Leasing a Property in Israel

As of 2023, Israel boasts approximately 2.5 million households, of which roughly a quarter reside in rented accommodations. This implies that nearly 700,000 Israeli households are living in apartments they do not own.
Consequently, hundreds of thousands of residential apartments are leased out annually in Israel, catering to both families and individuals. This doesn’t even account for the leasing of commercial spaces, warehouses, and logistics centers.

What is a Lease for a Residential Property?

A lease is a legal arrangement granting the right to occupy and utilize a property for a specified, non-permanent period in exchange for certain benefits. Typically, residential leases outline terms such as the lease duration, options for renewal, the responsibilities of both the lessor and lessee, rent, associated payments, and any provisions for breaching the lease agreement by the tenant, among other things.

Tenant’s Declarations and Obligations

In most rental agreements in Israel, a dedicated section covers the tenant’s declarations. In this section, the tenant affirms their intention to use the rented apartment exclusively for residential purposes, their ability to enter into the rental agreement and fulfill their obligations, as well as their inspection of the property, confirming it is clean, well-maintained, and suitable for their needs.

If such declarations are present in the rental agreement, it is advisable for the tenant to actually inspect the apartment before asserting its suitability. Furthermore, tenants may request the lessor to provide a registration form and a photocopy of their identity card as a means of verifying their ownership of the property. Additional documentation such as condominium records or documents related to adjacent amenities can be requested to confirm parking availability specified in the contract or the presence of a storage room, and so forth.

 

What is Considered a Habitable Apartment?

The Israeli Renting and Lending Law, specifically its 2017 amendment (also known as “the Fair Rental Law), outlines the criteria for determining the habitability of an apartment in the State of Israel, thus also defining what qualifies as a habitable one. The law stipulates that an apartment is considered uninhabitable if any of the following conditions exist:

 

1. Absence of a drainage system, including sewage and waste disposal.

2. Lack of an electrical or lighting system.

3. Insufficient ventilation, natural lighting, and doors and windows to seal the openings, including the main entrance.

4. No access to a drinking water supply system.

5. Absence of a partition between the bathroom and the apartment.

6. An apartment that poses unreasonable risks to the tenant’s safety or health.

 

The landlord is obligated to deliver the rented apartment in a habitable and suitable condition. Failure to do so would constitute a breach of contract on the part of the landlord.

What Constitutes a Residential Lease Agreement?

The Israeli law mandates that a residential lease agreement must, at the very least, encompass the following key aspects:

1. The identities of the contract’s signatories, including their identity card numbers and current addresses.

2. The address of the leased apartment, and it is advisable to include land registry identification details for added clarity.

3. The rental duration, whether there is an option to extend the lease, and if such an option is unconditionally granted to the tenant or subject to the landlord’s terms and conditions.

4. The provisions for contract termination by either party and the circumstances under which such termination is permissible.

5. A description of the rented apartment, including its furnishings and accessories.

6. The rent, including its due date and the designated payment method.

7. Any additional payments required from the tenant apart from the rent.

8. Any deficiency or significant defect within the leased apartment, known to the landlord.

9. Any elements within the apartment or its immediate vicinity that may result in genuine disruption to the tenants during their occupancy, provided the landlord is aware of them.

Payments

According to the Israeli law, the tenant is, naturally, obligated to pay the agreed-upon rent, along with any applicable taxes related to the property’s ownership, such as property tax (called in Hebrew Arnona). 

 

Additionally, the tenant is responsible for covering costs associated with the consumption of utilities, such as water, electricity, heating, and gas, as well as expenses for routine maintenance, which may include contributions to the homeowners’ association or management fees to the property management company.

The Israeli law also clarifies that the tenant is not responsible for any payments beyond those specified in the previous paragraph. This includes payments for the acquisition or improvement of permanent systems or facilities within the rented apartment, except for special adjustments or improvements requested by the tenant. 

 

Additionally, the tenant is not liable for insurance premiums associated with structured insurance or payments the landlord must make to third parties, such as brokerage fees for the agent acting on behalf of the landlord.

