By Shia Getter
When renting long term, careful forethought in preparing the contract can help maximize your investment.
The preamble to the contract sets out the identities of the parties, the duration of the rental term, and the monthly rate. The customary mention of Unprotected Tenancy is technical, but still important.
In the body of the contract, detail the condition of the apartment, appliances, and furniture. Take the tenant through the apartment with a video camera, making it clear that the tenant is expected to return everything in the same condition, aside from normal wear and tear.
Payment And Securities
Determining the right price is tricky if you are not familiar with the area. It would be to your advantage to consult with a professional who knows the market. (Plus, such professionals have a continuous flow of potential tenants who may be interested in your apartment.)
Clarify the date by which payment must be made, and stipulate that 7-10 days late is a breach of contract. Dated and signed checks are the most efficient so you won’t have to run after him for payment every month. In addition, you should receive securities: at least one month’s rent in cash, plus an open check, as well as open checks for the municipality tax and utility companies in case there are unpaid bills at the end of the contract term.
For additional security, it’s a good idea to have the tenant bring two guarantors with Israeli IDs who accept responsibility for the tenant’s obligations.
The contract term should not exceed a year or two. It can always be renewed with the agreement of both parties. Include a clause that allows you to sell the apartment at any time, provided that the tenant’s rights will not be affected.
Long-term subleasing happens if your tenants decide to leave in the middle of the rental term and want to find someone to finish their contract with you. Be flexible, but make sure the sublease tenant is someone who meets your standards.
On the other hand, tenants often want to sublease short-term when they are traveling. Since they are leaving their own possessions in the apartment, they will be very careful about the people to whom they give their key. Still, have your representative in Israel meet the potential sub-leasers, if possible.
The definition of “normal wear and tear” is subjective. Therefore, the contract should make things as clear as possible: tenants are responsible to repair whatever breaks down, except for things unrelated to their use. For instance, if an internal pipe bursts, this is not a result of misuse, but a part of the normal wear and tear of any apartment. On the other hand, burnt-out light bulbs, clogged sinks or toilets, or a stuck window blind should not be the responsibility of the owner. Clarify your expectations regarding upkeep and repairs of anything else you can think of in your specific apartment. Allow your tenants the option not to use a system if they do not wish to be responsible for it.
Clarify that the tenants will not be compensated for the time the A/C or heating system was broken.
Don’t overlook insurance. Even if you have homeowners’ insurance, the tenants should insure their own belongings and take out third-party risk insurance, which will cover injuries of visitors or cleaning help. Make sure the policy requires the insurer to waive any right of subrogation against you.
The monthly payments for electricity, water, gas, and phone, as well as the communal building fee (va’ad bayit) and municipal tax (arnona) are to be paid by the tenant. In addition, long-term tenants should have all above bills transferred to their own names, so that if they leave a debt, it’s not your debt. If you have a proper management company, they can make sure that this is taken care of and assist your tenant if necessary.
The contract should include a clause about showing the apartment to future potential tenants two months before the end of the rental period, obviously after coordinating with the tenants.
In addition, state your right to check the condition of your apartment during the year, again with advance coordination. This clause simply protects you in unforeseen situations.
Last But Not Least
Towards the end of the contract, list the circumstances that would be considered a major breach of contract that may result in immediate termination of the rental period. In addition, choose a rav to serve as arbitrator in case of conflict between the parties.
The best contract in the world is not a substitute for your personal impression of the tenant. Avoid long-distance contract signing at all costs, even if the tenant is your neighbor’s second cousin. Meet him personally or have someone you trust do it for you and make an informed decision. ϖ
Shia Getter is the CEO of The Getter Group, a full-range real estate services firm in Jerusalem catering to the Anglo investor. He is a noted expert, columnist, and author of Everything You Need to Know About Buying Real Estate in Israel. He and his professional team manage many upscale Jerusalem properties and have helped countless people buy, sell, and renovate property in Israel.
This article is intended to provide general information about the subject matter covered. It is not meant to provide legal opinions, offer advice, or serve as a substitute for advice by licensed, legal professionals.