Smadar Shattner Sayag
Smadar is an associate in the firm’s Real Estate department.
Smadar handles a wide variety of straightforward and complex real-estate transactions, including purchase and sale agreements for diverse residential and commercial projects, cooperation agreements, purchasing consortiums, agreements with various types of service-providers, lease agreements, receivership proceedings, etc.
Smadar provides ongoing legal counseling and assistance throughout all stages of real-estate transactions.
Smadar handles the preliminary investigations for her clients, the negotiations, the engagement in the set of agreements required for the purpose of executing the transaction, registering of the rights with the relevant authority, and representation before the various authorities relevant to the transaction. This, including the Israel Lands Authority, local authorities, the Israel Tax Authority and the land registry.
Interdisciplinary Center Herzliya (L.L.B, B.A. Finance), 2006
Member of Israel Bar Association since 2007
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Tips before Signing a Lease Agreement for an Apartment
Most of us have rented an apartment in the past or are planning to at some point.
Since an apartment lease can contain several pitfalls, here are some important issues you should check in order to ensure you begin your lease on the right foot.
Who owns the property?
First of all, it is important to ascertain who the registered owner of the property is, in order to verify that the person renting it to you is not a fraud impersonating the legal owner. You can verify the legal owner by checking the real estate extract of title or another official document certifying the registered owners of the apartment. In instances when the person directly handling the rental is not the property owner, you should verify that the person listed on the lease as the owner of the property is indeed the owner and that the rent money will be transferred to him or her. It is also advisable to ask to see a written document certifying that the registered owner of the property has authorized the person conducting the negotiations with you to do so on his or her behalf.
The rent and additional payments
Naturally, the sum of the rent must be specified in the lease. So should whether or not the rent is linked to an index, as well as the frequency and mode of payment of the rent. The lease should also explicitly specify what additional payments are imposed on the tenant in addition to the rent, such as management fees, house committee fees, municipal tax, etc.
Who is responsible for repairs in the apartment?
You should thoroughly check the condition of the apartment and see whether any repairs are necessary. For example, you should check for mold and signs of plumbing problems, the working order of electrical appliances in the apartment (such as air conditioners), and building elements like shutters, doors, etc.
Of course, not all defects are readily visible and sometimes are only detected after you occupy the apartment. Therefore, the lease should explicitly specify that the landlord is responsible for repairs in the apartment (excluding, of course, damage caused by the tenant). The lease should also specify that the landlord authorizes the tenant to pay for urgent repairs and then offset the payment to the repairman from his or her next rent payment or, alternatively, that the landlord will reimburse the tenant.
The law in Israel prescribes that the responsibility for repairs in a rented apartment is imposed on the landlord under all circumstances, apart from damage caused by the tenant. Consequently, even if this is not explicitly stated in the lease, the provisions of the law prevail in this regard.
The most important aspect of the security deposit is the circumstances enabling the landlord to confiscate it.
Some forms of security deposit, such as bank guarantees and cash security deposits, may be exercised without referring to the courts. On the other hand, promissory notes and security checks can only be exercised after going to court.
From the tenant’s perspective, it is preferable to insist on a security deposit that requires court involvement, since it enables the tenant to voice his or her arguments before the landlord exercises the security deposit.
Currently, the law limits the cash amount of the security deposit a landlord can demand from a tenant to a maximum of three months’ rent or one-third of the total rent for the term of the lease, whichever is lower.
You should also make sure that the lease specifies the timing of the return of the security deposit to the tenant.
Lease renewal options
It is important to check if the lease includes an option for renewal and whether the option is extended to you or to the landlord and under what conditions. From the tenant’s perspective, it is obviously best if the lease gives the tenant an option to renew the lease, under reasonable conditions similar to the initial term. Ensuring that the lease offers the tenant a lease renewal option is very important, because it prevents the landlord from being able to demand an unreasonable hike in rent at the end of the initial lease term.
What if I want to move before the lease expires?
Tenants often find that they want or need to move before their lease expires. Therefore, it is important to make sure the lease clearly states that the tenant is allowed to find a subletter to replace him or her.
A recent legislative amendment relates to this issue and prescribes that a tenant cannot sublet his or her apartment without the landlord’s consent. There is one exception to this rule: if a landlord unreasonably refuses a sublet, the tenant is allowed to proceed even without the landlord’s consent.
