Renting out an apartment? Here are a few things every lease should include (legal information)
Despite the great demand for housing, landlords face more than a few difficulties on their way to renting out their apartments. The knowledge that strangers will be staying in the property for a long period of time brings up understandable concerns. The way to deal with such concerns is to devote attention to the content of the lease. In this article, an attorney from our office who specializes in contract and real estate law will explain how the lease can help you, the landlord, to maintain peace of mind.
In the offices of Cohen, Decker, Pex, Brosh, in Jerusalem and Tel Aviv, you will find attorneys specializing in contract and real estate law. Attorneys in our office provide a range of legal services to tenants and landlords, based on extensive experience and in-depth knowledge. Our office assists clients regarding leases for residential apartments, setting up offices and businesses, and more.
How can you reduce concerns about renting out your apartment?
In these times, renting out an apartment is not a simple matter. Even though demand for housing is very high, leases are mostly signed with strangers, people with whom the landlord has no previous acquaintance. Many apartment owners fear that the tenants will damage the apartment or property in it, default on paying rent, or refuse to leave the property when the lease is up.
These fears are not entirely unfounded, and any rational apartment owner wants neutralize them and ensure that the rental goes smoothly. To that end, there are many legal issues that must be considered ahead of time. Use of a ready-made lease, downloaded from the Internet, is not recommended. In any case, if doubts arise, it is recommended to obtain legal assistance in writing the lease. Below we will look at several common issues that we have encountered in our experience with writing leases and advising landlords.
Before you start
It is important to get to know the people who will be the future tenants of your apartment. You can hold an introductory conversation with the tenants and make sure that they are reliable. But even if they tell you that they’re gainfully employed and promise to keep the apartment in good condition, that is not always enough. It is legitimate to ask potential tenants to provide proof of their financial ability. Common forms of such proof are payslips or a bank statement. It is important to do everything necessary to ensure that the tenants will indeed meet their obligations and that you can be relaxed about having them residing on your property.
Purpose of the rental
If the property is rented out for residential purposes, it is very important to agree ahead of time that the tenants will not put the apartment to any other use. If the apartment is in fact rented out for business use, you will generally be required to pay capital gains tax as a result. This is because an exemption from capital gains tax is granted only in cases where the apartment is primarily used for residence. Moreover, you may run into trouble from the municipality or local council, since use of an apartment for business purposes generally requires a license. Therefore it is important to avoid this situation, or obtain legal counsel to avoid legal complications down the road.
Responsibility for damage and ongoing payments
In the lease, it is important to specify the condition of the apartment and the items remaining in it, such as furniture and electrical appliances. The lease should clarify ahead of time who is responsible for any damages. In addition, it is advisable to specify that the responsibility for paying utilities (water, electricity, gas, municipal property taxes, etc.) falls on the tenants. It is important that the lease even obligate the tenants to transfer the utilities to their names. To this end, you can request that they provide you with documentation of the payments.
Breaking the lease, selling the apartment, and the option to renew the lease
Today, most types of Israeli apartment rentals fall under the fair rental regulations of the current version of the Rental Law. The law includes specific provisions regarding the option to extend a lease, as well as rules for breaking a lease. In both cases, when clauses regarding breaking or extending the lease are included, they involve advance notice to the other party. Landlords are legally required to give a minimum of 90 days advance notice, while tenants are required to give a minimum of 60 days. It is important to note that if a lease includes clauses with time periods shorter than these, those clauses have no legal validity. Therefore it is important to act according to these regulations, as well as the other regulations in the Rental Law (see this article for an in-depth explanation of the law).
In addition, it is important to set conditions for breaking the lease. For example, the parties may agree that the tenants will have to find a replacement. It is customary to include a clause that if a replacement tenant is not found, the tenants must pay the full rent for the time remaining until the end of the rental contract.
Another important issue is selling the apartment and transferring the rights to the property. What do you do if you want to sell the apartment while it is being rented out? It is important to create a mechanism in the lease in order to ensure continuous rental, which applies even in the case where you transfer ownership of the apartment. If you do not do so, you are potentially exposed to charges of violating the lease.
Evacuating the rented premises
Unfortunately, a painful issue arises in more than a few apartment rentals: the issue of evicting the tenant when the contract expires. When tenants refuse to leave the apartment, it is possible to file an “unlawful detainer suit” against them to evict them from the property. In a parallel process, you can sue for financial compensation. But before you get to such unpleasant scenes, you may specify sanctions in the rental contract. An example of a sanction for refusing to leave would be an agreed-upon compensation for every day of refusal. However, it is important to obtain legal counsel regarding such clauses, to make sure that they are enforceable in court and that they comply with the various regulations under the law.
Contact our experts in contract and real estate law
In this article, we have explained a number of issues that landlords should cover in the lease for their apartments. Taking these issues into account will help you maintain peace of mind throughout the rental period. For detailed advice regarding a rental contract and assistance on any related issue, our office is at your service. The law offices of Cohen, Decker, Pex, Brosh specialize in contract and real estate law. They provide their clients with comprehensive solutions regarding rental contracts, for landlords and tenants alike.