Lease Agreements in Times of War: Continued Validity and Sample Lease Agreement

War and Lease Agreements: Operation Swords of Iron and its Impact

The recent Operation Swords of Iron has significantly impacted Israel’s economy, raising numerous legal questions. One key question concerns the effect of the operation on contractual obligations, particularly lease agreements.

Each legal issue must be assessed on a case-by-case basis. However, understanding the relevant laws is crucial. Many property owners across Israel have generously provided their properties to displaced individuals from the south and north. To facilitate this, we’ve provided a sample unprotected lease agreement in Word format. This sample agreement is tailored to the complex situation arising from Operation Swords of Iron. Additionally, you can find a short-term (non-short-term) lease agreement here.

Generally, War Does Not Justify Breach of Contract

The fundamental principle is that contracts must be fulfilled in good faith. In other words, if fulfilling the contract (or as closely as possible) is feasible, it should be done. Claiming a breach due to military operations alone is insufficient.

Even if a claim of “breach due to war” is based on substantiated circumstances, its success is unlikely. A defense against a breach of contract due to war must demonstrate “exemption due to force majeure or frustration of contract” (Section 18 of the Contracts (Remedies for Breach of Contract) Law, 5731-1971). The breaching party must prove that they were prevented from fulfilling their contractual obligations due to circumstances beyond their control and that they could not have foreseen these circumstances. Therefore, they are exempt from enforcement of the breached contract or payment of compensation.

To successfully claim contract breach due to force majeure or frustration, three cumulative conditions must be proven:

1. Circumstances rendered performance impossible or fundamentally different from what was agreed upon;
2. At the time of contract formation, the breaching party neither knew nor should have known of these circumstances;
3. The breaching party could not have prevented these circumstances.

The second condition is the most problematic when claiming frustration due to war. The Supreme Court has ruled that war is not an unforeseeable event in Israel. Therefore, there is no justification for accepting a claim that a contract was frustrated due to such an event. This trend is evident in case law, even in the most severe wars that paralyzed the entire country. From the Yom Kippur War to Operation Protective Edge, a security situation has not been recognized as sufficient grounds for breach of contract.

“Legal Breach”: The Extension of Time Limits Law

A major reason for rejecting claims of contract frustration is the Extension of Time Limits Law of January 1975. This law defines situations or contracts where deadlines for fulfilling contractual obligations are automatically extended or may be extended upon the obligor’s application to the court.

For example, if someone is called for emergency service at a time when they were required to perform an action or 30 days prior, they have an extension to perform the action until 30 days after the emergency service ends (Section 2(a) of the Extension of Time Limits Law, 5735-1975).

Accordingly, courts have ruled that where there is a legal solution that mitigates deadlines for fulfilling agreements under a state of emergency, it should be utilized. You can read more about extensions of deadlines due to Operation Swords of Iron in this article.

Lease Agreement Breach during War: Separate Legal Consideration

Except for special cases, most leases in Israel are governed by the Rent and Loan Law. Because housing is a highly sensitive matter, the Rent Law establishes a dedicated mechanism for exemption from payment obligations (Section 15 of the Rent and Loan Law).

A tenant will be exempt from rent payments for the period they were prevented from using the property if all the following conditions are met:

1. The tenant was prevented from using the property for the purpose of the lease;
2. The prevention is related to circumstances concerning the leased property or access to it;
3. At the time of contract formation, the tenant neither knew nor should have known of these circumstances;
4. The tenant could not have prevented the circumstances;
5. The tenant did not terminate the contract due to the prevention.

In other words, the same conditions for “regular” contract frustration must be met, plus two additional conditions (1 and 5). While claims of contract frustration due to a security situation have not been accepted, the Corona pandemic changed this trend. Courts recognized that Corona was an unforeseen “force majeure,” but usually approved only partial exemptions for tenants.

Postponement of Deadlines in Lease Agreements during War – Operation Swords of Iron

On October 19, 2023, the Law for Postponement of Deadlines (Temporary Order – Swords of Iron) (Contract, Judgment or Payment to an Authority), 5784-2023 was published. This law specifies situations where a group of eligible individuals can postpone certain payments. For a list of those eligible for a deadline postponement, click here.

According to the law, the deadline for performing actions under a lease agreement will be postponed by 30 days if all the following conditions are met (Section 2(a) of the Law for Postponement of Deadlines):

1. The contract was concluded before the relevant period (from October 7, 2023, to November 7, 2023);
2. The payment to be made falls within the relevant period;
3. The applicant for postponement is included in the list of those eligible for a deadline postponement;
4. The applicant for postponement or their representative notified the other parties to the contract;
5. The other parties to the contract are not eligible for a deadline postponement.

If all conditions are met, there is no basis for a claim of breach of contractual obligation.

An individual eligible for a deadline postponement will also be automatically eligible for a 30-day postponement of the following payments (Sections 3 and 4 of the Law for Postponement of Deadlines):

1. Payments to authorities (such as property tax, security fees, water, etc.);
2. Deadlines set in a final court decision (e.g., a judgment with a deadline for eviction).

Sample Lease Agreement – Short-Term Agreement Adapted to the Security Situation

During security crises, many property owners rent their properties to displaced persons from at-risk areas. Following Operation Swords of Iron, many people were left homeless, either because their homes were damaged or they had to evacuate for security reasons.

However, while the desire to help is commendable, the needs of both parties must be considered. Displaced persons will benefit from a lenient, short-term lease agreement; property owners will retain protection for their assets.

For your convenience, we have prepared a sample short-term lease agreement.

We have also included a sample promissory note. And of course, a sample unprotected lease agreement is available.