ISRAEL Law and Practice Contributed by: Hagit Bavly and Adi Daniel Zamir, Arnon, Tadmor-Levy
Israeli shekel equivalent to approximately USD5,400). The law defines obligations governing owners of residential properties, including mandatory con - tractual disclosures, and stipulates the kinds of payments that the landlord should pay and may not demand from the tenant. As mentioned, some protected tenancies still exist and the rent for these is limited, though they are gradually disappearing from the market. 6.4 Typical Terms of a Lease The lease term is usually divided into an initial period of about three to five years, plus one or more options for extension periods which the tenant may exercise. The initial lease term and the option periods will not usually exceed ten years in total. Standard practice is that the tenant is respon - sible for ongoing maintenance and the repair of any damage, except for reasonable wear and tear. Commercial properties are often let in “shell and core” condition, and the tenant completes the finishing at their own cost. Triple net leases are less common in Israel and are used mainly when the tenant leases a whole building. Rent is usually paid every quarter, in advance. Since the COVID-19 pandemic, and following the lessons learned from it, lessors of commer - cial properties often stipulate in the lease agree - ments that the tenant is obligated to pay the rent and other payments applicable to them, whether they have used the property or not, for whatever reason. 6.5 Rent Variation In most cases, rent is linked to the consumer price index, and will also increase at the begin -
ning of every optional extension period if exer - cised by the tenant, as mentioned in 6.4 Typical Terms of a Lease . 6.6 Determination of New Rent The rent increase rate is usually predetermined by the parties in the lease agreement. It is com - mon to determine that in each option period rent goes up by 3% to 5%. 6.7 Payment of VAT VAT is due on rent, though leasing of residential units is exempted from VAT. 6.8 Costs Payable by a Tenant at the Start of a Lease In addition to the payment of rent, maintenance fees and other ongoing payments throughout the term of the lease (insurance and local taxes to the municipality, for example), tenants of com - mercial properties are usually required to submit securities to the lessor prior to the commence - ment of the lease term, and in some cases to contribute to the lessor’s legal fees in connection with the lease agreement. 6.9 Payment of Maintenance and Repair Common areas in commercial properties, such as lobbies and parking areas, are usually man - aged by the lessor, directly or through a third- party management company. The cost is usu - ally divided between all tenants, according to the ratio between the area of their leased premises and the total area of all relevant leased premises. 6.10 Payment of Utilities and Telecommunications For utilities and infrastructure that serve sev - eral tenants, the same payment applies – ie, the costs are divided between all the users.
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