The Fair Rent Law: A Guide for Landlords and Tenants

Fair Rental Law: The Rent and Loan Law

The Fair Rental Law refers to an amendment to the Rent and Loan Law, 1971, which came into effect in the summer of 2017. The dire state of Israel’s housing market and rental sector requires no elaboration.

This was a key factor behind the 2011 social protest. Nearly a million Israelis took to the streets, setting up tents and voicing their discontent to pressure the government to address the economic anomaly that had significantly inflated housing prices. Therefore, although the amendment came into effect six years after the social protest, some would argue it is one of its fruits.

The amendment’s language indicates a twofold purpose:

1. To create greater legal certainty regarding rental and loan transactions.
2. To establish fairer arrangements for tenants, who are often in a weaker position than landlords.

Among other things, the amendment defines a suitable dwelling; the landlord’s obligations regarding repairs; the guarantees that may be collected from the tenant; the details that must appear in the contract and the manner of its execution; the status of the lease vis-à-vis third parties; and more.

A significant innovation in the amendment is the provision stating that certain clauses of the law cannot be waived; and others can only be waived if the waiver benefits the tenant. In other words, even if a tenant signs a rental agreement that infringes upon their rights under the Rent and Loan Law, the provisions of the law still prevail; and the tenant’s signature on the agreement will not be used against them. Therefore, it is crucial to familiarize oneself with the provisions of the law beforehand and ensure that the rental agreement does not contradict it; the alternative of a subsequent dispute is always more problematic.

Standard 2023 Rental Agreement for Download

Does the “Fair Rental Law” apply to all rental agreements?

No. Section 25טו(א) of the Fair Rental Law stipulates that the law will not apply to the following rental agreements:

• A residential rental agreement for a dwelling that is one of the following:
• A hotel room;
• A dwelling rented for leisure purposes;
• A hostel as defined in the Supervision of Hostels Law, 1965;
• A dwelling in a sheltered housing facility;
• A dwelling in student dormitories – for students or employees;
• A dwelling to which the Tenant Protection Law (1972) applies;
• Short-term residential rental agreements (up to a maximum of 3 months), without the possibility of extension;
• Residential rental agreements for a period exceeding 10 years, where the landlord cannot terminate the agreement earlier.
• Residential rental agreements where the monthly rent exceeds 20,000 NIS.

Does a Residential Rental Agreement Require a Written Contract for Fair Rent?

Yes, a residential rental agreement should be in writing. Section 25ב of the Rent and Loan Law states this clearly. First, the agreement must be written. Second, both parties must sign it. Third, each party gets a signed copy. This ensures Fair Rent terms are clear.

Contradictions and Clarifications

However, this conflicts with the Land Law (1969). Section 79(a) of that law says a lease under 5 years doesn’t need a written contract. The legislator tried to fix this. Section 25ב adds that a missing written contract doesn’t invalidate the agreement. So, a verbal or conduct-based rental agreement is still valid.

Another way to resolve this is legal interpretation. The Supreme Court favors newer, specific laws over older, general ones. This applies here. The Land Law (1969) is general. The Rent and Loan Law (amended 2017) is specific to rent and loans, aiming for Fair Rent.

Essential Details for a Fair Rent Agreement

For a Fair Rent agreement, specific details are legally required. According to Section 25ג of the Rent and Loan Law, your rental contract must include:

• Dwelling Address: The full address of the property.
• Party Details: Complete names, ID numbers, and contact addresses for both landlord and tenant.
• Property Description: A clear description of the dwelling. This includes furniture and fixtures. Also, describe any rented adjacent common property.
• Rental Period: Specify the lease duration. Include any options to extend the period and their nature.
• Termination Rights: State if there’s a right to terminate early. Outline the conditions for early termination.
• Rent and Payment: Clearly list the rent amount, its due date, and payment method.
• Additional Payments: Detail any non-rent payments due from the tenant, and their amounts.
• Known Defects: Disclose any non-insignificant defects or faults in the dwelling. These must be known to the landlord at the contract signing.
• Significant Disruptions: List anything in the dwelling or its surroundings causing significant disruption to its use. This must be known to the landlord when the contract is made.

Ensuring these details are present helps establish a transparent and Fair Rent arrangement for both parties.

What constitutes an unsuitable dwelling? What is the legal recourse for an unsuitable dwelling?

Section 25ו of the law stipulates that the landlord is obligated to provide a dwelling that is suitable for habitation. A landlord who provides a dwelling that is not suitable for habitation shall be deemed to have breached the rental agreement; thus, the tenant shall have grounds for a claim for breach of an unprotected rental agreement.

According to Schedule 1 to the Rent and Loan Law, a dwelling is unsuitable for habitation if one of the following applies:

1. It does not have a drainage system, including a system for the proper disposal of sewage and wastewater;
2. It does not have an electrical system or lighting system;
3. It lacks ventilation and natural light openings, as well as doors and windows for closing these openings; including a main entrance door with locking mechanism;
4. It does not have a system for supplying drinking water;
5. It lacks a partition between the toilet and the dwelling;
6. There is an unreasonable risk to the tenant’s safety or health.

