As a general rule, property tax applies to the holder making use of the property. The issue is who will be liable for paying the property tax when the property is vacant and not in use.
The court ruling which defined the term "holder" in Section 1 of the Municipalities Ordinance established that the intention is to refer to the person who is the factual holder of the property, even if they are not using it, and not to the legal owner of the property.
The rule of thumb is that an owner of property who has not transferred any rights in the property to another party, then regarding the debts applicable to the property, there is no intervening factor between the owner and the property, and therefore the owner will always be the liable party.
However, the situation is not similar in a case where there is an intervening factor between the owner and the property, such as a tenant, in the common case, even if they are not using the property, as long as the tenant has not legally notified the authority regarding the cessation of their possession of the rented property, as will be explained below. In other, more exceptional cases, it may even be argued that a squatter also constitutes an intervening factor between the owner and the property, and consequently, it may be possible to impose the property tax payments on that "interfering" factor.
In that case, the municipality is permitted to impose arnona on a taxpayer even if they have ceased to hold the property, as long as they have not formally notified the municipality of the cessation of holding, as will be explained below.
The obligation to report the cessation of possession of a leased property rests on the taxpayer, based on the assumption that the taxpayer who ceased possessing the property has an interest in promptly reporting to the authorities the cessation of their possession of the leased property.
Many tenants are unaware of this obligation and are surprised when they receive a payment notice from the municipality regarding a period when they are no longer in possession of the property. In Civil Ruling Tel Aviv 33766/85, the owner notified the municipality of a tenant's commencement of possession of the property. After the tenant vacated the rented premises, he did not notify the local authority of the termination of the tenancy. The tenant argued that since the owner had notified of the commencement of the tenancy, it was not his obligation to notify of the termination of the tenancy. It was ruled that the tenant has the obligation to notify of the cessation of his possession of the property, and as long as he has not done so, he must pay property tax.
Therefore, the ruling stipulates that the obligation to pay property tax will only cease when two cumulative conditions are met: the person ceases to possess the property, and written notice is sent regarding this. Hence, the writing requirement is essential and must be fulfilled; an oral notification to the authority and/or its representative about ceasing possession of the property is insufficient. .
Reader question:
I own a rental property, and the tenant has ended the lease term and notified me of the lease termination. Which of us was obligated to notify the municipality of the lease termination concerning the ARNONA liability for the period after the lease ended?
Answer:
Since the tenant did not notify the municipality in writing of the termination of their possession of the leased property, it can be argued that the tenant will continue to be the liable party for arnona (municipal property tax) regarding the property, even for the period they no longer possessed it. This is true even if they notified the owner of the termination of their possession, but not the municipality as required by law. This is of course as long as the property remains vacant and has not been leased to another tenant who has become the new liable party with the municipality for arnona.
