“For Residence Only” – a Tourist or a Tenant?

“For Residence Only” – a Tourist or a Tenant?

Yair Aloni, Adv.
October 2, 2023

A person decided to purchase an apartment for investment purposes in a condominium located in a popular street in Tel Aviv. For that purpose, he invested a large sum in design and purchased furniture and electrical appliances with the intention of renting it out to tourists for short-term periods through online platforms such as AirBnb and Booking, hoping to profit and receive a higher return than long-term rentals. Shortly thereafter, when the apartment was rented out to tourists, one of the neighbors complained about noise and demanded that he immediately stop renting the apartment to tourists. Does one of the residents of the building have the right to interfere with the use of another's apartment? Is there a difference between a use for "residence" for short periods and "residence" of another kind?

The relations between apartment owners in a condominium, including the nature of use of the apartments and common areas in the building, are regulated by a number of different norms and regulations such as the provisions of the law, including the planning and construction laws, the condominium agreed bylaws (and in the absence of one, the common bylaws that are part of the law will apply), the decisions of the general meeting of the condominium, the decisions of the representative of the condominium entrusted with the management and maintenance of the building, as well as the decisions of the Land Registration Inspector, inter alia, in disputes between the tenants of the condominium. Any owner of rights in a condominium apartment may demand to receive a legal remedy in case of infringing on shared property rights of all the apartment owners in the condominium.

The agreed condominium bylaws apply to all apartment owners, including those who became owners before it was recorded and it constitutes a contract between the owners, including with regard to regulating the use. Whereas, naturally, there is a significant difference as to the nature of living between a neighbor who is a tourist substituted every few days, or having permanent resident as a neighbor, the owners in the condominium are entitled to determine that the use will be "for residential purposes only" and not for any other purpose. One may argue that the use of the apartment for short-term rental purposes, are also "residential" needs, however more than once it has been held that the term "residential" cannot be construed to include short-term rental for vacation or business purposes.

For example, in a case heard by the Tel Aviv Land Registration Inspector in October, 2018, it was held that an apartment cannot be used for short-term rentals, but for permanent use or at least for long-term rentals of several months. In that case, the condominium bylaws stipulated that "the use of the apartments will be exclusively for residential purposes, not even mixed use".

A short-term rental may even be considered a business activity and raise issues of legality of use under planning and construction laws and even the need for a business permit. For example, in a case heard in November, 2018, the Safed Magistrate Court issued a cease-and-desist order to stop all uses of a hospitality villa in Safed, rented out for short-term periods for vacation purposes, because it was built on land designated for residential purposes only and therefore the use deviates from the lawful designate use. In another case heard in September, 2023, at the Jerusalem Magistrate Court, a company was prohibited from renting out apartments for short-term periods in a condominium in Jerusalem. In that case, five apartments were rented for a few days for vacation purposes while cleaning and laundry services were provided. Not only was the use contrary to the condominium bylaws (which allowed "residential use only") and contrary to a specific decision of the tenants' general meeting prohibiting short-term rentals of the apartments, but the actual use was a hotel-business without any business license, as required by law.

Therefore, before making a decision on whether to put an apartment in a condominium up for short-term rental, it is important, at the very least, to examine the condominium bylaws. In some cases, an amendment to the bylaws can be initiated in the general assembly in order to regulate the minimum periods in which the rental will not be considered a short-term rental that exceeds the permitted residential use. In any case, the feasibility must be considered alongside the implications arising from it, with regard to the provisions of the relevant law. It should be noted that there are other aspects that also should be taken into account, including the potential of having the use of the property classified as business and paying city tax at a high business rate, paying income tax, etc. For all of these, and as a rule of thumb, it is always advisable to practice good neighborly relations, with mutual consideration and to consult with an attorney expertise in the field of real estate and the commercial field.