Rental Contracts (Lease) Overview - Part 1

If you are about to rent any real estate, especially a house or an apartment in Israel, you may find it a bit difficult to navigate the legal system concerning a contract. This document was created to help you with a few issues that will certainly arise in the negotiation process - or at least should.

Please read this article carefully before engaging in any kind of negotiation.

The Internet “Sin”

It is a truism everywhere that signing a contract is no small matter and the implications are long-term and not always positive. 

One of the (many) "sins" of the Internet era is that one can find any sort of contract available in any language. There is no doubt that models are always welcome but it is just like a new pair of shoes. If you buy a pair of shoes through the Internet or mail, without trying them on, they may not fit you. Even if the size is correct, they may be very uncomfortable on your feet. 

The result can come out the same as a medication: you go to the drugstore and buy the same antibiotics that healed your neighbor. What if you are allergic to those specific antibiotics? 

Rental contracts can be especially troublesome either for the tenant or the landlord. The heart of the matter is finding a way to balance the conflicting interests of the parties - tenant and landlord. 

We all want to find a way to save in a rental transaction; and some people feel the best way to cut costs is to avoid paying lawyer`s and real estate broker`s fees. If you can find your ideal place to live without being helped by a real estate broker, of course you won’t have to pay for their services. If you choose not to consult a lawyer prior to signing a contract, you may find the cost far exceeds the lawyer’s fee in the long run.

Reading and Understanding the Contract

It is best to begin by reminding you that we are dealing now with Israeli law and the Israeli system; therefore forget all you know about leasing abroad - welcome to a new system.

The very first question before signing any kind of agreement, lease or contract is of course whether or not you are able to read and understand the legal terms before signing it - and then being committed to its terms without some legal help from a lawyer.

I recommend you have a professional lawyer review your rental contract before committing yourself. Contracts always have loopholes or pitfalls and to breach a contract is a very unwise move implying heavy penalties. You may find yourself in a courtroom soon after breaching a contract with very little chances of winning the case.

The Realtor (Real Estate Broker)

From the moment a real estate broker (after signing a contract between you two), has shown or just mentioned the existence of a place that you wind up renting, you must pay the broker`s fees down to the last penny, even if they never showed you that place. Generally, there is no manner of getting away from that.

Everything can be negotiated. Sometimes the broker charges only one side, sometimes both sides. In general, each side pays for his/her part. The fees are the equivalent of a half month to one month rent.

Finding a place you can afford (and not necessarily your dream place)

For this purpose you may want to use a real estate broker (realtor) and here is where we start to be careful not to make any mistakes.

The first advice is: choose a place you can afford and do not be pressured by anyone. A lease is a long term commitment and as a new immigrant you will be in a transition until you settle down. Many changes could happen, for example, you could find yourself without income for a month or more between jobs, causing you a heavy financial burden that makes it difficult to make high rental payments.

The Cost of Rent

The rent is a result of a negotiation between both parties. Be sure you can afford the rent and the expenses around it such as municipality taxes, utilities, etc.

Your landlord cannot increase the rent unless the lease gives him that right. Usually a raise in rent is dealt with in the option to renew clause. If the lease does not mention a rent increase, then the rent stays the same even for the new renewal period (second year).

The rent is payable according to the terms agreed in the rental contract. You may pay monthly or in any other term both parties have agreed to upon signing the contract. You may pay in dollars or shekels but always keep a receipt and it is advised to deposit the rent in the landlord’s account every month and keep a record of these payments.

In addition to the rental payments, the tenant is usually responsible for paying utility bills, municipal taxes on the property, home owner’s association fees, water, electricity and some maintenance expenses.

It is customary in all rental agreements for the tenant to give the landlord some form of “financial security” (but not a cash deposit) to ensure compliance with the rental agreement.

“New Olim” can claim an exemption or discount from municipal taxes for a one year period during their first two years after making Aliyah, but as with everything else in Israel there is some bureaucracy involved; you have go to the municipality and request this reduction – bring your rental contract along with your teudat zehut and teudat oleh.

Sincerely,
 

Tzvi Szajnbrum, Attorney at law