Some (potential) good news for renters!
Many will recall the law passed in Knesset last year (הצעת חוק השכירות והשאילה , התשע"ז-2017) aimed at setting the standards for rental apartments in Israel and the relationship between a renter and landlord. The media completely misrepresented the point of the law based on a lazy reading of the line which addressed realtors. Every news article or Facebook post I read falsely claimed that the law established that only landlords would now pay brokerage fees, but renters would not. As I explained in my post at the time, all that the law said about realtors is that the landlord cannot force the renters to pay the fees that are incumbent upon the landlord. A memo forwarded to me from a big-time broker basically told his members not to worry about the new law – continue business as usual. Not surprisingly, this weakly worded clause effected little to no change in the cutthroat Israeli real estate industry.
For this reason, I was encouraged to see today (December 12, 2018) that an amendment by MK Roy Folkman (Kulanu) aimed at increasing the degree of transparency in rental transactions was publicized today by Justice Minister Ayelet Shaked with her support (interestingly, this comes several days after Shaked rejected a bill by Folkman to create a public database about past rental deals). Shaked wrote that, “The purpose of the amendment is to create transparency regarding the brokerage fees received from additional parties to the transaction. This may help the tenant find out whether the landlord, whose broker acted on his behalf, actually imposes the costs of the brokerage fees on the tenant, contrary to the Renting and Lending Law.”
The amendment would require full discretion by the realtor to both parties regarding how much each of them has agreed to pay. Failure to disclose this information when signing the brokerage agreement would allow the client to refuse payment to the realtor. Having this card should allow renters to demand more transparency from the realtor showing them the property, and ensure they have a fair arrangement.
As I mentioned in the post from last year, one of my goals has been to get both sides of a transaction to split this cost. While this amendment may be a step in that direction, it leaves a bigger issue unaddressed. Part of the failure of the original law is that even if a landlord indeed pays their side of the real estate fee, he or she often rolls their costs over to the renters anyway. I have witnessed this firsthand on many occasions. For instance, I had clients who asked me to rent out their properties, and I explained to them how they would be responsible for paying part of the real estate fee. They said something to the effect of, “No problem – my asking price is 5000 NIS per month, for a year. If you can get them to pay 5200 per month, 2000 NIS is for you.” If anything, this amendment would only encourage such behavior if landlords are forced to start paying their fees.
Political solutions aside, I believe that the real key is difficult, but much simpler: don’t work with lousy realtors. If a real estate agent has not brought any added value to a deal no one really wants to pay them. On the flip side, I have found that when I, or any brokers I work with, genuinely provide clients with much needed assistance, they are happy to pay. I have spoken to many real estate agents over the years, and the one’s with the worst reputations tend to say that the only reason they have business is because landlords give them exclusivity rights. They don’t leave you any choice but to go through them to rent the apartment. So either you end up paying them directly because you hired the realtor with the most listings, or you pay them indirectly because the landlord has included their fees into the monthly rent.
So my advice to the readers is as follows:
Apartment owners – do not sign an exclusivity agreement with a real estate agent unless you understand exactly how much you will be paying them, and precisely what added value they will be providing you. Sometimes all you really need is for someone to help you with the marketing, but the showings you are happy to do yourself. Don’t let a realtor scare you out of showing your own home!
Renters – If you decide to see apartments through a real estate agent, make them sell you their service before they try selling you the properties. Don’t just sign away a month’s worth of rent, or even half a month’s worth, without understanding what exactly they will be doing to make your renting process more successful and efficient. And if you do find a real estate service whom you trust, you can have them show you apartments listed by competing brokers as well, because they will understand that each broker will be paid by the side they are representing.
As with any bill or amendment, there are plenty of steps before it becomes part of law, and even then, it’s up to society to incorporate it into how we do business. Nevertheless, by being a more informed consumer, you become a more empowered consumer, so make sure to always know your rights!
Feel free to check back on this blog for updates on this law and other real estate news and advice or reach out to Trusted House with any questions about the rental process.