Over the past decade, the Israeli real estate market has been asking the chicken-or-egg precedence question as it witnesses a continuing boom in demand for rental apartments, and not surprisingly, a reciprocal frantic climb in rental prices. Given the current state of the market, many tenants lose hope of finding low-cost and problem-free accommodation; so much so, that they succumb to signing long complicated contracts under pressure, before they’ve had a chance to read and fully understand them.
What might seem like an exclusively Anglo issue, exacerbated by language and further compounded by complicated legalese, is in fact a national problem that affects tenants in all sectors of the Israeli population.
Just like every other facet of adult life, “doing hishtadlus” is the best way to face your first rental contract. Michael Decker, from the Jerusalem Law Offices of Cohen, Decker, Pex & Brosh, calls it “doing your homework.” “Come prepared and you’ll avoid the most common pitfalls in signing a rental contract.”
In a market saturated with both supply and demand, coming prepared means knowing what you want and what’s available on the market. “Once you’ve defined your family’s requirements and found an apartment that meets these needs, the first and most important thing is to ensure that the rental price is justified and reflects market value. To put it plainly: Make sure you’re not getting ripped off,” warns Decker.
“You can find a number of useful market- value calculators online, but you don’t need to be a math whiz to recognize the most basic factors that determines market value: Geographic location (for prevalent price range); apartment location (within a geographic location, such as proximity to its central business district); apartment size and number of rooms; proximity to educational institutions, amenities and employment opportunities; apartment floor within a building and presence of elevator/Shabbat elevator; age of the building and condition of the apartment.”
Decker’s advice to map out the specifications of an apartment and compare them with similar properties makes a lot of sense. Look for the common denominator and see where various apartments differ. “To ascertain if the rental price is reasonable, compare it to other properties for rent in the same area that match the must-haves on your list. For a truly objective comparison, widen your comparison to other agents.”
But what about local custom or law when it comes to written or oral agreements, payment methods and timetables? Is there an unspoken rule that determines who pays utilities?
Decker assures us that while Israel laughs in the face of what other countries might consider mandatory legal decorum, when it comes to real estate law, Israel is far from Wild West status. Decker recommends signing a contract that includes as many details as possible including an agreed upon price. Once signed, it’s legally binding. In the case of rental contracts, they hold enough water to take precedence over a sale contract if the sale took place after a rental contract was signed.
Israeli legislation rarely attempts to enforce oral contracts, or even pay attention to oral agreements in any form, no matter how well witnessed. Promises made by an owner or tenant not recorded in writing, are as near to worthless as their conscience dictates. “Don’t ever rely on an oral agreement. If an owner insists on closing important details orally, it is a MAJOR red flag and will cost one of the parties a great deal of money and aggravation.”
“Payment methods must be agreed on in advance,” he says. “There are usually one of two methods: Direct debit (authorized to the owner) or post-dated checks. Make sure you have the means for the method you agree upon to avoid defaulting on payments.” Decker also suggests that a contract should specify how often rent is paid (monthly, quarterly or annually). “Make sure you can commit to the agreed timetable. Inability to pay rent on time could be considered breach of contract, which could lead to eviction.”
In contrast to the practice in the United States, for example, in Israel it is the tenant who pays municipal taxes on an apartment, in addition to utility bills such as electricity, gas, water, building committee (vaad bayit) and so on. Many tenants are entitled to discounts on municipal taxes, for example, new olim, soldiers, the elderly, the disabled, students, etc. Decker’s tip is to check if you are eligible for a discount, which could mean monthly savings of hundreds of shekels.
A tenant is responsible for covering costs of repairs due to their own negligence or (intentional or unintentional) destructive behavior.
However, additional taxes such as betterment levies or payments to the vaad bayit unrelated to the apartment itself, e.g. painting the public stairwell or repairing the heating pipes, as well as reasonable wear-and-tear of the apartment, such as a plumbing or electricity fault, are usually an owner’s onus.
It’s starting to sound like most legal ramifications of a rental contract lean in favor of the owner. But protection of assets is important as long as it’s logical and reasonable. An owner may request one or two months’ rent up front. This secures a guarantee of sorts if the tenant skips town after falling behind on rental payments.
However, when a marriage between tenant and owner presents as not exactly a match made in heaven, both owner and tenant have a right to early termination. The former needs time to find a replacement tenant and the latter needs time to pack up their belongings and find a new housing solution. “Include a clause in your rental contract that offers an option for early termination, subject to advance notice of either 30 or 60 days,” advises Decker. “So if you find yourself in an unhealthy rental relationship with no way to bridge the divide, you can always default to that clause.”
Other securities exist to protect the interests of the apartment.owner and serve to cement the tenant’s commitment. A bank guarantee promissory note or third-party guarantee are some examples.
The first is a sum of money entrusted to the bank by the tenant which the bank pays the owner of an apartment if needed. This guarantee is usually equivalent to three months’ rent. “If a guarantee is autonomous, the owner can redeem it without having to prove their tenant was in breach of contract. In fact, an owner doesn’t even have to notify their tenant of intentions to redeem the guarantee.” The last determines that should a tenant default on payments, guarantors named in a third-party guarantee fully assume the tenant’s responsibilities and undertake to comply with all terms of the contract as though they signed it themselves.
“It’s important to be aware of these, but as long as you uphold your side of a contract, these guarantees are usually provisional only and never executed.”
The fact that rental contracts have a beginning and end date makes us falsely perceive them as less binding because of their “temporary” nature. Add to this the effort required to decipher a complex legal contract and the pressure of securing an apartment quickly, and it’s no wonder most tenants sign on the dotted line with just a hope and a prayer. “If it seems too complicated to go over a long contract and make sure that it includes all the relevant details and is free of sticky clauses and fine-print traps, retaining the services of a real estate lawyer to evaluate the rental contract is both possible and highly advisable.”
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 02-624-4499 or through their website www.lawoffice.org.il.
ABOUT MICHAEL DECKER
Jerusalemite Michael Decker is a partner in Cohen, Decker, Pex & Brosh and a member of the Israeli Bar Association since 2008. Decker serves as chief legal counsel for several leading commercial firms, with areas of expertise including real estate, business, commercial, nonprofit and Israeli immigration law, and significant litigation experience. He is a CoFounder of IJA, Israeli Justice Alliance whose aim is to fight anti Semitism on an international level and protect the religious freedom of minority groups in Israel while maintaining Israel’s character as a Jewish state with a Jewish majority. His involvement in several petitions before the Israeli Supreme Court of Justice has had a real impact on Israeli legislation.