Office and commercial leases in Israel

Letting an office does not follow the rules that govern a flat: the fair rental law of 2017 covers residential tenancies only. Here nothing is imposed on you — and nothing is guaranteed to you either. What is not written into the contract does not exist.

VAT: the first dispute, and the most avoidable

Letting commercial premises to a business is subject to VAT (מע״מ), unlike a residential letting to an individual, which is exempt. A rent quoted as "8,000 ₪" therefore means two different things depending on whether VAT is included, and the gap is far wider than anything a negotiation would turn on.

Put it in black and white: is the rent VAT inclusive or exclusive? It is the simplest line in the contract and the one most often missing, because each side assumes the other was thinking as they were.

Provide for the invoice too: a registered tenant needs one to reclaim the tax. A landlord who issues no proper invoice costs them that reclaim, and it is you they will come to about it.

Your tenant is a company: what that changes

In a residential letting, the tenant is a person, with a salary and assets. In an office lease, it is usually a limited company (בע״מ) whose assets may amount to its laptops.

If that company stops paying, the lease gives you a claim against it alone. Hence the practice, in any serious commercial lease, of asking for a personal guarantee from the directors or shareholders alongside the company's own: ערבות אישית. Without it, your contract is worth whatever the tenant's bank balance is worth.

Check the company's exact identity too — its registration number, not just its trading name — and who has authority to sign for it. A lease signed by someone who could not bind the company is a lease to do again.

What the 2017 law does not give you here

No legal cap on guarantees. You may ask for a bank guarantee of three months, six, or more, plus a deposit, a promissory note and guarantors, with no limit on the total. That is standard in commercial leases and surprises nobody.

No imposed deadline for repairs, no list of habitability conditions, no mandatory contents, no rule on who pays the insurance or the agent's fee. All of it is negotiable and all of it must be written, or the question stays open until the day it arises.

And no protection for you either: a commercial tenant leaving early falls under no statutory notice rule. If you want notice, compensation, or a bar on assigning the lease, write them in.

Permitted use and the business licence

The contract should name the activity the tenant will carry on there, and stop at that. A vague phrase — "commercial activity" — opens the door to a use you would never have accepted, and can put you at odds with the building or the municipality.

Many activities require a business licence (רישיון עסק), which depends on how the premises are zoned as much as on the tenant. Settle who carries the risk if it is refused: does the lease continue, or may the tenant walk away? With no clause, you face a tenant who cannot trade and will not pay.

Signage and nameplates are handled in the same spirit: what is allowed, where, and who applies for municipal permission if any is needed.

Management fees, fit-out, and what stays at the end

In an office building, management fees (דמי ניהול) are a separate line, often index-linked, sometimes as heavy as half a rent. Say who pays them, how much, what they cover, and how they may change. A tenant who discovers them afterwards disputes them.

Fitting out the space is the other big item. Who carries out the works, who pays for them, and above all what happens at the end: does the tenant reinstate, or do the works stay with you? Both answers are defensible; neither is obvious.

Finally, arnona on commercial premises is charged at a different rate from residential, generally higher. As with a flat, transferring it into the tenant's name is declared to the municipality and does not happen by itself.

FAQ

Does the 2017 fair rental law apply to an office?+

No. The chapter introduced in 2017 covers residential tenancies only. An office or commercial lease is subject to no guarantee cap, no repair deadlines and no mandatory contents: the contract stands in for the law.

Is office rent subject to VAT?+

Yes, unlike a residential letting to an individual. Write explicitly whether the quoted rent is VAT inclusive or exclusive, and provide for the invoice: a registered tenant needs it to reclaim the tax.

What guarantees may I ask for?+

Whatever you agree on: there is no legal cap. A bank guarantee of several months, a deposit, a promissory note and guarantors may be combined. In a commercial lease that is the rule rather than the exception.

My tenant is a company. Should I ask for anything else?+

Yes: a personal guarantee from its directors or shareholders. A limited company answers only on its own assets, which may be close to nothing. Check its registration number too, and the signing authority of whoever signs.

What happens if the business licence is refused?+

Whatever your contract provides, and nothing else: no statutory rule settles it. Write whether the lease continues, whether the tenant may withdraw, and within what time. With no clause, a dispute is certain.

Do the tenant's fit-out works stay with me at the end?+

Only if the contract says so. Set out who carries out the works, who funds them, and what happens on the way out: reinstatement by the tenant, or the works passing to the landlord.

An office lease written around the right questions

Permitted use, VAT inclusive or not, monthly management fees, fit-out works, signage, personal guarantors: the questionnaire asks them one by one, and the contract comes out in Hebrew with your language under each clause.

Create my contract