Law

The Fair Rental Law: Will it Really Make Things Fair?

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In the last issue, we spoke with attorney Michael Decker about the real estate market in Israel and what to look out for when signing a rental contract. We’re happy to have him back to discuss the recently passed “Fair Rental” law, which comes into effect on September 17. This law seeks to ensure fair rental standards, quality of rental housing and contract regulation.

The population of apartment renters is often younger, poorer and less established than that of apartment owners.  The olim chadashim population constitutes a major portion of the renters in Israel.

Will the Fair Rental law help control rent prices and prevent unfair rental practices?

The Fair Rental law is the result of a compromise between Knesset members concerned with social justice and the government’s economic policy, which emphasizes marketplace over regulation in determining rent prices.  The result has eliminated rent control and the “rent registrar,” which compiled and disseminated information about rent prices and practices.  Also, the law only applies to “standard” rental properties, excluding short-term and luxury apartments, as well as those rented to family members or protected tenants.

So those hoping for hard limits on rent prices and increases will be disappointed?

Yes, and rightly so.  The law of supply and demand determines rent.  More housing projects, whether state-sponsored or private, are the best way to lower rent costs.  What the state law DOES try to ensure is a minimal standard of amenities in rental properties and a certain standard of fairness in rental contracts, such as: All rental properties must conform to minimal standards of health and safety, have running water, electricity, ventilation and a lockable front door.  No mention is made of the state of repair, gas, furniture, water heating, central heating/AC or overall condition (these topics were removed from the initial drafts).  The property must be delivered in the agreed-upon condition and the property owner is responsible for flaws discovered during occupancy.  Any glaring flaws that the renter fixes (beyond routine maintenance and wear and tear) can be documented and deducted from the rent payment.  Any attempts to avoid this obligation by transferring it to the renter in the contract are specifically declared legally null and void.  The property owner must pay for property insurance.  If the owner employed the services of a real estate broker, expenses are paid entirely by him.  Any other third-party services the owner undertook are also his to pay.  The renter’s responsibility remains: utility bills, vaad bayit, municipal taxes and so on.  Both sides can terminate the rental contract before the agreed date – the property owner within 90 days, and the renter within 60.

These all seem like fairly common-sense provisions.

There were not many rental properties failing to provide the minimal conditions and the new landlord responsibilities are not overly onerous.  The only drastic changes are those governing securities. The guarantee can cover up to one third of the projected rental period or three months, whichever is lower.  Guarantees can only be redeemed in the event of non-payment (of the rent or other pre-agreed payments), damage to the property or refusal to vacate the premises.

That does seem a game changer compared to the previous status-quo.

It would be, if the law had any enforcement mechanisms.  This is the main point of criticism regarding the law.  It’s toothless by design – property owners can ignore it at will, with zero repercussions.  So this law, which applies only to a specific sub-set of rental properties, demands the most common sense standards and is a far cry from the government takeover of the rental market we’ve been warned about and doesn’t have any real effect.

So at best, this is a first step in dealing with the rental crisis?

Not even that.  There’s no reason to assume any actionable legal proposals in the future will rely on the Fair Rental law or incorporate it in any way whatsoever.

What would you like to see in future legal efforts?

I thought the rents registrar was an interesting proposal, even as a way to compile information about the housing market, without any regulatory authority.  It would provide an impartial way to document trends and prices and would have been immensely helpful for property owners and renters alike.  One provision that didn’t even make it into the preliminary, more expansive, drafts of the law, was for the protection of non-native speakers dealing with complicated legalese.  As mentioned in my previous article, consultation with a real estate lawyer remains the best way to avoid “gotcha” clauses, but better legislation on the subject would offer genuine protection of vulnerable renters, without infringing on the rights of honest property owners.

Cohen, Decker, Pex & Brosh Law Office

Since its establishment in 2012, Cohen, Decker, Pex & Brosh Law Office has grown exponentially in reputation, staff and clientele. They practice in all civil law areas, including litigation, commercial law, contracts, labor law and legal consultation, with a specialization in Israeli real estate and immigration law. They can be reached at  02-9903180 or through their website www.lawoffice.org.il.

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