An Israeli lease fair to both sides:

There are a number of reasons why it is important to create a lease that is fair to both the tenants and the landlords. Like the rest of the world, Israel is in the midst of a financial crisis whose full implications are still unclear. The crisis is affecting the rental market, making it more in landlords’ interests to keep their tenants for the long term. In this article we explain what legal mechanisms should be included in a lease to make it fair and balanced.

Attorneys in our offices in Jerusalem and Tel Aviv, specialize in contract and real estate law. Attorneys in our office have extensive experience in providing legal assistance to tenants and landlords. Services offered by our office include writing apartment leases, legal counselling regarding rentals, representation in legal disputes related to rentals, mediation and conflict resolution, and more.

Why is it particularly important now to create a fair lease?

In the current period, both apartment owners and tenants have a significant interest in maintaining long-term fair rentals. It is a known fact that the effects of the Corona crisis are causing economic instability. Many people are losing their jobs and income levels are reduced, which is likely to cause property owners real difficulty in finding potential tenants.

At the same time, restrictions on tourists’ and foreign workers’ entrance to Israel has significantly reduced the use of short-term rentals (sublets, Airbnb, etc.). The changes taking place in the market and uncertainty about the future are causing more landlords to seek to create a balanced contract that will encourage tenants to stay in the apartment for the long term.

A fair rental contract must set conditions that take in account the interests of both sides. To accomplish this, one must act in accordance with the regulations on fair rental in the current Rental Law (see this article for an in-depth explanation of this law). In addition, mechanisms may be included in the contract which ensure maximum consideration of both the tenants’ and landlords’ interests. See below for some examples of such mechanisms, which we recommend that you consider including in your lease.

Fair rules regarding payment of rent and utilities

Regarding payment of the monthly rent, a fair and balanced lease includes a mechanism to take into account that technical difficulties may delay transfer of the payment. Such delays are not always dependent on the tenants and may not necessarily be their fault. Accordingly, the lease should state that the landlord is obliged to send a warning in the case of a late payment, so that the tenants will know that the delay will not immediately be used to claim that they violated the contract.

In addition, as appropriate, it is recommended to consider a clause stating that the amount of monthly rent will include utilities (gas, electricity, water, municipal property tax (arnona), etc.) This may make things easier for tenants, many of whom may be willing to pay a slightly higher price for the knowledge that they do not need to deal with any additional payments. To make sure that such a clause does not become an incentive for the tenants to use more electricity and water, the lease can stipulate that the tenants leave a deposit at the beginning. Any time the utility bills exceed the average, the lease can then authorize the landlord to deduct the difference from the deposit.

Surety

It is considered customary for rental contracts to require some kind of surety. There are various types of surety, such as a personal guarantee, a security check, a bank guarantee, or a third-party guarantor. Surety is a significant part of a rental contract, since it promotes trust between the two sides. However, for apartments regulated under the Fair Rental Act (that is, most rental apartments in Israel), a maximum amount of surety has been set: a third of the rental period or three months’ rent, whichever is less. Therefore, if the parties decide to create a surety mechanism in the lease, it must meet these legal requirements.

Mechanisms for breaking the lease and providing an option to renew

It is recommended to set up mechanisms that allow both sides to break the lease before it expires, as well as an option to extend the lease at the end of the rental period. It is important to note that in both cases, the Fair Rental Law requires that the tenants or landlords give advance notice, for either breaking the lease or actualizing the option to extend it. In both cases, the law determines a minimum notice period of 90 days, in the case of the landlord, and 60 days, in the case of the tenant. The lease can set longer periods than these, but not shorter ones.

Contact an attorney specializing in contract and real estate law

For additional questions on an apartment rental contract and writing it so that it will be fair to both sides, you can contact us at the telephone numbers or email address below. Our law offices specialize in contract and real estate law, and provide their clients with comprehensive, professional legal solutions, with no cutting corners.