ISRAEL Law and Practice Contributed by: Hagit Bavly and Adi Daniel Zamir, Arnon, Tadmor-Levy
6.11 Insurance Issues In multi-tenant commercial properties, the les - sor usually takes care of the insurance of the building and includes the tenants as addition - ally insured. In some cases, the tenant is billed separately for this cost. In properties that are let to a single tenant, the building insurance obliga - tion can be passed on to the tenant. Coverage is standard; disputes sometimes arise in connec - tion with the duty to insure against earthquakes or other natural disasters. The Israeli govern - ment provides insurance with respect to dam - age caused by war and terrorism. Depending on the terms of the insurance, the insurance company can sue the person or entity that caused the damage paid for by the insur - ance company. 6.12 Restrictions on the Use of Real Estate Lessors may stipulate provisions regarding the use of the real estate in the lease agreement, such as the purpose (subject, however, to anti - trust law in the case of shopping malls and sim - ilar properties), operating hours, maintenance, etc. Tenants’ use of the property is also subject to regulatory provisions, such as the Business Permits Law, which regulates operating hours, the duty to obtain a business permit, compliance with permitted use in accordance with the city plan and building permit, etc. 6.13 Tenant’s Ability to Alter and Improve Real Estate Standard practice is that the lessor prohibits the tenant from performing any works or changes to the property, unless approved in writing and in advance by the lessor. Lessors will generally prohibit any work that involves changes in con - struction and infrastructure or any change in the external part of the property.
6.14 Specific Regulations As mentioned, the Leasehold Law was amended in 2017 and “fair rental” provisions were added, which apply to residential leases of residential units whose monthly rent does not exceed an amount in Israeli shekel equivalent to approxi - mately USD5,400. The purpose of this amend - ment is to protect residential tenants that are usually the “weaker” party, primarily through imposing certain disclosure duties and liabilities on the lessor. The rent fee is not limited by law. 6.15 Effect of the Tenant’s Insolvency The Insolvency and Financial Rehabilitation Law 2018 (the “Insolvency Law”) states that the ini - tiation of insolvency proceedings regarding a corporation or its being insolvent does not lead to the cancellation of an existing agreement and does not grant the lessor a right to cancel it, even if it is stipulated in the contract that the contract will be cancelled under such circum - stances. A trustee appointed to an insolvent tenant may, within a limited timeframe, submit to the court a motion to cancel an agreement even if there is no contractual or legal cause for cancellation. The court may approve the cancellation, or order the cancellation of only part of the agreement, if such cancellation is required for the financial rehabilitation of the corporation or will result in an increase in the debt to be paid to creditors. Even if there is a cause for cancellation of a lease agreement due to its violation by an insol - vent tenant, the court may, at the request of a trustee appointed to an insolvent tenant, order the enforcement of the agreement if it finds it necessary for the economic rehabilitation of the corporation.
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