Guide to Transferring Lease Rights in a Transaction

What is a Lease Transfer and Why is it Important in a Transaction?

The transfer of lease rights is a complex legal process that occurs when a lessor or tenants wish to transfer their rights under a lease to a third party. Contrary to common misconception, a lease transfer is not a simple act of signing a document — it involves legal procedures, record checks, obtaining official approvals, and coordination with various entities such as the Israel Land Authority (ILA) and holders of lease rights.

In a lease transfer transaction, the parties are obligated to understand the full legal, financial, and administrative implications. A transfer that is not conducted properly may result in cancellation of the transaction, significant financial loss, or even eviction from the property. Therefore, it is very important to obtain professional legal advice at this stage.

Mandelbaum, Gor, Weizman-Gor & Co., Attorneys at Law specializes in real estate and property transactions, including complex lease transfers. In our experience since 2008, we have seen how risks can be minimized and how to ensure that a transfer is conducted legally and efficiently.

What is the Structure of Leases in Israel?

To understand lease transfer, one must first become familiar with the structure of leases in Israel. In Israel, most properties are owned by the public or by the Jewish National Fund (JNF). The owners of these properties grant tenants the right to lease for a defined period — typically 49 years or 99 years (depending on the period in which the lease was granted).

The lease agreement defines the rights and obligations of tenants toward the property owner (the lessor). With this right, the tenant can use the property, invest in it, and transfer it to a third party — but always in accordance with the terms set out in the agreement and in law.

Can a Lease be Transferred? What Does the Law Say?

Yes, a lease can be transferred, but it is subject to strict legal conditions. Generally, the lease agreement itself stipulates whether the lease can be transferred, whether the lessor's approval is required, and if there are additional fees or conditions.

According to the approach established in Israeli case law, the holder of the lease (the tenant) is entitled to transfer his rights, but must comply with the requirements of the law and lease agreement. If the agreement prohibits transfer, or if a proposed condition is not valid, the transfer may be void.

Lease Transfer Process — Key Steps

A lease transfer involves several steps that must be carried out in the correct order and with legal precision:

1. Review of the Original Lease Agreement

The first step is a thorough review of the original lease agreement. The attorney must examine whether there are restrictions on transfer, whether lessor approval is required, and whether there are payments or fees to be paid at the time of transfer. Every condition in the agreement can affect the validity of the transfer.

2. Review of Lease Status with the Israel Land Authority (ILA)

The Israel Land Authority is the government authority responsible for managing and registering leases in Israel. Before conducting a transfer, the status of the lease with the ILA must be checked — whether there are outstanding obligations (rent, taxes), whether the lease is valid, and whether there are any notes or restrictions recorded on the property.

3. Agreement of the Parties and Signing of the Transfer Agreement

The seller (current lease holder) and the buyer (new lease holder) must reach an agreement on the terms of the transfer, including the price, the effective date, and any additional payments. Afterwards, a legal transfer agreement must be signed by both parties. This agreement must be accurate, detailed, and cover all aspects of the transfer.

4. Obtaining Lessor Approval (if Required)

If the lease agreement requires lessor approval for transfer, a formal request must be submitted to the lessor (usually the ILA or JNF). The request should include details about the new buyer, the transfer agreement, and additional required documentation. Typically, approval is granted within a few weeks, but this depends on the authority's workload.

5. Filing an Application for Registration of the Transfer with the ILA

After obtaining lessor approval (if required) and signing the transfer agreement, a formal application must be submitted to the ILA for registration of the transfer. This application must include all necessary documents, including the transfer agreement, lessor approval, and official forms. The ILA will review the documents and register the transfer in its records.

6. Obtaining ILA Approval and Issuance of a New Lease Agreement

After the ILA approves the transfer, it will issue a new lease agreement in the name of the buyer. This is the official document confirming the new lease rights. At this stage, the transfer is considered complete, and the buyer is the holder of the lawful rights under the lease.

Costs and Timeline — What to Expect?

One of the most frequently asked questions in a lease transfer transaction is: How long will it take and how much will it cost?

Procedure Timeline

Typically, a lease transfer process takes between 4 to 8 weeks from the time of agreement between the parties until final registration with the Israel Land Authority. This timeline depends on various factors: workload at the Israel Land Authority, the lessor's response speed, and the number of issues or exceptions that may be encountered along the way. In complicated cases, the process may take considerably longer.

Typical Costs

Lease transfer costs include several components: legal fees (for preparing the transfer agreement and managing the procedure), Israel Land Authority fees (for registering the transfer), and in some cases fees or payments to the lessor. Each case is different, and the cost range depends on the property size, the complexity of the transfer, and the specific conditions of the lease.

Mendelbaum, Gor, Witzman-Gor & Co. Law Firm offers a free initial consultation, during which we can assess the risks, provide a preliminary estimate of costs and timelines, and plan the procedure efficiently.

Comparative Table — Different Scenarios

As can be seen in the table, the procedure timeline varies depending on case complexity. A simple transaction may be ready within six weeks, while a complicated transaction may take three months or more.

Common Risks and Exceptions in Lease Transfer

In our experience as attorneys specializing in real estate transactions, we have encountered several risks and exceptions that can increase the complexity of the transfer:

Unpaid Debts to the Lessor

If the current tenant has not paid rent or taxes related to the lease, the Israel Land Authority may refuse to register the transfer until the debts are settled. Typically, the new buyer wants these debts to be paid by the seller before completion of the transaction.

Restrictions in the Original Lease Agreement

Old lease agreements, especially those signed many years ago, may contain restrictive conditions on transfer. In some cases, a lease may prohibit transfer entirely or impose very strict conditions. If this is the situation, it may be necessary to modify the agreement or seek a special legal arrangement.

Data or Document Mismatches

Sometimes, the data in Israel Land Authority records does not match the documents in the parties' possession. This can cause significant delays in the transfer process. A thorough preliminary review can identify such problems early on.

Disputes Between Parties

Sometimes, the seller and buyer disagree on certain conditions of the transfer or responsibilities for problems with the property. In our experience, such disputes can escalate and lead to cancellation of the transaction. Early legal counsel can help both parties reach agreement amicably.

Issues with the Israel Land Authority or Lessor

Sometimes, the Israel Land Authority or the lessor requests additional documentation or raises questions that were not addressed beforehand. Handling such issues requires legal expertise and experience in communicating with the authorities.

How Mandelboim, Gur, and Witzman-Gur Can Help You

Mandelboim, Gur, and Witzman-Gur Law Firm has been engaged in real estate and property transactions since 2008. Drawing on our extensive experience, we have handled dozens of lease transfer transactions—from straightforward transactions to complex transactions involving disputes, exceptions, or legal issues.

Our approach is unique and dedicated: we take time to understand each client's unique situation, we plan the process promptly, and we manage all legal and administrative aspects to ensure that the transfer is executed lawfully, efficiently, and without surprises.

In our initial consultation meeting (which is free of charge), we:

• Review the original lease agreement and identify any restrictions or requirements
• Examine the lease status with the Land Registry and identify any issues or unpaid obligations
• Assess the potential risks of the transfer
• Provide a preliminary estimate of the time and execution of the process
• Plan the next steps clearly and systematically

We then manage the entire process from start to finish, including preparing the transfer agreement, managing communications with the Land Registry and lessor, and obtaining final approval. We also help you understand the legal and financial implications of the transfer, including matters such as capital gains tax and purchase tax.

Our office is located in Ramat Gan, and we also have a branch in Petah Tikva (Yoni Netanyahu 8). We give each client personal and dedicated attention, and we are available for your questions and concerns at every stage of the process.