Preventing Unfair Rent Hikes – part II

(ruling 74091 of the Eretz Hemdah-Gazit Rabbinical Courts)


Case: The defendant (=def) is a community yishuv which for decades has been renting out commercial buildings, including a 220 sq. meter structure rented by pl. In recent years, def started raising the rent per meter of these buildings and last year they removed the longstanding 50% discount on half the area. Pl complains that def may not take advantage of pl’s lack of alternatives to raise the price in a manner that is not true to market values, and against the standard practice that rental agreements for commercial property are for 5-10 years. The 50% discount was done to encourage businesses to come to the area and once this was agreed upon decades ago, def is committed to keep to this arrangement. Def was also required to negotiate the matter with pland not present the changes as a fact, and warning time needed to find a new location is 6 months. Therefore, pl demands that the rent should be linked to the inflation rate. Def responds that by a vote of its board, they may change prices like any other landlord in a free economy and that they did allow pl to plead his case before the board, who rejected it. Regarding the reason for the change in policy, market forces no longer make it necessary to encourage rentals, and the deficit in def’s budget makes it necessary to raise revenues. They delayed the end of the discount, and they gave ample notice for relocation if pl is unhappy with the new conditions.

Ruling: Last time we saw that in this case beit din is not authorized to prevent the rental rate increase.

P'ninat Mishpat (704)

Various Rabbis

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377 - Preventing Unfair Rent Hikes – part I

378 - Preventing Unfair Rent Hikes – part II

379 - The Lawyer’s Rights to Full Fees from Reluctant Client – part II

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The mishna (Bava Metzia 101b) mentions different amounts of time required for informing renters of the end of the rental. They range from thirty days to six months, to twelve months, to three years, depending on the purpose of the rental and the season. Regarding a store, twelve months is needed for the proprietor to receive payment from those who bought on credit. While needs can change in different times and places, in every context the amount of time must be clear and must not differ from tenant to tenant.
The law often helps establish the custom. In Israel the law usually requires a month’s notice, and sometimes three months, when there is no stipulation in the contract, and it does not distinguish between different uses of the property. In a case like this, where the law is not coming to respond to the needs of the time but to set a time it considers generally fair, the halacha has precedence over the law. Beit din sought information on the customary warning periods in such cases, and the most common finding was 90 days.
Do we count the 90 days from the time def wanted to change the price or from the time beit din ruled they are permitted to do so? The Rama (Choshen Mishpat 312:14) says, in a parallel case, that it is from the time he wanted to remove the renter, because the renter should have considered he would lose the case. Regarding removing the discount, since at first the decision may not have been taken properly, the 90 days starts from when the clearly valid decision was taken.