In line with the general trend in the Israeli economy of providing assistance to young couples seeking to buy or rent apartments, a number of draft bills have been submitted recently to parliament. These bills address the issue of housing rentals, the objectives being to regulate the housing rental market in Israel, to achieve balance between tenants’ and landlords’ needs and to create greater stability for tenants: draft bill Fair Rentals (Temporary Order and Legislative Amendments),5775 – 2015; draft bill Regulation of the Rental Housing Market in Israel, 5775 – 2015; and the draft bill Regulation of the Transfer of Tenants’ Rights and Early Termination of Residential Apartment Leases, 5775 – 2015.

Some of these bills had been submitted to the previous parliament a long time ago, but were not approved before the parliament was dissolved. Since then, a number of draft bills have been submitted in this regard, all of which were submitted to the parliament on June 1, 2015. We set out below an update on a number of key provisions appearing in the draft bills.

Cap on rent increases during the first three years – the draft bill prescribes that no rent increases will be allowed for three years after a lease is signed, even if the tenant in the property is replaced during this period. Notwithstanding this restriction, the landlord will be allowed to raise the rent annually, provided that one year has passed since the lease was signed, but by a maximum of 2% per annum.

Any landlord who hikes the rent by more than 2% will be liable to pay compensation, even without proof of damages, of up to NIS 2,000 for each month that rent was collected in violation of the 2% cap.

Longer standard lease period – the draft bill prescribes that leases will be long-term contracts (i.e., for a period of at least three years), unless the tenant wishes to engage in a short-term contract (i.e., a lease shorter than three years).

Early termination of a lease by a tenant – the draft bill will allow tenants to terminate a lease at any time by issuing advance notice to the landlord of 60 to 90 days, depending upon the term of the lease.

Likewise, the landlord will also be allowed to terminate the lease, but only one year after the first year of the lease, after issuing advance notice to the tenant of at least 90 days, and under particular circumstances, such as: sale of the property, if the landlord needs to reside in the property, renovation of the property and more.

Cap on security deposits – the draft bill puts a cap on the security deposit that landlords may demand from tenants at a maximum of one third of the lease term and not more than six times the monthly rent.

The draft bill also incorporates a list of additional provisions to protect tenants, such as: forbidding landlords from forcing tenants to participate in brokerage and lawyers’ fees; obligating landlords to repair defects in their properties and defining deadlines for completing such repairs; defining the minimum conditions under which landlords may rent out apartments, such as: apartments must contain a kitchen, lavatories in good working order, hot water, properly working electricity, minimum space and more.

The purpose of the draft bill is to create stability and certainty for tenants for a longer period, since the issue of housing has such a material impact on tenants’ lives and livelihoods. In this way, the draft bill is attempting to create fairness in the rental housing market and to raise the status of tenants, who are, in effect, nearly powerless against landlords, particularly in the current rental housing market, with landlords preferring to engage in short-term leases.

The passing of the draft bill will have far-reaching implications on the wording of lease agreements and therefore, tenants and landlords should consult with attorneys who understand and specialize in property law and who can ensure that their rights are protected.

We stress that the aforegoing is still solely within the scope of a draft bill and has not yet been promulgated into Law.