Short-Term Rental Guide Airbnb — Legal Status in Israel

What is Short-Term Rental and What is the Legal Status in Israel

Short-term rental is the lease of housing for a short period — typically a few days to several months — as opposed to regular rental which lasts a year or more. Platforms such as Airbnb, Booking.com and HolidayIQ have become central to this field in recent years, raising numerous legal questions on the subject.

The legal status in Israel regarding short-term rentals is still in development. There is no dedicated legislation that explicitly regulates Airbnb or similar platforms, but short-term rental is subject to existing legal rules: the Tenancy Law, tax law, building and planning regulations, and tenant protection laws. Every apartment owner or landlord must understand the legal implications before starting short-term rental activities.

In recent times, complaints from permanent tenants regarding disturbances, noise and traffic congestion in residential buildings where short-term rentals take place have increased. Certain municipal authorities have begun imposing restrictions, and the Tel Aviv Municipality enacted a bylaw requiring licensing and limitations. This reflects a global trend of increased oversight in this field.

At Mandelbaum, Gor, Witzman-Gor and Partners, Law Offices (Ramat Gan), we advise apartment owners, landlords and tenants on legal rights and obligations in short-term rentals. Our experience since 2008 in real estate law, property law and civil law enables us to provide comprehensive and focused advice for each case.

Rights and Obligations of the Apartment Owner in Short-Term Rental

An apartment owner who rents short-term must understand that he bears significant legal and commercial responsibility. First, the Tenancy Law applies to short-term rentals, and the provisions regarding landlord's rights and tenant's obligations apply accordingly. The apartment owner is responsible for ensuring that the apartment is in reasonable condition for use, meaning it must be safe, intact and suitable for its purpose.

Second, from an income tax perspective, income from short-term rental is considered taxable income that must be reported to the Income Tax Authority. An apartment owner who rents continuously must report his income, deduct permitted expenses (maintenance, insurance, municipal taxes, depreciation) and pay tax on the profit. Failure to report or partial reporting may result in substantial financial penalties.

Third, insurance obligation: an apartment owner who rents short-term must review his insurance policy. Standard apartment insurance often does not cover short-term rentals or covers them under strict conditions. If an accident or damage occurs during a rental period, inadequate insurance may leave coverage excluded.

Fourth, obligations toward permanent residents in the building: if the apartment is located in a multi-unit building, the owner must comply with the common property building laws and the building committee guidelines. Short-term rental may violate building bylaws if it causes disturbances or if the bylaws explicitly prohibit it.

Fifth, safety obligations and building code: the apartment must comply with building safety regulations, including emergency exits, fire extinguishers, emergency lighting (in certain cases) and basic sanitary conditions.

Rights and Obligations of Short-Term Tenants

On the other hand, a short-term tenant has certain rights, although fewer than a long-term tenant. According to the Rental Law, a tenant is entitled to housing in reasonable conditions, without unreasonable disturbances, and to basic maintenance of the apartment (water, electricity, heating, air conditioning in their respective seasons).

However, short-term rental typically includes a short and limited agreement that defines explicit conditions: price, duration, cancellation terms, liability for damages, and house rules. The short-term tenant must comply with these rules, and companies such as Airbnb impose additional rules on them (ratings, cancellation, security).

If the tenant causes damage to the apartment or items within it, the landlord is entitled to claim damages. In many Airbnb agreements, the platform itself offers basic liability insurance, but this is often limited and subject to terms.

It is important to note: a short-term tenant is not entitled to the full protections of tenant protection law, such as protection from arbitrary eviction or the right to renew an agreement. The protections are more limited, and the tenant should be aware of this.

Legal Risks for Landlords

A landlord renting out on a short-term basis is exposed to many legal risks:

• Damage claims: If a tenant causes damage to the apartment, furniture, or equipment, the landlord must prove the damage and file a claim. If the tenant does not pay, the process can be lengthy and expensive.
• Payment delays or default: A tenant may occupy the apartment without payment or leave it in poor condition. Evicting a tenant from an apartment requires a legal procedure (notice, lawsuit, judgment) that can take weeks.
• Building regulations violations: If the building bylaws prohibit short-term rentals or restrict them, the building committee may sue the landlord. Many residential buildings impose restrictions or bans on Airbnb.
• Tax and insurance issues: If the landlord does not report income or fails to update insurance, he may face significant penalties.
• Claims of disturbance to permanent residents: If permanent residents in the building complain about disturbances due to short-term rental, the building committee or residents may file a lawsuit.
• Civil liability: If a guest of the tenant is injured in the apartment (fall, fire, etc.), the landlord may be sued under personal injury or negligence law.

Legal Risks for Tenants

Short-term tenants are also exposed to risks:

• Loss of security deposit: The landlord may claim the security deposit or part of it on grounds of damage, even if exaggerated or unjustified.
• Sudden cancellation: The landlord may cancel the booking suddenly, especially if the platform permits it (although companies like Airbnb attempt to prevent this).
• Personal exposure: Tenants should be wary of fraud or misrepresentation of the apartment in photos or description.
• Local laws: In some municipalities, short-term rental is illegal or requires licensing. A tenant may find themselves in an apartment whose rental is unlawful.

