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Renting or Leasing out an Apartment? Here’s What You Should Know

Renting or Leasing out an Apartment? Here’s What You Should Know

Many tenants move in August, so now is the perfect opportunity to refresh your memory on the rights and obligations of the parties involved (both the lessor and the lessee).



Which Clauses Should Be Included in the Lease?


Rental Fees and Additional Payments: Make sure to note the sum of the monthly rental payment and the manner and timing for payment (monthly, quarterly, etc.) In addition, if additional special payments are applied to lessees, be sure to note them.


The Lease Term: Be sure to set a definite time period and note the exact days the lease term begins and ends.


Extension Option: If you have decided to grant your lessees an option for extending the lease, you must note the conditions for the lessees’ exercise of the option, such as meeting their obligations under the agreement and written advance notice of their wish to exercise the option. In addition, you must establish rental fees for the option period.


Maintenance and Vacating: Define the conditions under which the apartment will be returned to you at the end of the lease term. You may demand that the lessees repair the walls after removing shelves or pictures and the like, as well as that they paint the walls to their original color. It is also recommended to include sanctions for holdover, such as payment of double the daily rental rate for each day of holdover.


Insurance and Guarantees: It is recommended that lessees be obligated to purchase renters’ and third-party insurance. Also, ensure that the insurance company waives its right for indemnity against you in the policy.


What to Learn about the Lessees before Execution and Which Guarantees to Accept?


The Lessees’ Identities: Some lessors inquire into the lessees’ occupations and request recent pay stubs. Lessors that are more cautious may seek a reference from previous lessors or make further inquiries through expert companies to ensure there are no “red flags” as to the lessees’ financial standing.


Securities: The main difference between the securities common in the rental market is the manner in which they may be realized. While the realization of a note or personal surety will likely necessitate court proceedings, the realization of autonomous bank guarantees  or deposits does not. Therefore, it is in your interest to require at least one guarantee of the latter type. In this context, it is important to know that the law limits the amount of the financial guarantee one may demand from lessees to up to three months of rent or a third of the lease term, whichever is lower.


How to Ensure Lessees Do Not Vacate the Apartment without Paying

You will not be able to prevent lessees from vacating the apartment (as well you should not be). Therefore, it is important you clarify in the agreement that should lessees do so, they are still required to meet all of their obligations under the agreement. Even if you agreed to accept the lessees’ rental payments in cash or by bank transfer rather than in checks, you should also require checks dated for the payment dates stated in the agreement. These will not be deposited by you, but will serve as backup if the lessees do not make payments or decide to flee. Additionally, note in the agreement that in the case of nonpayment, and subject to notice to the lessees, you will be entitled to act toward the realization of the guarantees you hold.


How to Set Rental Fees

Before offering the apartment to potential lessees, you ought to research the rental fees asked in the area for apartments with comparable characteristics. You can do so by checking with local realtors, internet bulletin boards, news media, or even with neighbors in the building or the buildings nearby.




What to Check before Taking Possession of the Apartment?


Physical Condition: You should do a walkthrough of the apartment in order to identify any defects or problems. This check is important for two reasons. First, an apartment is usually rented as is and thus you will not always be able to demand that the lessor repair any defects. Second, at the end of the lease term, you will have to turn the apartment over to the lessor in the condition it was in when you took possession, subject to reasonable wear and tear. Therefore, it is important to note various defects in the rental agreement or in a walkthrough report at the time of taking possession.


The Legal Status: It is important that you receive documentation as to the rights of the landlord in the apartment, that you make sure the landlord appears as the lessor on the lease, and that the lease is signed by the landlord or by its proxy.


The Planning Status: It is recommended that you look into whether an urban renewal project is planned for the building or near it. If so, ask to incorporate this into the rental agreement, by reducing rental fees during the construction or by being entitled to terminate the rental term because of it.


Who Is Responsible for Repairs?

The air conditioner broke, the faucet is leaking, there is a clog in the toilet—what to do? The law states that you must make any repair caused by your unreasonable use of the apartment. On the other hand, in accordance with the law, the lessor must repair any other defect (that is not minor) within 30 days of your demand for repair. In addition, the lessor must repair urgent defects, i.e. those that do not allow reasonable habitability in the apartment, within three days. Should the lessor refuse to make the repair, you are permitted to make the repair instead (subject to reasonable notice). Alternatively, you are permitted to reduce the rent fees because of a defect, so long as it has not been repaired. You should know that this provision cannot be negotiated in the terms of the contract.


May I Assign the Rental Rights?

In accordance with the law, rental rights cannot be assigned to a substitute lessee or to a sub-lessee without prior consent of the lessor. However, if the lessee refuses such assignment on unreasonable grounds, the lessee may assign the rental rights even without the lessor’s consent. However, this statutory provision may be negotiated within the terms of the contract. Therefore, it is in your best interest to make sure the rental lease stipulates that you be entitled to find a substitute lessee to take your place.


May I Terminate Possession Early?

Should you wish for the option to terminate the agreement and return possession to the apartment before the end of the lease term (and without finding a substitute lessee as noted above), an appropriate provision must be included in the agreement.


If the lessor added a provision to the agreement that entitles him to terminate the contract, then, in accordance with the law, the lessor must notify you of such termination at least three months in advance. In addition, in such circumstances, you, too, shall be entitled to terminate the agreement by giving the lessor at least two months’ notice.


The fact the parties hold opposing interests does not justify creating draconian lease agreements with unreasonable terms, in particular because current law regulates the main issues in the leasing relationship between the parties and it is generally impossible to act in violation of these regulations.


For more information, feel free to contact Adv. Alon Wolner

Source: barlaw.co.il