Galilee and Northern Moshavim Conference 2019

On 16 July 2019, we held a conference at Adir Winery in Kerem Ben Zimra on developments and changes affecting the future of agricultural holdings in moshavim. We raised the question of the next generation’s future on these holdings and how to address the housing crisis for the benefit of all its members.
The conference was attended by Mr. Meir Tzur, Secretary-General of the Moshavim Movement, and leading public figures from the moshavim. Speakers included Adv. Uri Shiloh, on new approaches to organising a holding; Adv. Yossi Or-Hacohen, on the current legal position; and tax specialist Adv. Miki Michaelovitch, on tax issues accompanying family arrangements for managing the family farm.
Introduction
Workers’ moshavim were established in Israel until the early 1960s on state land, to establish a presence on the land and consolidate Jewish settlement. Land values in frontier communities were then very low. The Jewish Agency built very small homes, and life in these communities was extremely difficult.
Against this background, laws regulating settlers’ status were adopted. In particular, moshavim and new settlers were assigned the distinctive status of licensee, which under the prevailing interpretation was inferior to that of a “trespasser”.
Establishing moshavim on state land was intended to achieve social, economic and security objectives and maintain continuous Zionist settlement. This important Zionist undertaking was never intended to create family disputes or unjustly enrich a few.
The complexity of the position of settlers’ children and heirs, who would be unable to share the family wealth and would find themselves outside the moshav without any economic foundation, appears to have escaped national policymakers. The legislature gave the matter no consideration.
Today, in the twenty-first century, hundreds of legal disputes among heirs and family members concerning inheritance of agricultural holdings make it clear that Israel’s legal arrangements are poor, insufficient and threaten social cohesion. In the undersigned’s view, the time has come for new statutory arrangements with social significance, ensuring a just and fair distribution of family wealth and preventing, as far as possible, family disputes over inherited agricultural holdings.
The “family farm”
In her fascinating 1983 article, “Legal Arrangements Concerning Inheritance of a Holding in a Workers’ Moshav”, Prof. Smadar Ottolenghi described the problems with the existing arrangements and proposed a new approach, anticipating future changes in moshav holdings. She called her proposed solution a “family farm”, with clear residential arrangements and separate arrangements for managing the economic enterprise.
The land-allotment agreements, whether tripartite or bilateral, also restricted agricultural holders’ rights. Under the tripartite agreement, for example, settlers are licensees with no right to transfer their holding, during life or by inheritance, except under that agreement. Importantly, the owner and lessor is the State of Israel through the Israel Land Authority. The lessee is not the moshav but the Jewish Agency for Israel, the settling body, despite having no connection to the land. The cooperative association has no proprietary rights at all; it is merely a licensee.
In the twenty-first century, settlers’ status was upgraded. The state and Israel Land Authority clarified to the High Court of Justice, and included appropriate provisions in Authority decisions, that in relations between the state and agricultural holders, a licensee’s status is equivalent to a lessee’s. Yet the tripartite agreement itself remained unchanged…
Moreover, while that agreement remained in its historical form, agricultural holding values rose dramatically. Building rights increased significantly, settlers upgraded their homes and some became luxurious residences. Most holdings were also allowed extensive development. Subject to the applicable town plan, a holding may include three residential units, three guest cabins, a 500-square-metre building for non-agricultural activity, an agricultural shed and a laying-hen house, alongside approximately twenty dunams of agricultural crops. Family estates of very substantial economic value have thus emerged.
The Galilee Law added further economic advantages for Galilee moshavim in egg production. The economic value of poultry quotas is estimated at approximately NIS 1 million per holding.
As noted, the late Prof. Ottolenghi anticipated this economic development in her article and proposed reconsidering the moshav’s structure and the allocation of land parcels.
Workers’ moshavim have indeed developed economically, adding production branches in industry, crafts, services and tourism. Yet the tripartite agreement governing their proprietary status has not been updated. Despite the enormous increase in holding values, one substantive legal provision remains unchanged: the restriction allowing a holding to be transferred, including by inheritance, to only one person.
This complicated legal position creates a deep sense of inequality and distributive injustice among family members, particularly the next generation. In practice, courts are flooded with claims by second-generation moshav members who object to awarding rights in a holding to one sibling or one grandchild of the founders.
Binding case law confirms that an “heir” may inherit by law or by will. Therefore, where the deceased designated a successor child—who, it must be stressed, is not an heir—or one heir to the agricultural holding, did not designate any of the other children as heirs, and the heir is willing and able to manage the holding, the other children are not regarded as “heirs”. They receive no rights in the holding and are not entitled to compensation under section 114 of the Succession Law.