Repairs

Lease agreements in Israel typically indicate that the tenant must use the rented apartment responsibly, avoiding any damage to the property. Often, they state that the tenant should use the apartment “as a prudent owner” and assume the cost of repairs for any damage resulting from irresponsible use. In cases where damage arises from reasonable use or relates to apartment systems, the landlord is typically responsible for the repair expenses.

 

The Israeli law states that the landlord is obliged to rectify any defects or issues within the rented apartment at their expense, except for those caused by unreasonable use (unless otherwise agreed upon in the contract) and that are not minor. This should be done within a reasonable timeframe, no later than 30 days from the date of the tenant’s request, and within 3 days for urgent repairs that render the apartment uninhabitable.

What constitutes an urgent defect? It is one that makes living in the apartment unreasonably difficult.

It’s important to bear in mind that the Fair Rental Law stipulates that in the event of a defect or issue so urgent that the tenant cannot reasonably wait for the landlord to address it, the tenant may undertake the necessary repairs and subsequently seek reimbursement from the landlord for their reasonable expenses.

It’s worth noting that the legal provisions permit the tenant to rectify any defect or issue that falls outside the landlord’s responsibility, provided that the tenant has afforded the landlord a reasonable opportunity to address the matter. In such a scenario, the tenant can request the landlord to compensate them for their justifiable expenses or reduce the rent proportionally as long as the defect or issue remains unresolved, reflecting the extent to which the rental value has decreased due to the ongoing problem.

However, there may be defects or issues that the landlord should not be obliged to repair. It should be noted that if these defects arise in circumstances or conditions unknown to the landlord at the time of the contract, which they could not have known or prevented, and if repairing the defects is impossible or entails substantial costs that alter the agreement between the landlord and the tenant significantly, then it is not reasonable to demand repair, compensation, or expense coverage.

 

Termination of the Lease Agreement

Some leases may include a clause that allows the landlord to terminate the contract without specifying a reason, provided the tenant has not violated any contractual provisions. As per legal stipulations, such a unilateral termination clause is void unless the contract also grants the tenant the right to cancel the agreement with prior notice without providing any specific reason.

An Option to Extend the Lease

At times, tenants request options to extend the rental period with advance notice, while landlords may request that such extensions be conditional on the tenant’s compliance with all the agreement terms, punctual rent payments, and potentially pre-defined rent rates during the extended period. 

 

The Israeli law dictates that if the tenant possesses the option to extend the rental period, they must notify the landlord no later than 60 days before the lease’s end if they intend to exercise this option. Conversely, if the landlord has the choice to extend or not, they must inform the tenants no later than 90 days before the lease concludes.

 

Guarantees

The Israeli law also specifies that if the landlord requests a financial guarantee from the tenant, involving cash (or an immediate payment check) or a bank guarantee, the total sum of all guarantees must not exceed 1/3 of the total rent the tenant is committed to paying, or an amount equivalent to three times the monthly rent, whichever is lower.

Furthermore, the law mandates that the landlord must provide the tenant with reasonable prior notice of their intention to utilize the security deposit and allow the tenant a reasonable period to rectify any default.

Legal Services for Tenants and Landlords

Our firm specializes in representing both landlords and tenants of residential apartments in cities, Moshavim, and Kibbutzim.

As part of our service to clients seeking to either rent out their residential apartments or find apartments to lease for living, we perform a comprehensive review of the rights pertaining to the leased property.

We ensure that the intended usage of the property aligns with legally permissible uses and that it corresponds with the existing plans. We meticulously craft lease agreements in full compliance with the provisions of the Fair Rental Law and relevant court rulings.

Our services also encompass the preparation of guarantee forms for the signature of tenants and/or guarantors.
Additionally, we verify the tenants’ names against the register of limited accounts at the Bank of Israel, as well as the register of debtors subject to enforcement and bankruptcy proceedings.

Furthermore, we engage in negotiations regarding the lease agreement, working closely with both parties until the agreement is ready for signature.

Our office also represents property owners who are not residents of Israel. They can enter into lease agreements through a power of attorney and even seek assistance in property management, including tenant management.