Renting Out an Apartment? 10 Key Provisions for a Strong Rental Agreement
Have you purchased an apartment and are planning to rent it out? A well-drafted, comprehensive rental agreement is essential to protecting your property and your investment. In this guide, we outline the ten most important provisions that every landlord should include in their lease. Note that in 2017, the Israeli Rent Law was amended (commonly known as the Fair Rent Law), introducing several new obligations for landlords that we address throughout this article.
By Igal Mor, Adv. & Notary
Accuracy in Legal Advice. Excellence in legal support.
1. A Habitable Property
The Fair Rent Law requires the landlord to provide a property that is suitable and safe for residential use, with adequate living conditions — including a connection to electricity and water, a functioning drainage system, and proper doors and windows. If the parties sign a lease and the tenant discovers that the apartment fails to meet these basic habitability standards, the tenant is entitled to cancel the agreement. Therefore, before beginning to search for tenants, the landlord must ensure that the apartment meets the legal definition of a habitable property.
2. The Purpose of the Lease
The agreement must clearly state that the property is leased for residential purposes only and that the tenant is prohibited from using the apartment for any other purpose. This provision is primarily intended to prevent the tenant from operating a business out of the property without the landlord’s knowledge or the necessary regulatory approvals.
3. The Rental Period
The lease term is determined by agreement between the parties. It is important to address the option for contract renewal within the agreement. If the parties have agreed to a renewal option, the law requires the landlord to notify the tenant at least 90 days before the end of the lease if the landlord does not intend to exercise the renewal option. The tenant, in turn, must notify the landlord at least 60 days before the end of the rental period.
4. The Rent Amount
The agreement should clearly state the monthly rent amount and the method of payment. It is customary for the tenant to provide postdated checks covering the entire rental period. The lease should also specify whether the monthly payment includes only the base rent or also covers ancillary charges such as water and property tax — as is common, for example, when renting a housing unit attached to a private home.
5. Property-Related Payments
In addition to rent, the tenant is typically responsible for property-related expenses such as electricity, water, municipal property tax (arnona), and building committee fees. The tenant’s obligation for these payments should be clearly defined in the rental agreement, along with a provision requiring the tenant to transfer all relevant utility accounts into their name for the duration of the lease.
6. Subletting Restrictions
The subletting clause is one of the most critical provisions in any lease agreement. It must clearly establish that the tenant is prohibited from subletting the property — in whole or in part — without the landlord’s prior written consent.
7. Repairs and Property Damage
Under the Fair Rent Law, the landlord is obligated to repair, within a reasonable time after receiving notice from the tenant, any defect that causes a genuine disruption to the normal use of the apartment or its use as agreed upon in the lease. If the landlord fails to make the necessary repairs, the tenant is legally entitled to arrange the repair independently and seek reimbursement from the landlord.
8. Modifications to the Property
The amended law makes clear that the tenant may not make any modifications to the apartment without first obtaining the landlord’s consent. Given the importance of this provision, the agreement should specify that such consent must be obtained in advance and in writing. If the tenant makes unauthorized changes, the landlord may require the tenant to restore the property to its original condition at the tenant’s expense.
9. Security Deposits and Guarantees
The Fair Rent Law introduced a significant change regarding security deposits: the landlord may not demand a guarantee exceeding the equivalent of three months’ rent. Furthermore, before drawing on the guarantee, the landlord must provide the tenant with reasonable advance notice and an opportunity to pay the outstanding debt directly, rather than having the guarantee forfeited.
10. Insurance and Brokerage Fees
The amended law also changed the customary practice regarding insurance and brokerage costs. The landlord is now prohibited from requiring the tenant to pay for building insurance or to cover the brokerage fee when the broker was engaged by the landlord.
Do you own a rental property? Are you about to sign an important rental agreement? We invite you to schedule a legal consultation to discuss the terms of your lease — before you sign a memorandum of understanding or rental contract.