Guarantees in Residential Apartments: Limits of the Rental Law

Before 2017, many landlords in Israel demanded draconian conditions – ranging from 5 months of bank guarantee, open promissory notes for huge sums, and even cash deposits that never returned to the tenant. The Israeli legislator intervened (Section 25M of the law) and limited residential housing with a cogent law (which cannot be stipulated against).

Legal Disclaimer: The restriction does not apply to a promissory note (Shtar Chov) or to the personal guarantee of guarantors, but only to guarantees involving a "financial expense / freezing of liquidity" by the tenant (bank guarantee, or cash deposit to the landlord). (March 2026).

1. The Hard Limit: What is National Maximum Deposit?

If the apartment owner asks the tenant for security by handing over a cash deposit, or opening an autonomous bank guarantee (which costs the tenant money and a bank commission): The total amount of the guarantee shall not exceed the lower of the two:

1. Rent of one-third (1/3) of the lease period (For example: in a one-year contract – up to 4 months).
2. An amount equivalent to up to three (3) months of rent.

• Classic Example: A lease of 5,000 ILS for one year (12 months). 1/3 of the period is 4 months. But the second condition allows up to 3. Therefore, the absolute ceiling the landlord is permitted to demand from the tenant in a bank guarantee or cash is exactly 15,000 ILS.
• A demand for a 20,000 ILS bank guarantee in this case is prohibited and constitutes a violation of the law.

2. When are we exempt from this limit? (Promissory Note / Personal Guarantors)

The law acts in favor of the tenant's current liquidity, and therefore does not limit "free" security measures that landlords often request to complete the security net:

• Open Promissory Note (Shtar Chov): A paper signed in front of 2 guarantors and handed to the landlords. The note is permitted to stand at 50,000 ILS or 80,000 ILS – there is no maximum limit. It is activated through the Execution Office (Hotzaa LaPoel) in case of damage or non-payment.
• Security Checks to Authorities: An open check (or with a sum of 2000-5000 ILS) written in advance to the order of the Jerusalem Municipality, the Gihon water company, or the Electric Corporation. These are permitted for collection and are not counted as the guarantee ceiling, because they are merely 'tools' to cover the client's municipal debt on the day of departure.

3. When is it permissible to forfeit the guarantee and how is it returned?

A landlord cannot forfeit (cash in) a bank guarantee just like that. They must give the tenant a time-out warning prior to execution. The law allows the landlord to use the guarantee only for specific purposes (significant damage to the apartment caused by the tenant's fault, or arrears in municipal taxes and rent that the tenant refused to pay over a period).

Time of returning the guarantee at the end of the contract: Until a decade ago, apartment owners would "drag out" returning the security note for months, claiming "we will wait to see the final electricity bill." Today: Cash deposit/bank guarantee – must be returned to the tenant within fewer than 60 days from the date the apartment is vacated, unless a substantial lawsuit was filed. If the final bills have been settled, the securities must be returned at the time of handing the keys back.

Cleaning Notes and Digital Signatures with Landager

Mordechai (property manager) rents out 14 different apartments. In his closet lie almost 40 old promissory notes covered with Post-it notes, half of which belong to tenants who left three years ago and he simply "forgot" to return to them. The Landager system solves the threat of open securities. Our options include depositing "virtual" credit deposit guarantees (Hold) – which are automatically unfrozen upon reaching the 'Move Out Date'. If a traditional promissory note is demanded from 2 guarantors (digitally signed on a cloud server), Landager sends an alert to the landlord during the final week of the contract to cancel and electronically shred it, ensuring avoidance of 'stolen notes' lawsuits vis-a-vis former tenants.

Back to Overview: Residential Tenancy in Israel.