The law also prescribes that insofar as the lease states that the landlord has the right to terminate the lease for any reason, the tenant must be given a corresponding right to terminate.
It is also important to make sure that the lease contains a clause whereby, if the landlord sells the apartment, the tenant’s rights under the lease are not prejudiced. Within this context, you should also check whether any urban renewal projects are planned for the building or for adjacent buildings. It is in your best interest to insist on adding a clause that gives the tenant the option to terminate the agreement if such project or projects are expected to begin during the term of the lease and the tenant wishes to leave as a result.
Since an apartment lease is a binding contract that imposes financial charges in the scale of thousands of shekels per month, we recommend that you always consult with a suitable professional before signing any legal document.
New Court Ruling Prohibits Short-Term Apartment Rentals
The Supervisor of Land Registration at the Ministry of Justice accepted a lawsuit filed by the housing committee of a condominium building in Tel Aviv and forbade one of the apartment owners from using his apartment for short-terms rentals (Airbnb, Booking).
What to Know before Signing a Contractor's Purchase Application
In most projects, the marketers/contractors/developers customarily require potential apartment buyers to sign a purchase application/proposal form.
This document constitutes a preliminary stage in the engagement between the parties, and it anchors the principles of the commercial terms that will be incorporated later in the sale agreement.
Inter alia, it is important to make sure the document is worded in the format of an inquiry/application from you to the contractor, in order to avoid it being recognized as a binding sale agreement between the parties.
Therefore, already at this stage, it is highly advisable to consult with an attorney who is an expert in this field and who will be able to advise you to pay attention to particular issues in the application.
Description of the apartment – In the application form, you should specify the type of apartment, the story, its size, and whether it includes any appurtenances, such as parking, a storage room, etc. We recommend that you negotiate these points already at this stage, since any later addition to these terms will most likely involve additional costs.
Price – It is important to question and verify exactly what the price of the apartment includes, whether you will incur additional expenses (such as a lawyer’s fee or property registration expenses), and whether each sum includes VAT.
In this regard, you should ascertain whether the contractor is expecting you to bear the cost of its lawyer’s fee (even though this lawyer is not representing you during the purchase transaction). If you are required to pay this lawyer’s fee, please be advised that today the Sale Regulations limit the fee a contractor’s lawyer can charge. In respect of apartments priced at up to NIS 4,642,750, the maximum is a fee of up to NIS 4,960 plus VAT. (These sums are updated according to the changes in the index.)
Payment terms – The terms of payment for the apartment are also usually specified in the application form you will be asked to sign. In this regard, it is important to find out whether a bank is providing financing to the project and the stage of construction of the project. If the project is in its initial stage, we recommend stipulating that payments be contingent upon the completion of milestones in the construction stages.
The obligation to execute payments on schedule is the principal and most important obligation that will apply to you in the signed sale agreement. Consequently, you should plan the potential payment schedule with all due seriousness and prudence.
It is also important to keep in mind that purchase tax may apply to you. If so, you will be required to pay this within 60 days of signing the sale agreement. Please be advised that you cannot finance the purchase tax using the loan funds secured by a mortgage.
Index linkage – When purchasing an apartment from a contractor, the purchase price is usually linked to the construction inputs index. In most cases, the purchase application specifies the base index to which the purchase price will be linked, even though, until the sale agreement is actually signed, the index might rise in a manner that increases the purchase price by thousands of shekels. Therefore, we recommend negotiating the linkage terms already at this stage.
“Application fee”/“reservation fee” – Many contractors demand the payment of a fee of tens of thousands of shekels at the time of signing the purchase application, which is a kind of commitment fee to sign a sale agreement. In this regard, it is extremely important to expressly stipulate in the application form that, in the event the sale agreement is not signed for any reason whatsoever, the reservation fee you deposited with the contractor be returned to you. You should also demand that, if you do sign a sale agreement, the aforesaid payment be deemed partial payment in respect of the apartment. We further recommend that the aforesaid sum be held in escrow by the contractor’s attorney until the sale agreement is signed.
As is evident, even a supposedly short and simple document, like an application to purchase an apartment from a contractor, involves numerous material matters that require meticulous attention to their wording. Therefore, we highly advise you to never sign a document of this type hastily. And, of course, we recommend that you consult with an expert attorney before you sign anything.