Legal Status in Different Municipalities in Israel

One of the most important factors in assessing the legality of short-term rentals is the local situation in the municipality or city. Municipalities have the authority to impose restrictions on short-term rentals through local regulations, building plans, and bylaws.

Tel Aviv-Jaffa: In recent years, the Tel Aviv Municipality has taken firm decisions against short-term rentals. In December 2023, the municipality determined that short-term rental of residential apartments constitutes a change of use that requires a permit. As a result, many apartment owners in Tel Aviv were forced to cease operations or obtain a license. The municipality also imposed restrictions on the number of apartments that can be rented short-term in each building (typically up to 25% of units).

Jerusalem and Haifa: In these municipalities, the situation is less regulated, but there are also partial restrictions. In some neighborhoods, joint building regulations prohibit short-term rentals.

Ramat Gan and Petah Tikva (where our office branches are located): In these municipalities, there are not yet comprehensive regulations prohibiting short-term rentals, but discussions and investigations are ongoing here as well. Apartment owners should check with their local municipality and building committee before commencing short-term rental.

Strong recommendation: Always check the municipality regulations, joint building bylaw, and required permits before starting short-term rentals. Our office can assist you with this review.

Tax and Income Laws Regarding Short-Term Rentals

One of the most critical issues in short-term rentals is income tax. The Israeli Tax Authority views income from short-term rentals as taxable income requiring full disclosure.

If you rent an apartment or part of it short-term, you are required to:

• Obtain a business number or report as a self-employed person if you rent regularly (typically more than 3-4 times per year or for an extended period).
• Report income on income tax (annual return or quarterly estimated tax payments).
• Deduct allowable expenses: maintenance, repairs, insurance, municipal taxes, depreciation on furniture and equipment (not on the property itself).
• Pay tax on profit (income minus expenses). The tax rate depends on your total income (progressive: 10% to 50%).

Additionally, if you rent out an entire apartment (not a part of the property where you reside), you may be liable for capital gains tax upon future sale of the property. Capital gains tax is calculated on the difference between the purchase price and sale price, taking into account the appreciation in property value.

Very important: Many apartment owners do not report income from Airbnb, mistakenly believing it is "minimal income" or "informal." This is a serious legal error. The Tax Authority can examine your bank accounts, see transfers from Airbnb or PayPal, and impose significant penalties (up to 100% of tax evasion plus interest).

Guidelines on Short-Term Rental Insurance

Insurance is one of the most critical issues overlooked by apartment owners. Most homeowner insurance policies do not cover short-term rentals, or they cover them under very limited conditions.

Common Insurance Problems:

• Standard apartment insurance: Typically covers housing only for a family or individual permanently residing in it. If you are renting short-term, the insurance may not cover damages or claims.
• Policies with rental restrictions: Some insurance companies allow short-term rentals, but under strict conditions: limited number of renters per year, insurance adjuster approval for each booking, or high deductibles on claims.
• Airbnb Insurance: Airbnb itself offers basic liability insurance (Host Protection Insurance), but it is very limited: it does not cover damages caused by the property owner themselves, and does not cover everything (there is a high deductible).

Recommendation: Before you begin short-term rental, speak with your insurance agent and ensure that your policy explicitly covers short-term rentals. If not, request extended coverage or switch to another policy. The cost of additional insurance is usually small compared to the risk of remaining uninsured.

Rental Agreements: What Must Be in the Agreement

A short-term rental agreement is essential. Even if you use a platform like Airbnb, it is recommended to have your own written agreement or at least understand exactly what Airbnb offers.

Essential Elements in an Agreement:

• Identification of the parties: Name of the property owner, name of the tenant (or "guest"), identification numbers.
• Description of the property: Address of the apartment, number of rooms, proximity to public transportation, amenities (internet, air conditioning, etc.).
• Rental period: Check-in and check-out date, number of nights.
• Price and payment terms: Price per night or per period, currency, payment terms (in advance, in installments), method of payment (bank transfer, credit card).
• Security deposit: Amount of the deposit (usually 20-50% of the rent), conditions for refund (whether returned at the end of the rental or deductions for damages).
• House rules: Quiet hours, smoking prohibition, pet prohibition, number of guests allowed, prohibition on parties.
• Liability for damages: Who is responsible for damages caused by the tenant, how damages are proven (photos, invoices), what is the limit on the claim amount.
• Cancellation and modification: Cancellation policy (free cancellation up to X days before check-in, otherwise loss of deposit), conditions for changing dates.
• Emergency contact: Who to contact in case of an urgent problem in the apartment (burst pipe, no electricity, etc.).
• Cleaning obligations: Who is responsible for cleaning at check-in and check-out (usually the tenant leaves the apartment clean, the owner cleans afterwards).
• Signature and date: Signatures of both parties and identification of the data.

If you use Airbnb, the platform offers a basic agreement, but it is recommended that you have your own additional agreement or at least carefully read Airbnb's terms of service.