at 260–261; Kanei Batim, supra n. 162, at 53–55; Rubinstein v. The District Planning and Building Commission of Tel-Aviv, (1991) 45(ii) P.D. 133, at 139; Artzi v. Rachmani, (1989) 43(iii) P.D. 489, at 503–504). This practice is very common due, in part, to the financial crisis of many local authorities. Since the discussion of these issues is beyond the scope of the article, we shall suffice with a short comment. Indeed, in the above mentioned cases (with, possibly, the exception of the Artzi case), there was unsuitable use of development rights, either by illegal addition and calculation of development rights or by permission of high-density construction that harms the quality of life of other people. However, this practice does not necessarily cause negative effects. In most cases, there is a range of reasonable planning decisions. For example, it is possible that both permission to construct a building of two stories and permission to build four stories are reasonable planning decisions considering the character of a certain area. Therefore, if the authority compensates a person who has a part of his land expropriated by adding development rights to the remainder, it does not necessarily follow that the addition increases the building density to an undesirable extent. Alterman is of the opinion that this practice should not be invalidated if suitably supervised and if uniform criterions are layed down for the “trade” in development rights: for example, if general provisions are included in the regulations of the plan itself (which is subject to administrate and public scrutiny) regarding the circumstances in which development rights may be increased and to what extent. Alterman notes that the inclusion of criteria for development agreements in the plan itself is uncommon in Israel: Alterman & Vitek, supra n. 3, at 97–98, 119–120, 120–137. Amendment no. 26 of the Planning Law (S.H., 1988, p. 144) has greatly limited the possibility of adding development rights without changing the plan applicable to the land. In the past, it was possible to deviate to some extent from the range of building permitted in the plan by granting a “planning concession” or a permit for “non-conforming use”. The amended sec. 151 states that as regards plans deposited after March 1st, 1989, any addition of development rights constitutes a “considerable deviation” that may not be granted as part of a concession or permit for non-conforming use (see Alterman & Vitek, id. at 98–102; Revital, supra n. 168, at 169–172, 180–181). Another limitetion on the authority's freedom of action regarding the grant of development rights was added with the enactment of the Planning and Building Regulations (Calculation of Areas and Development Rights in Plane and Permits), 1992 (K.T., at 798). The regulations require, for example, that the areas of basements and balconies will be considered in calculating the permitted development rights (Reg. 4). These regulations were meant to prevent the practice of some local authorities of not considering all the built areas in the calculation of development rights. This practice enabled the authority to receive various benefits from developers in return for concessions and turning a blind eye at development rights (see also Revital, id., at 157–158B). However, the new legislation does not prevent the creation of “flexible” plans, that include express provisions permitting the addition of development rights when certain conditions are met. On the issue of flexible plans, see Alterman, R., “What is an Outline Plan Under the Israeli Planning and Building Law?” (1981) 18 City and Region 5.Google Scholar

172 Barletzki, supra n. 170, at 228–229.

173 The distinction between the two cases may be important in other contexts. For instance, there is less fear of systematic discrimination against certain individuals if the preference is unintentional. However, it should not be assumed that an unintentional preference will be randomly or heterogeneously allocated throughout society, because certain groups of people have a higher chance of coming into contact with planning authorities in these contexts.

174 In other words, even if the preference of certain individuale does not cause direct damage to others (such as authorization of construction that constitutes a nuisance or not requiring a developer to supply the public services needed by his development), the grant of undeserved benefits, in itself, indirectly injures individuals who do not enjoy a similar preference. In the Barletzki case, direct damages to the public were possibly caueed as well. This is the case if the development rights added to the three recipient parcels increased the density in the area beyond that justifiable under sound planning considerations. There are many examples in the case law of the phenomenon of granting unjustified benefits to developers. See Rubinstein, supra n. 171 (authorization by the local commission that the areas of basements and passages in the building shall be disregarded in calculating the permitted development rights. Evontually, the authority withdrew its permission. The court rejected the contractor's claim, because the authority cannot be forced to act unlawfully); Migdal Nahum v. Municipality of Bat-Yam, (1970) 24(ii) P.D. 115 (claims regarding the authority's waiver and postponement of betterment tax payments. The appellant did not succeed in proving its claim that in return for the tax waiver, it dedicated land without compensation to an extent exceeding that required by law). On the danger of discrimination and corruption in planning processes, see Buildings of Kidmat lod v. The Local Planning and Building Commission of Lod, (1977) 31(i) P.D. 579, at 584–585.

175 Whether the dedication complies with the principle of equal contribution or deviates from it is not determined by examining whether the amount dedicated is above or below 40% of the land. Even a dedication of less than 40% may not comply with the principle, being for a non-permitted purpose or too large an amount. The opposite may also be true — the principle may justify a dedication of more than 40% of the land (as for a high-density construction).

176 It must be stressed that according to current law, burdens deviating from the principle of equal contribution cannot be included in building permite. The situation may be different if the authority proves that the conditions in the permit are not unilaterally imposed by it, but rather are the product of agreement with the developer. See ch. E.5.(b) supra.