Who is responsible for repairing defects in the dwelling? Does this obligation apply to all defects?

Many people don’t realize that a landlord is not obligated to repair every defect in a dwelling. There are types of defects for which the tenant alone is responsible. The method of repairing defects – including the time frame for doing so – is also a matter for discussion.

Due to the importance of this issue, we have written a separate article on this topic: What are the defects for which each party to the contract is responsible? What is the method of repair and within what time frame must each defect be repaired? For more information on defects in the dwelling.

Is it permissible to sublet a dwelling without the landlord’s consent?

The presumption is no. Section 22 of the Rent and Loan Law states that a tenant may not transfer their rights under the rental agreement to a third party or sublet the dwelling without the prior written consent of the landlord.

There are exceptions to the foregoing rule; that is, the tenant may transfer their rights under the rental agreement if one of the following applies:

• The landlord did not consent for unreasonable reasons; or –
• The landlord conditioned their consent on unreasonable terms.

What constitutes “unreasonable terms”? This is an interpretive question that will be examined as needed based on the specific circumstances of the case in question.

Tenant Obligations: Landlord Inspections and Fair Rent

Is a tenant obligated to allow landlord inspections at any time? Not exactly. For Fair Rent practices, Section 17 of the Rent and Loan Law outlines specific conditions. The tenant must allow inspection and repairs only if all of these are met:

• Reasonable Time: The landlord must visit at a “reasonable time.” Surprise 3 AM visits are not permitted.
• Advance Notice: The landlord must give reasonable advance notice. This applies to inspections or changes.
• Minimize Disruption: The landlord’s visit must minimize disruption to the tenant.

Waivers and the Fair Rent Law

One key innovation of the Fair Rent Law is that some provisions cannot be waived. Any rental agreement clauses contradicting these provisions are void.

Most other clauses can only be waived if it benefits the tenant. However, the tenant’s obligation to allow landlord inspection is an exception. This specific provision can be waived in a rental agreement (Section 25יד of the law).

In simpler terms, a landlord can stipulate in the agreement that they may inspect without prior notice. They can also specify any chosen time. But if this is not in the agreement, the three conditions listed above apply. This ensures a more Fair Rent arrangement for both parties.

Pets and Fair Rent Agreements: What Landlords Can Do

Can a landlord prohibit pets in a Fair Rent dwelling? Yes, they can. The Rent and Loan Law doesn’t specifically mention pets. However, it states that landlords determine the extent and manner of dwelling use. So, if a landlord wants to prohibit pets, they can stipulate this.

The Pitfalls of Verbal Agreements

Note: Landlords often use generic online rental agreements. They might not even know about clauses restricting pets. Savvy tenants sometimes ask about such clauses. They might get verbal consent to bring a pet.

However, most current rental agreements include a generic clause. It typically states that any representation or agreement not in the contract is void.

If problems arise, the landlord might use this clause. They could claim the tenant breached the agreement by having a pet. This is true even with prior verbal consent.

Therefore, tenants should always read the rental agreement carefully. Ensure every important condition, like pet allowances, is written in the contract. This protects your Fair Rent arrangement.

Understanding Security Deposits for Fair Rent

Many tenants, especially in central Israel, face high security deposit demands. These can include security checks, promissory notes, or even bank guarantees for thousands of shekels.

The Fair Rent Law aims to curb this practice. It sets a maximum amount for security deposits. It also specifies methods for their collection and payment. In a separate article, we covered every question related to this:

• What is the maximum security deposit amount?
• How many security deposits can be collected?
• When can a landlord redeem them?

For more detailed information, please click here.

How should a tenant return the dwelling at the end of the rental period?

Upon termination of the rental period, the tenant shall return the leased property vacant of any person or property, except for the landlord’s property serving the leased property (Section 20א of the Rent and Loan Law).

If the tenant returns the property as described above, the landlord must accept the leased property (Section 20ב of the law). A negative provision may be read from this:

If the tenant does not return the property as stated, the landlord may refuse to accept the leased property; and accordingly, not release the tenant from their obligations as such, with all that entails.

What to do if a party has violated the provisions of the law or the rental agreement?

The wisest course of action is to try to resolve the matter with the other party without resorting to legal avenues. If an amicable solution is not reached, it is necessary to file a lawsuit, which will usually be a small claims lawsuit.

If we exclude landlords who submit promissory notes for execution by a bailiff and lawsuits for commercial spaces, a small claims lawsuit will usually be the best course of action. There are two main reasons for this:

1. The advantage of conducting a quick, inexpensive, and efficient legal proceeding in the Small Claims Court.
2. The amount of the claim usually does not exceed the ceiling for claims in the Small Claims Court (a total of 38,900 NIS, as of January 2023).