The tripartite agreement indeed permits a settler to leave the farm to a spouse or one successor child, neither of whom must compensate the other heirs at all. The other heirs will therefore have to leave the holding and moshav without any share of the inheritance! Is that just?
If no successor child was appointed, the holding passes to one heir, under law or by will, subject to section 114. If, for example, the deceased had five children and a holding worth NIS 5 million, the sole heir receiving it must compensate the other heirs by NIS 4 million.
Even if this is called a “just” solution, the heir generally does not have that sum to compensate siblings, and a mortgage of that size cannot be obtained against the holding.
The result is that holdings with, or capable of accommodating, 2.5 homes—and in future 3.5—can pass residential rights only to one successor child or one heir. If no other heirs are designated, the remaining children, sometimes many of them, receive no inheritance share. This causes numerous disputes and irreparable family rifts.
In practice, we see many cases where just one heir receives the entire agricultural holding and the others feel wronged. They often bring extremely expensive claims in the family courts, whose outcomes frequently create indelible divisions within the family.
The housing crisis
Israel currently faces an unprecedented housing crisis, with a projected shortage of hundreds of thousands of homes in twenty years.
An heir receiving a residential plot averaging 2.5 dunams becomes wealthy at the state’s expense and prevents a fair distribution of the residential land it allocated. This is an enormous area with disproportionate economic value. Giving such a large plot to one heir means siblings have nowhere to live. If their finances are poor, they become a burden on public funds rather than supporting themselves primarily from their parents’ estate.
Remember that this is state land the settlers did not purchase. It can therefore rightly be argued that allocating enormous plots in moshavim constitutes unlawful discrimination against other citizens, and an unequal, unjust distribution of building land.
Modern law recognises various flexible solutions for reducing inequality and distributing family wealth more fairly. As landowner and creator of the present legal situation, the state has a duty to implement these solutions, or some of them.
The proposed solution
The proposal addresses two situations:
A. A family agreement, while current legislation remains unamended.
B. Arrangements under the proposed “Family Farm” Law.
The family agreement
Under present conditions, we propose that the licensee sign a “family farm” agreement with their spouse and children who wish to maintain an ongoing connection with the moshav. It would regulate both residence and the economic enterprise, for example:
A. Separate arrangements will apply to residence and to agricultural activity.
B. Family members’ residential rights will be limited to one dwelling per family unit.
C. The economic activity of a holding containing, or capable of containing, more than one dwelling will be transferred to a “family farm”: a registered family agricultural association owned by the founders registered with the moshav, Jewish Agency and Israel Land Authority.
D. Only the founder’s direct descendants may belong to the family farm. Spouses of children or grandchildren may not be members of the corporation.
E. The family farm will be managed by a committee consisting of the successor child and two other family members: the founder, the founder’s children or grandchildren.
F. Management and cultivation of agricultural land, non-agricultural activity and all means of production, including tourism, crafts, industry and membership in enterprises, will be entrusted to the family-farm corporation. It will operate as a “management corporation” for family members’ benefit, with the principal objective of maximising profits for the family corporation, provided that it undertakes to distribute most profits annually to all members.
G. The founders may limit the number of family-farm members and identify the “successor children” entitled to continue managing and deriving economic benefit from the family holding.
H. If a “first successor child” is designated, that person will receive membership rights in the moshav cooperative. On substantive matters specified in the family enterprise’s regulations, however, that person must vote in accordance with the majority of parties to the family agreement. If none is designated, cooperative membership will be registered in the name of a family representative elected by majority vote.
I. A designated “first successor child” will receive residential rights in one home on no more than 700 square metres of the residential plot. Otherwise, residential rights will be distributed through a mechanism agreed by family members.
J. Residential areas within the holding, on a plot that may be separated from it, on an expansion plot if allocated, and on a doubling plot will be allocated to the other children, limited to at most one dwelling per child. If there are fewer children than potential dwellings, the remaining units will be reserved for grandchildren. These rights will have a status higher than protected tenancy, and occupants’ children will be entitled to protection without a generational limit.
K. Membership rights in the family farm may be inherited only by direct descendants. If the deceased has no descendants, the other heirs may demand redemption of their share in the family corporation at a value determined by an expert economic valuer.
L. The transfer rights of an appointed successor child will be limited, subject to family-farm principles and the other members’ right of first refusal, all subject to section 114 of the Succession Law.