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.

According to the Rent and Loan Law: Does a residential rental agreement require a written contract?

Yes. Section 25ב of the Rent and Loan Law stipulates that (1) a rental agreement must be in writing; (2) each party to the agreement is obligated to sign it; and (3) each party will receive a signed copy of the agreement.

However, it is important to note: this provision conflicts with a previous law from 1969 (Section 79(a) of the Land Law). According to this, a lease agreement for a period not exceeding 5 years does not require a written contract. The legislator attempted to resolve this contradiction by stating in Section 25ב that the lack of a written contract does not affect its validity. In other words, a claim that a rental agreement concluded verbally/by conduct is invalid solely because it is not in writing will not be heard.

Another way to resolve this conflicting provision is to apply the rules of interpretation adopted by the Supreme Court, which holds that a later specific enactment prevails over an older general enactment. This is precisely the situation here: the Land Law is general, from 1969; the Rent and Loan Law is specific (only rent and loan), and the amendment to it was introduced in 2017.

What details must be included in a rental agreement?

According to Section 25ג of the Rent and Loan Law, a rental agreement must include the following details:

• The address of the dwelling;
• The details of the parties to the contract (full names, ID numbers, and contact address);
• A description of the dwelling, its furniture, and fixtures, including a description of the adjacent common property that has been rented;
• The rental period, the existence and nature of an option to extend the period;
• The existence of a right to terminate the contract and the conditions of termination;
• The rent, its due date, and the method of payment;
• Additional payments payable by the tenant that are not rent, if any, and their amount;
• Defects/faults in the dwelling that are not insignificant and are known to the landlord at the time of entering into the contract;
• Anything in the rented dwelling or property in which it is located or its surroundings that causes or may cause a significant disruption to the use of the dwelling and is known to the landlord at the time of entering into the contract.

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.

Is the tenant obligated to allow the landlord to inspect the dwelling at any time?

Not exactly. Section 17 of the Rent and Loan Law states: the tenant is obligated to allow the landlord to inspect the property and make repairs, only if all of the following conditions are met:

1. The landlord wishes to arrive at a “reasonable time” (and not to conduct a surprise visit at 3 a.m.);
2. The landlord notified the tenant of their wish to inspect the leased property or make changes thereto, with reasonable advance notice;
3. The landlord’s visit will minimize disruption to the tenant as much as possible.

Note! One of the innovations of the Fair Rental Law is that certain of its provisions cannot be waived; that is, provisions of a rental agreement that contradict the law are null and void.

Most other clauses cannot be waived unless the waiver benefits the tenant. However, the tenant’s obligation to allow the landlord to inspect the property is one of the provisions that can be waived in a rental agreement (Section 25יד of the law).

In other words, a landlord may stipulate in the agreement that they may inspect the property even without prior notice and at any time they choose. But if this is not stipulated in the agreement, the three conditions listed above apply.

Is a landlord permitted to prohibit the introduction of pets into the dwelling?

Yes. The Rent and Loan Law is silent on the specific issue of pets; but it does state that the landlord shall determine the extent and manner of use of the dwelling. In other words, if a landlord wishes to stipulate that pets are prohibited – so it shall be.

Note! Landlords often submit generic rental agreements found online and are not even aware of the clause restricting pets in the dwelling. Then, when savvy tenants ask about the clause, they sometimes receive verbal consent to bring a pet into the dwelling.

However, today most rental agreements include an additional generic clause: that any representation and/or agreement not expressly appearing in the contract is void.

So, if the relationship with the landlord escalates, they may invoke the clause that nullifies any representation/agreement not in the contract; and under this guise claim that the tenant breached the rental agreement by bringing in a pet.

Therefore, tenants would do well to carefully read the rental agreement and ensure that every condition that is important to them is written therein.

Is a landlord permitted to demand any security deposit for the rental agreement?

Many tenants (especially in central Israel) encounter demands to provide several security deposits in high amounts. From security checks, promissory notes, and even bank guarantees of thousands of shekels (in the best-case scenario).

The Fair Rental Law seeks to put an end to this phenomenon by setting a maximum amount for security deposits and also specifying methods for their collection and payment. In a separate article, we reviewed every question in this context:

What is the maximum amount of security deposit; how many security deposits can be collected; and when a landlord is permitted to redeem them. For more information, 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).