Shabbat Parashat Eikev 5784

P'ninat Mishpat: Who Pays for an Unexpected Tax? – part III

Case: The defendant (=def) was interested in buying the plaintiff’s (=pl) house, but the sale could not be completed because def was not yet a member of the yishuv in which the property is found. Def moved into the house under a rental agreement, which was replaced by a sales contract months later, when the yishuv approved def. After the second contract was signed, it became known that a recent change in urban planning rules made it possible to add three rather than two housing units to the house. This fact added significantly to the mas hashbacha (betterment tax at the time of sale), which pl lowered by negotiation to 72,672 NIS. Pl argues that for all practical purposes, the sale took place before the tax was levied, and it is unfair that this tax, which was levied due to a technicality caused by def, should fall on pl when only def will benefit from the regulation change. Def responds that since the original arrangement was indeed a rental, the tax falls on pl, and, in any case, there is no reason for a buyer to pay a sales tax. Def adds that he does not plan to build the extra unit and might not have bought the house if it required reimbursing pl this extra amount. Def also points out that the contract says that the seller will pay the mas hashbacha and that pl should have been aware of the apartment’s legal status.

Ruling: [Last time we saw that there are grounds to either nullify the sale or demand return of the excess value of the extra building rights. Now we will investigate factors that can prevent pl from getting back the amount of tax paid.]  

Provision in the contract: While the contract states that the seller will pay the mas hashbacha, that is a standard clause that refers to the tax based on the expected situation, not an amount of mas hashbacha there was not reason to suspect. Even if one would want to extend the clause to unexpected amounts, since pl can claim mekach ta’ut on the house’s value, which is much more money, if he waives that right in favor of the smaller amount of the tax, def is required to do so.

Pl’s obligation to be aware: We do find a concept that a buyer who should have checked for easily noticeable blemishes loses his right to complain about them (Maggid Mishneh, Mechira 15:3). However, that applies to a blemish for which a buyer is expected to check, as is standard procedure. A seller, in contrast, assumes that he knows his property’s characteristics, and therefore his lack of checking is not a sign that he waives rights or of recklessness. Also, pl asked community representatives about changes in zoning and was told that it should not affect him, which turned out to be wrong. It was also his lawyer’s job to check the taxation element, and the lawyer’s failure does not make the seller considered one who waived rights he did not know about.

Buyer’s claim that he might not have bought the property: There is no reason to believe that the relatively (compared to the sales price) small change would cause def not to buy. However, since paying the significant added amount requires def’s planning, we allow def, based on compromise, to pay in 24 installments. 

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