A Supreme Court judgment handed down in December by the Honorable Justice Yoram Danziger ruled that the demand by local planning and building committees that deeds of indemnity be signed is illegal (Bikel Flowers Ltd. vs. the Local Planning and Building Committee – Rishon Letsiyon).

The case deliberated the question of the legality of the practice of local planning and building committees demanding that entrepreneurs sign indemnity agreements in respect of compensation claims pursuant to section 197 of the Planning and Building Law.

Prior to this judgment, any entrepreneur applying for a local committee for its approval of a plan was required to sign and submit a deed of indemnity to the committee in respect of compensation claims by bordering landowners claiming to be injured parties as a result of the plan.

The Supreme Court ruled that the law imposes an obligation on local planning and building committees to indemnify injured parties. Further, that there is no legal provision which authorizes local planning and building committees to require a deed of indemnity which may result in an imposition of payment on an entrepreneur, and that if such an imposition occurs, it is similar to a tax levied on the entrepreneur without legal basis, contrary to the principle of legality in administrative law.

This judgment might have material repercussions for the construction market in Israel, due to the concern that planning proceedings will become substantially longer as a result of the ruling. Local committees are likely to begin performing punctilious examinations and adopting a very rigorous approach when approving plans; furthermore, it is possible that some plans – that would have been approved were it not for the Supreme Court ruling – might now not be approved.