Fair Rental Law – 7 things that landlords and tenants need to know

If you ever let or rented an apartment in Israel, you are familiar with the uncertainty that characterizes the local rental market. The Fair Rental Law was passed with the goal of making the Israeli market more balanced, for both landlords and tenants. However, few are fully aware of the law’s provisions and their legal significance. This leads many landlords to act in violation of their legal obligations, even exposing themselves to lawsuits and sanctions. Therefore, we have put together guidelines to help you comply with this important law.

Attorneys in our offices in Jerusalem and Tel Aviv, specialize in contract and real estate law. The office provides a variety of legal services to tenants and landlords. Services offered by our office include: writing apartment leases for residential use, legal counselling regarding rentals, and representation in legal disputes related to rental contracts.

Fair Rental Law – General background

The Israeli rental market is characterized by significant problems and uncertainty. This stems, in part, from the small supply of apartments relative to the high demand, often creating power imbalances between landlords and tenants. As a result, tenants are often forced to compromise on apartments in dilapidated condition, to provide large amounts of surety, and to remain in the dark throughout the rental period regarding the possibility of extending the lease.

In an attempt to solve these problems, the Fair Rental Law was legislated in 2017. In effect, this is a significant revision of the Rental Law, which regulates the legal situation regarding rental of apartments in Israel. The goal of the law was to make the rental market more balanced and set out clear guidelines for the conduct of landlords and tenants alike. The law’s formulation is intended to encourage more fair conditions for tenants, but, at least for the moment, without setting rigid rules, such as government supervision of rental prices.

Although several years have already passed since the law came into effect, not all landlords and tenants are familiar with its stipulations. This is unfortunate for a number of reasons. The law offers significant support to tenants, and provides them with many rights of which they may not be aware. But beyond this, violating the law leads to various legal sanctions. These sanctions may include reducing rental payments and even justification for a charge of contract violation. With the goal of preventing such situations, we have prepared a detailed description of the main aspects of the law.

1. When does the Fair Rental Law apply?

The law applies only to apartments that meet certain criteria. It does not apply in cases where the rental is for a period of less than three months or more than ten years. Nor does the law apply to apartments in a hotel or in student housing, to rent-controlled housing units for the elderly, or to cases where the rent is over 20,000 ILS per month. However, since these apartments and types of rental make up only a relatively small part of the Israeli rental market, the law in fact has an extremely wide application.

2. The law sets out strict conditions for what can or cannot be included in a rental contract

In cases where the law applies, there is a wide range of issues which cannot be made conditional in the contract at all, or which may only be made conditional to the tenants’ benefit. For example, the law specifies a basic standard for an apartment that is appropriate for residence. Said standard excludes apartments without a barrier between the bathroom and the apartment, apartments that poses an unreasonable risk to tenants’ safety or health, or apartments with no ventilation and natural light.

For some of you, the above standard extremely obvious, but unfortunately there are such apartments on the market, and therefore they are excluded from the law’s coverage. As a rule, the two sides cannot make an agreement regarding rental of such an apartment. In addition, regarding issues such as guarantors for paying the rent, payment of shared bills, extending the lease, etc. – special conditions are set out which can be violated only for the benefit of the tenants. Below we will explain what this means.

3. Bearing the payments for shared bills

The law states that in cases where it applies, the tenants pay for electricity, water, gas, additional shared services, and taxes (including property taxes). However, as a rule there is nothing preventing an agreement that the landlords pay the shared bills and charge the tenants a fixed rent which includes the average cost of the bills. This is because it is a condition in the contract which is considered to favor the tenants. In contrast, the law forbids charging the tenants for other types of payments, such as apartment insurance premiums (as part of building insurance); third-party payments, such as realtors’ fees (if the realtor acted on behalf of the landlords); etc. Landlords are obligated to bear these costs.

4. Fixing damage and defects

The law states that any damage caused by reasonable use of the apartment will be repaired at the landlord’s expense, unless the two sides have determined otherwise. In certain cases, however, where the damage does not allow for normal living in the apartment and therefore requires urgent repair, the tenants can demand that the landlord do the repairs. If the landlord does not comply, the tenants may, subject to the law’s provisions, pay for the repairs and reduce the rent by that amount. This should be done with all due caution, making use of legal counsel if necessary.

5. Surety

The Fair Rental Law, for the first time, restricts the amount of surety that can be required by a rental contract. There are different types of surety, such as a security check, a promissory note, a personal guarantor, a third-party guarantor, and more (for more information on this issue, see the comprehensive guide on our site). In cases where the Fair Rental Law applies, the amount of surety is limited to no more than one-third of the rental period or three months’ rent. Nothing prevents landlords from requiring lower sums, but they are not able to require sums exceeding the above limits.

6. The option to extend the lease

The law states that if no option is specified for extending the lease, the landlords must notify the tenants if they want to extend the lease, and under what conditions. However, the law does not specify the time frame in which the landlords must do this, merely stating that it must be done within a “reasonable time”. Given that the law is still new, courts have yet to determine more specific guidelines on this issue. Therefore, it behooves landlords to notify their tenants of their intentions as early as possible, in order to avoid violating the contract.

In addition, for contracts that include an option for the landlord to extend the lease, the law states that landlords must notify tenants within at least 90 days of the lease’s expiration if they are intending to activate this option. For a tenant’s option to extend, tenants must notify landlords within at least 60 days of the lease’s expiration. However, longer time frames than these can be incorporated in the contract, as long as they are to the tenants’ benefit.

7. Breaking the lease

Here too, the law restricts the option to break the lease in cases where there has been no violation of the contract. The contract cannot include a clause enabling only the landlords to break the lease. Both parties’ right to break the lease must be explicitly set out in the contract beforehand, or alternatively only the tenants’ right. The right to break the lease is subject to a minimum of 90 days’ notice by the landlords and 60 days by the tenants. For detailed information on the options for breaking a rental contract, see this article on our site.

Contact an attorney specializing in contract and real estate law

In this article we have explained the Fair Rental Law and its provisions. Non-compliance with this law may lead to legal sanctions and even form the basis for a lawsuit over contract violation. Therefore, it is important to avoid unilateral actions and obtain legal advice as needed. If you have any questions or need assistance on this issue, contact us and an attorney from our office will be happy to be at your service. Our law offices specialize in contract and real estate law, and provide their clients with comprehensive, professional legal solutions, with no cutting corners, in any issue regarding rental contracts.

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