ISRAEL Law and Practice Contributed by: Hagit Bavly and Adi Daniel Zamir, Arnon, Tadmor-Levy
5.5 Applicable Governance Requirements
There is an obligation to report a leasehold agreement to the tax authorities and to register it in the Land Registry, depending on the term of the leasehold (ten years for registration, 25 years for reporting to the land tax authorities and paying taxes). A long-term lease of more than five years is called hahira in Hebrew. If the term exceeds 25 years, it is called hahira-ledorot (lit - erally: generations long-term lease). A status of protected tenancy exists in Israel, protecting tenants who were tenants when the Protected Tenancy Law entered into effect and anyone who rented real property and paid a sub - stantial amount up-front in order to obtain this status. However, hardly any new protected-lease agreements are entered into anymore. There is no longer protected tenancy for commercial property, and protected tenancy is gradually disappearing from the residential lease market as well. 6.2 Types of Commercial Leases Various mechanisms exist for effecting com - mercial lease agreements, including advance payment, monthly/quarterly payment, rent cal - culated on revenue, etc. This does not affect the substantive nature of the engagement as leasehold. 6.3 Regulation of Rents or Lease Terms Lease terms are freely negotiable as they are not regulated, though they are subject to certain “general” legal restrictions and obligations, such as to negotiate in good faith and to reveal to the tenant known defects in the property. The Leasehold Law was amended in 2017 and “fair rental” provisions were added, protecting residential tenants (of residential units whose monthly rent does not exceed an amount in
No specific requirements apply to entities that invest in real estate (as opposed to entities investing in other fields). As mentioned previ - ously, there are restrictions and obligations on REIT funds (see 5.3 REITs ). 5.6 Annual Entity Maintenance and Accounting Compliance Companies and partnerships must file annual statements with the Companies Registrar and with the tax authorities, and must pay a fixed annual fee to the Companies Registrar. The annual cost of all the foregoing starts from ILS6,000 to ILS10,000 (approximately USD2,000 to USD2,500), and increases depending on the scope of activity and level of complexity. 6. Commercial Leases 6.1 Types of Arrangements Allowing the Use of Real Estate for a Limited Period of Time The Leasehold and Borrowing Law, 1971 (the “Leasehold Law”) provides the following defi - nition: “[a] leasehold is a right granted, against a consideration… to hold possession and use property for a limited time”. The Land Law, which lists leasehold rights as one of the five property rights, offers a simi - lar definition. Making real property available to others for exclusive use, for a limited time, and against a consideration can only be done through a leasehold. Terms such as “use” or “permission”, which are not defined by law, are sometimes used in this respect; they are sub - stantially leaseholds.
429 CHAMBERS.COM
Powered by FlippingBook