Selling a rented apartment in Israel is one of those transactions where small decisions determine the big outcome. The tenant keeps full rights even after the apartment is sold, so the question is not only what the apartment is worth, but who you sell to, when possession is handed over and what happens to the lease on the day the contract is signed. In north Tel Aviv, Ramat Hasharon and Herzliya, where a large share of apartments are let on long leases, the difference between selling with a tenant in place and selling a vacant apartment can affect the pool of buyers, the financing they can obtain and the price. In this guide we have gathered what the law provides, the three ways to sell, the tax implications and the steps worth taking before the listing goes live. The figures are accurate as of October 2026, and every specific case should be reviewed by a lawyer or a tax advisor.
You may sell a rented apartment without the tenant’s consent, but the lease continues to bind the buyer until the end of its term. The central decision is therefore whether to sell to an investor with the tenant in place, wait for the lease to end, or reach an agreement on early vacating.
- The tenancy right is valid against everyone, and the buyer steps into the landlord’s shoes under the existing lease terms.
- The landlord must notify the tenant in writing of the sale, with the buyer’s details, before the apartment is handed over to the buyer.
- Buyer viewings depend mainly on what the lease says, and respectful coordination with the tenant is worth real money.
- Residential letting does not in itself rule out the single apartment exemption from capital gains tax (mas shevach), but it may affect the gain calculation when the sale is taxable.
Selling a rented apartment in Israel: what the law says about the tenant
Section 21 of the Tenancy and Borrowing Law, 5731 1971, provides that once the tenancy right has been granted to the tenant, it is valid against everyone. In practice, selling the apartment does not cancel the lease. The buyer steps into the landlord’s shoes, receives the rent from the date agreed between the parties and is bound by every term of the lease: the term, the rent, the options and the repair of defects.
Three conclusions follow, and they are worth understanding before you begin:
- The tenant’s consent is not required to sell. The owner may transfer his rights in the apartment at any time. The tenant is not a party to the sale agreement.
- The sale is not grounds for eviction. If the lease has no early exit clause for the landlord, the tenancy cannot be ended simply because the apartment was sold.
- The tenant has no statutory right of first refusal. Unless the lease grants him one, there is no obligation to offer him the apartment before others, although he is sometimes the natural buyer.
Since a 2017 amendment to the law, known as the Fair Rental Law, there is also a duty of notice: a landlord who has transferred his rights in the apartment must inform the tenant in writing, before the date on which the apartment is to be handed over to the buyer, and give him the buyer’s details and contact information. A proper notice prevents misunderstandings about the next payment, the security deposit and the handling of repairs.
What your lease says
Before any decision on price or timing, read the lease from beginning to end. It defines your room to maneuver more than any other factor. These are the clauses to check:
- The lease term and end date. How many months remain, and whether the lease renews automatically.
- Extension options. Under the Fair Rental provisions, when the landlord holds an option to extend, he must notify the tenant no later than 90 days before the end of the term whether he is exercising it. When the option belongs to the tenant, the tenant must give notice no later than 60 days before the end of the term. An option held by the tenant may extend the tenancy beyond what the seller had planned.
- Early exit. Whether the landlord has a right to end the lease early, and on what conditions. Such a clause must be written explicitly.
- Showing the apartment to buyers. Many leases require the tenant to allow viewings by prior arrangement and at reasonable times. Where there is no such clause, the law contains no explicit duty to allow buyer viewings, and everything depends on agreement.
- Security. What security was given, who holds it and how large it is. The law caps the security at the lower of three months’ rent or one third of the rent for the entire lease term.
We recommend passing the lease to the lawyer who will handle the sale already at this stage, so that the relevant clauses are properly reflected in the sale agreement. We cover the main clauses of the agreement itself in our guide to the apartment sale agreement.
Three ways to sell an apartment with a tenant
Almost every sale of a rented apartment falls into one of three routes. Each has a different buyer pool, a different timeline and different pricing.
Route one: selling to an investor, with the tenant in place
The buyer acquires an income producing apartment, takes over the lease and starts receiving rent from day one. For an investor, a reliable tenant who pays on time is an advantage, not a problem. The drawback is a narrower pool of buyers: an investor who is not buying a sole residence pays purchase tax (mas rechisha) of 8% from the first shekel and 10% on the portion above ₪6,055,070, and a bank will usually finance up to 50% of the apartment’s value. Investors judge the apartment by its yield, so they are especially price sensitive.
Route two: waiting for the lease to end and selling vacant
Here the apartment is offered to the entire market, including families buying a sole residence, who can obtain financing of up to 75%, and upgraders, who can obtain up to 70%. This is usually the widest buyer pool in north Tel Aviv and the cities of the Sharon region. A sale agreement can be signed while the tenancy is still running, with possession set for the day after the lease ends. The drawbacks are time and the need to coordinate viewings while the tenant still lives in the apartment.
Route three: an early vacating agreement with the tenant
When a long period remains on the lease and there is no exit clause, it is possible to agree with the tenant on early termination, usually in return for compensation: waiving one or two months’ rent, contributing to moving costs or flexibility on the date. Such an agreement is drafted by a lawyer and includes an exact vacating date, the condition of the apartment at handover and the return of the security. A tenant who feels respected is usually a tenant who cooperates.
