One Heir Wants to Sell, One Refuses: Israeli Law Lets Any Co-Owner Force the Sale, the Holdout Almost Never Wins, and the American Return Watches the Whole Fight

This is orientation, not legal or tax advice. It maps what exists and the questions to take to a licensed professional. It does not tell you what to do about your own estate or taxes.

A father dies in Haifa in the spring. His will leaves the apartment on Har HaCarmel, worth about 2,400,000 shekels, to his three children in equal shares. Two of them live in the United States, one in New Jersey and one in Texas. The third has been living in the apartment for six years, first as a caretaker for the father, then simply as the person who lives there. The probate order issues without objection. The two American siblings want to sell. The third does not answer emails about it.

The American siblings assume they are stuck. In their experience, jointly owned things move at the speed of the slowest owner: nobody can sell a house in New Jersey out from under a co-owner who refuses to sign. So the apartment sits, the sibling keeps living in it, and the two abroad quietly write the asset off as something they will inherit for real in some future decade.

Israeli law is built on the opposite premise. It regards a co-ownership nobody wants as a problem to be ended, not a stalemate to be respected, and it hands every co-owner the tool for ending it.

The right the holdout does not believe exists

Two sections of the Land Law, 5729-1969 do the work. Section 27 says each co-owner is entitled to use and enjoy the whole property in proportion to their share. Section 37(a) says any co-owner may demand dissolution of the co-ownership, the pirok shituf, at any time. Not after a waiting period, not with a majority, not for cause. Any co-owner, any time, and Israeli commentary on the section is explicit that the legislature considered a forced partnership an undesirable condition and preferred giving people a clean exit over leaving them trapped. Inheritance is the most common way strangers to each other's finances end up as co-owners, and inherited apartments are where the section earns its keep.

The share size does not matter. An heir holding a third can file. An heir holding a tenth can file. What the court then asks is not whether the sale should happen but what form the dissolution takes: physical division where the property can honestly be split into parcels, and a sale with division of the proceeds where it cannot. An apartment cannot be split into three apartments. For an apartment, dissolution means sale.

There are two genuine outer limits. Courts apply a good-faith screen against a petition brought purely to harass, and a written co-ownership agreement that suspends the right to dissolve for a defined period has been honored in limited circumstances. Neither describes the ordinary inherited-apartment deadlock, where one heir wants market value for their share and another wants the status quo. That case is the statute's home ground.

The gate before the fight

The right runs against registered title, and an Israeli estate is not an entity the Land Registry can carry. Before anyone forces anything, the ordinary machinery has to run: the succession order or probate order that names the heirs, and then registration of the heirs at the Tabu as co-owners of the apartment. The heirs hold the estate in common by operation of law from the moment of death, but a partition claim in practice needs the title work done, and a firm handling one of these for a foreign heir will usually treat obtaining and registering the order as step one of the same engagement.

For the American heir this is mostly familiar paperwork with an apostille on it, and it does not require flying anywhere. It does mean the holdout gets a preview. Registering three names on the title is not a neutral act to the sibling living in the apartment; it is the moment the abstraction becomes two co-owners with rights. Families that expect the deadlock sometimes reach for the friendlier instruments at exactly this point, before registration, which is where the exits come in.

Three exits, priced from cheapest

The estate distribution agreement. If what the holdout actually wants is the apartment, and the estate has other assets, the heirs can sign a heskem chalukat izavon before anything is registered: the occupying sibling takes the apartment, the Americans take the bank accounts, and if no money moves from outside the estate Israel taxes none of it. This is the cheapest ending that exists, it is only available before the assets are distributed, and it requires the holdout to engage. Its American complications have their own page.

The buyout. After registration, one heir buying another's share is an ordinary taxable transfer in Israel: the selling heir faces mas shevach on their slice, measured from the deceased's original purchase, and the buying heir faces purchase tax. It costs real money that the pre-registration agreement would not have, but it is still a negotiated ending with a chosen price, and most deadlocks that end well end here.

The petition. When the holdout will neither trade nor buy nor sell, the American heirs' Israeli lawyer files the pirok shituf claim. Between siblings and other close family the claim goes to the Family Court; between unrelated co-owners, to the Magistrate's Court. The filing fee is modest, on the order of 3,500 shekels. The court, unable to divide an apartment in kind, orders a sale, either supervised between the parties or run by a court-appointed receiver, the kones nechasim, who markets the property, manages offers, and takes fees from the proceeds. Any mortgage is discharged from the sale price before the net is divided by registered shares. A contested case runs roughly twelve to twenty-four months from filing to money.

