Israel: The New Fair Rent Law – What Do You Need To Know?

Last Updated: 16 August 2017
Article by Liat Keisary Yahalomi

In July 2017, the Fair Rent Law (Temporary Order and Legislative Amendments), 5776 – 2015 was enacted, an initiative of MPs Stav Shaffir and Roy Folkman.

The main objectives of the New Law are to regulate the relationship between tenants and landlords and to define the minimum conditions for an apartment to be deemed "fit for dwelling."

Who? What? When?

The New Law does not apply to all leases, and prescribes that it will not apply to apartments for which the contractual relations between the landlord and the tenant differ from the standard contractual relations in a residential lease, such as:

  1. vacation apartments;
  2. apartments in student dormitories;
  3. protected housing;
  4. any apartment to which the Tenant Protection Law applies;
  5. luxury apartments at rents exceeding NIS 20,000 per month;
  6. apartments being leased to a family member (spouse, sibling, parent);
  7. short-term rentals (three months and less) and long-term rentals (10 years and more).

The New Law will come into effect on September 17, 2017. Unlike what was customary in the Hire and Loan Law, the provisions of the New Law are cogent and unconditional, unless the stipulation benefits the tenant.

Restrictions on Guarantees

If in the past the landlord could demand guarantees from a tenant to his heart's content, the New Law serves to help tenants and to restrict landlords by prescribing that a landlord may demand a guarantee in advance only up to the sum equivalent to one third of the rent for the entire period and never more than three times the monthly rent.

In addition to limiting the sum of the guarantee, the New Law clearly defines the circumstances under which the landlord may exercise the guarantee. According to the provisions of the New Law, the landlord is permitted to exercise the guarantee solely under the following circumstances:

  1. failure to pay rent on time;
  2. failure to pay additional payments for utilities the tenant owes (electricity, water, gas, municipal tax, etc.);
  3. failure to repair defects in the property caused by the tenant's recklessness;
  4. failure to vacate the premises by the date prescribed in the lease.

What Is “Housing Fit for Dwelling”?

The New Law defines the term "housing fit for dwelling" and, by doing so, basically defines which properties may be put up for let. Pursuant to the New Law, the property for let must contain adequate living conditions, including connections to electricity and water mains, connections to the sewage system, openings for ventilation, proper lighting, and a front door that can be locked.

If a tenant discovers that the property is not fit for dwelling for any of the above reasons, then the tenant is permitted to cancel the lease at any time.

Who Repairs What?

If in the past the landlord could define conditions for performing repairs, or could procrastinate in performing particular repairs, all at the landlord's absolute discretion, the New Law regulates the matter of repairs and defines clear timeframes for performing repairs:

Ordinary repairs: The landlord is obligated to pay for repairs or, alternatively, to himself arrange repairs of defects caused as a result of reasonable use within 30 days of receiving the tenant's demand.

Urgent repairs: When a problem arises that does not enable reasonable use of the property as a dwelling—a burst pipe, mold, and the like—the landlord is obligated to pay for or, alternatively, to himself take care of the repair within three days of the tenant's demand.

If a repair is not performed within the timeframe prescribed in the New Law, the tenant is permitted to perform the repair himself or through a professional. The cost of the repair will be deductible from the rent accordingly.

Who Pays for What?

The New Law retains the tenant's obligation to pay for current utilities payments (electricity, water, gas, municipal tax, and condo committee maintenance fee). Payments relating to property betterment will continue to apply to the landlord.

However, the New Law introduces an innovation pertaining to the real estate agent's fee. If a landlord hires a real estate agent, then the agent's fee in the transaction must be paid in full by the landlord and he will no longer be allowed to impose it on the tenant.

What Happens Now?

The purpose of the New Law is to regulate the housing rental market and to anchor the tenants' rights by law. The era when landlords could do whatever they wanted has come to an end. Therefore, property owners need to prepare themselves for the inception of the New Law and to amend provisions of their leases to conform to the New Law, in order to avoid exposure to any potential breach of contract and violation of the New Law.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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