Who is responsible for paying property tax on rental income in 2023?

Almost all real estate properties are subject to property tax (IBI), but the question arises: who is obligated to pay it in the case of a rental — the landlord or the tenant? In this article, we will explain in more detail who is responsible for paying the IBI in the context of a rental agreement.

Who pays the IBI in rented housing in 2023?

Typically, when renting a residential property, the tax obligations associated with it, such as property tax (IBI), are borne by the landlord. However, it is important to understand that all expenses related to the rented property can be negotiated and allocated between the tenant and the landlord in the rental agreement.

According to Article 20 of the Urban Property Lease Law (LAU), "the parties may agree that the common expenses for the proper maintenance of the property, its services, taxes, fees, and obligations that cannot be individualized and relate to the leased property or its accessories will be borne by the tenant." Thus, although the landlord most often pays the IBI, they may not do so if such an agreement is stipulated in the lease contract. The key point in determining who pays for certain expenses in a lease is to examine the terms of the lease.

What do the landlord and tenant pay for the lease?

As already mentioned, the distribution of expenses depends on what is agreed upon in the lease agreement. However, there are several basic rules regarding the distribution of various payments in rental agreements.

General breakdown of expenses

The landlord must cover the following expenses if they are not specified in the rental agreement:

• property tax (IBI)
• contributions to the homeowners' association
• garbage collection tax
• property insurance
• insurance for maintenance (for example, insurance for a boiler)

In turn, the tenant is obliged to pay for utilities that can be measured with individual meters: water, electricity, gas, telephone, etc.

As for malfunctions or damage in the property, the landlord is responsible for major repairs, such as those for a washing machine or boiler, unless the damage is minor or the tenant is found to be at fault. Regarding the tenant, they are responsible for damage caused by their actions or the actions of their guests, such as a broken window, as well as for minor expenses that arise during the use of the apartment, such as replacing light bulbs, repairing toilet tanks, or fixing blinds.

What happens if the tenant pays the IBI?

If the tenant takes on the payments for IBI, they can ask the landlord for a discount or a refund, although the landlord is not obligated to do so.

What are the tenant's obligations under the new law?

According to the new legislation, the tenant only pays for the expenses specified in the rental agreement, such as IBI, if both parties have reached a consensus on this issue. Generally, the tenant is also responsible for utility bills. However, under the new law, tenants will not bear the costs of paying agency fees for the rental. Property management expenses will now be the responsibility of landlords under the new Housing Law.