The number that matters most, though, is a different one. Practitioners report contested cases that looked like multi-year wars settling within six to eight weeks of filing, because the filing changes what the holdout's own lawyer tells them. Before the petition, refusal is free. After it, the holdout is paying counsel to lose slowly, at auction prices, with a receiver's fees coming out of everyone's share. The petition is less a lawsuit than a repricing of the refusal, and the buyout that was unavailable in the family WhatsApp group tends to materialize once it is on a court docket.

The sibling who lives there

Occupation is not a veto. The discretionary power Israeli courts have to delay a forced sale of a home is protection built around a spouse and children without alternative housing, applied to facts, not a general right of whoever happens to be sleeping in the apartment, and it is not a shield a sibling occupying an inherited flat can count on.

Occupation also has a price of its own. When one co-owner has held the property exclusively, without the others' consent and without paying rent, the co-owners can claim dmei shimush re'uyyim, compensation for reasonable use, a rent-equivalent for the period of exclusive occupation. Six years of sole use of a Haifa apartment is not a small number, and the claim rides along naturally with a dissolution proceeding. American heirs are frequently unaware it exists, and holdout siblings are frequently unaware it is accruing. It belongs in the first letter the Israeli lawyer sends, because it changes the negotiation before anyone sees a courtroom: the status quo the holdout is defending turns out to have a meter running.

What Israel taxes when the deadlock breaks

A forced sale is an ordinary sale to the Israeli tax system. The heirs stand in the deceased's shoes: under section 15 of the Real Estate Taxation Law, mas shevach is measured from the father's original acquisition date and price, not from the date of death, so a flat bought in 1987 carries decades of gain into the sale regardless of how recently anyone inherited it. The linear calculation shelters the pre-2014 slice for a long-held apartment, which softens the number considerably, and the mechanics live on their own page.

The single-apartment exemption is narrower for the Americans than they may have heard. Under Tax Decision 7701/21, a foreign-resident heir claiming the section 49(b) exemption must prove they do not own another apartment in their country of residence. An heir with a house in Teaneck does not clear that bar. Each heir's exemption position is assessed on their own facts, which means three siblings can sell one apartment and pay three different Israeli tax results.

What the American return sees

The two US-person heirs are keeping a second set of books whether they know it or not, and the second set is kinder. Under 26 USC 1014, each American heir's basis in their share is its fair market value at the father's death. Israel measures the gain from 1987; the United States measures it from the funeral. An apartment sold within a year or two of death often produces a substantial Israeli tax bill and a modest American one, and the Israeli tax paid on the same gain is generally creditable against the US tax on it through Form 1116, with the usual mismatch mathematics: credits are limited to the US tax on that income, and Israeli tax above that line is not refunded by anyone.

The endings differ on the American side too. If the holdout buys the Americans out, each selling heir recognizes gain under 26 USC 1001 over their stepped-up basis, usually a small number if the buyout tracks current value and death was recent. If the apartment sells at auction, same arithmetic, at whatever the receiver's sale fetched. In the year the inheritance itself was received, a US heir whose bequests from the foreign estate exceeded $100,000 reports them on Form 3520, and sale proceeds that sit in an Israeli bank account while the family decides what to do next can create FBAR and Form 8938 duties measured by account values, not by whether the money is going to stay.

None of this waits for the family fight to resolve. The Form 3520 year is the year of receipt, the FBAR year is any year the account tops the threshold, and dmei shimush actually collected from the occupying sibling is income with its own reporting question for a cross-border accountant.

Running it from nine time zones away

Nothing in the sequence requires the American heirs to be in Israel. The succession-order paperwork travels by apostille, an Israeli litigator can act on a power of attorney signed at an Israeli consulate in the United States, and if the estate has an appointed administrator, the mnahel izbon holds the assets while the heirs' dispute runs. Choose the lawyer for litigation capacity, not just probate: the firm that shepherds succession orders is not always the firm that files partition claims, and this file may need both.

Ask the Israeli lawyer, early: whether the title work is done and what remains before a claim could be filed; what the apartment would likely fetch at a receiver's sale versus a cooperative one, because that spread is the negotiation; whether a dmei shimush claim exists on these facts and from what date it runs; and whether the estate's other assets could still support a distribution agreement instead of any of this.

Ask the US accountant or cross-border adviser: what each heir's date-of-death basis is, documented now with an appraisal while it is easy to get; how a buyout versus an auction sale lands on each American return; and what the Form 3520, Form 1116, and FBAR calendar looks like against the likely timeline of the fight.

And ask the family the question the statute will otherwise ask for them: is the refusal worth what it now costs? Section 37(a) means the deadlock was never really a deadlock, only a negotiation one side had not started. The petition prices the refusal, the use-payments claim backdates it, and the sibling who understood that first usually sets the terms.