What exactly is a key fee for an apartment or business, is it a worthwhile deal and what do you do when you want to leave?
The outgoing tenant and the landlord can agree on the compensation
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It is likely that anyone looking for real estate to buy occasionally encounters properties for sale at relatively low prices relative to their value. When you read the fine print carefully you understand that it is an apartment or a commercial property with a key fee. What does it mean? Is such a purchase worthwhile? A tenant with a key fee? Can the property be sold? Is the property inherited? I will try to answer these questions briefly.
What is the difference between a key fee and a rent?
A buyer of an apartment, business or store with a key fee does not acquire the ownership of the property, but the contractual right to live or work in it in exchange for the payment of rent.
It is not registered in the land registers (taboo).
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At the same time, the acquired right is for life and its owner becomes a protected tenant in accordance with the Tenant Protection Law.
The term key fee refers to the lump sum which is paid upon the tenant entering the property for the purchase of the right.
This is in contrast to the term rent, which refers to the rent paid in each case each month to the landlord.
The cost of the key fee usually ranges from half to a third of the value of the property in the free market.
The rent is significantly lower than the free market and is determined according to the regulations set forth in the law.
In a commercial property the maximum rent is the amount paid before 1983, plus a few hundred percent.
As of 2003, it has been determined that there are businesses (such as banking, insurance, cinema, import-export, etc.) that are not subject to a limit on the amount of rent at all, as long as no key fees have been paid for the property.
What happens when the right holder dies or leaves?
In the case of a business, it was determined that the family member must continue to run the same business on the property, unless he applies to the court for permission to run a business other than that run by the right holder.
Is it possible to sell the right in the property to a third party?
When the protected tenant wants to leave the property, he is faced with the option of returning the property to the landlord, or alternatively selling his right to a third party, who will enter as a protected tenant in his place.
The outgoing tenant and the landlord can agree on the amount of compensation that the outgoing tenant will receive in exchange for his departure.
If there is no consent, the protected tenant may apply to the tenancy court in order for it to determine the amount of compensation he will receive.
Can the property owner evict the protected tenant?
The law lists grounds on which the landlord may demand the eviction of the tenant from the property.
First and foremost it is a situation where the landlord has proved that the tenant is violating the lease agreement between the parties, or does not pay the rent, or abandon the property, make changes to the property or cause damage, rent the property to a third party, harass the neighbors, use the apartment for no purpose Is legal or the property owner demands it for himself or wants to build under it.
In these cases, the landlord will have to provide the sheltered tenant with alternative housing or pay him compensation.
What are the duties of the landlord and tenant?
Pay for the cleaning and lighting of the stairwell and entrance, as well as for the cleaning of the yard of the house, provided that the protected tenant will share in some of these expenses.
Regarding repairs to the property, when it comes to thorough repairs, which are necessary for the integrity of the property (for example construction, plumbing, electricity, roof) the landlord must repair.
The obligations of the protected tenant in principle amount to adhering to the terms of the lease agreement and non-abandonment of the property, payment of rent and payment of his share of the expenses and services that the landlord must provide, including repairs.
Shai Ankuri is the Commercial Department Manager of the Keller Williams Bat Yam Branch and a Certified Business Consultant
Shai Ankuri in collaboration with the Commercial Division of the National Chamber of Real Estate Brokers
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