Comparison table: which route suits whom
| Question | Sale with tenant | Waiting for lease end | Agreed early vacating |
|---|---|---|---|
| Main buyer | Investor | The entire market, including sole residence buyers | The entire market |
| Typical bank financing for the buyer | Up to 50% | Up to 75% for a sole residence | Up to 75% for a sole residence |
| Purchase tax for the buyer | 8% and 10% for an additional apartment | Depends on the buyer’s status | Depends on the buyer’s status |
| Timeline | Immediate | Depends on the remaining lease term | Depends on the agreement |
| Cost to the seller | Pressure on price | Time and coordinating viewings | Compensation to the tenant |
| When it fits | A good tenant and market rent | A few months remain | A long period remains |
How the tenant affects the price
There is no single price for a rented apartment. Its value depends on three factors that a buyer checks immediately:
- Rent relative to the market. A long lease at below market rent reduces the apartment’s appeal, because the buyer “locks in” low income for a period. Market rent with a stable tenant is an asset.
- The remaining term. How long the buyer will have to wait before he can live in the apartment or let it again on his own terms.
- The condition of the apartment as it looks during a viewing. A rented apartment shown full of someone else’s belongings looks smaller and more tired. Arranging a viewing at a convenient time in a tidy apartment changes the impression.
To set the right price, value the apartment twice, once as vacant and once as an income property, and compare the gap with the cost of waiting or of vacating. We explain how to reach the right price in our guide to valuing an apartment before a sale, and investors can read about calculating yield in our guide to investing in an apartment in Tel Aviv.
A worked example from Ramat Aviv Gimel
This example is for illustration only, and its figures do not describe a real transaction. A four room apartment in Ramat Aviv Gimel is let for ₪9,500 a month, with 8 months left on the lease and no option for the tenant. Assume the apartment’s value when vacant is ₪4,600,000.
- Selling to an investor with the tenant: annual rent of ₪114,000 represents a gross yield of about 2.5% on a price of ₪4,600,000. The investor will pay purchase tax of 8%, that is ₪368,000, and will finance up to 50% through the bank. An investor looking for a higher yield will try to bring the price down.
- Signing now and handing over at the end of the lease: a family buying a sole residence can obtain financing of up to 75%, and its purchase tax is significantly lower. The buyer gains time to prepare, and the seller keeps collecting rent until handover.
- Early vacating: if the tenant agrees to leave within three months in return for two months of waived rent, the agreement costs ₪19,000, and in return the apartment is shown vacant and tidy to the entire market.
In such a case, the right comparison is between the discount an investor will demand and ₪19,000 of compensation or a few months of waiting. This comparison is made before the listing goes live, not after the first offer, because the route you choose determines who comes to the viewing.
Capital gains tax when selling a rented apartment in Israel
Letting the apartment for residential use does not in itself rule out the single apartment exemption from capital gains tax. The conditions are examined with respect to the seller: whether this is his only apartment in Israel, whether he has owned it for at least 18 months, and whether he has not sold an apartment under such an exemption in the 18 months preceding the sale. The exemption ceiling for a single apartment stands at ₪5,008,000, and the full explanation is in our guide to capital gains tax on selling an apartment in 2026.
When the sale is taxable, for example when it is an additional apartment, depreciation comes into play. The Israel Tax Authority’s practice is to deduct depreciation for the years of letting from the acquisition value, even when the rental income was exempt from income tax, and such a deduction increases the taxable gain. The issue has come before the courts in recent years, so the tax calculation on an apartment that was let should be reviewed in advance with a tax advisor or a lawyer who specializes in real estate taxation.
Tax changes the picture on the buyer’s side too: anyone buying an additional apartment pays higher purchase tax, and the brackets are set out in our guide to purchase tax in 2026. Once you understand what the buyer will pay, you also understand how much he can offer.
The tenant, the security deposit and handover day
The common mistakes in selling a rented apartment tend to occur in the operational details around the signing. These are the points to settle in the sale agreement and in the notice to the tenant:
- Apportioning the rent. From which day the rent passes to the buyer, and how a month for which rent was already paid in advance is settled.
- The security. Whether it passes to the buyer, or the seller returns it to the tenant and receives new security from him in the buyer’s favor. Either way, the arrangement must be in writing and agreed.
- Written notice to the tenant. Under the Fair Rental provisions, before the apartment is handed over to the buyer, with the buyer’s name and contact details.
- The condition of the apartment. Documenting the apartment’s condition on the day the rights are transferred, so that there is no dispute between seller and buyer over damage caused during the tenancy.
- Handing over possession of an apartment to be vacated. If the buyer is to receive a vacant apartment, the agreement should state what happens if the tenant has not left on time, and who bears that risk.
- A mortgage on the apartment. If the apartment carries a mortgage, its repayment must also be coordinated. See our guide to selling an apartment with a mortgage.
How to manage the marketing while the tenant lives in the apartment
The tenant is part of the marketing, even though he is not a party to the transaction. A tenant who feels threatened can make every viewing difficult. A tenant who understands the process sometimes becomes the apartment’s ambassador. These are some of the principles we observe when we accompany the sale of a rented apartment:
- An open conversation before the listing. The tenant hears about the sale from the owner, not from an advertisement. We explain that his lease is preserved and what to expect.
- Grouped viewings. Instead of viewings scattered across the week, they are concentrated in fixed time windows set together with the tenant. This respects his privacy and also creates a sense of demand.
- Screening buyers in advance. Only buyers who have had a preliminary conversation, understand that the apartment is let and know the timeline come to the apartment.
- Full transparency with buyers. The lease, the rent and the end date are shown to a serious buyer early, so that there are no surprises after a price offer.
If you are weighing whether to keep letting or to sell, our guide to renting out an apartment in north Tel Aviv covers the other side of the decision.
Frequently Asked Questions
Can I sell a rented apartment without the tenant’s consent?
Yes. The owner may sell the apartment at any time, and the tenant does not need to approve the sale. However, the lease continues to bind the buyer, and the landlord must notify the tenant in writing of the transfer of rights before the apartment is handed over to the buyer.
Can the buyer evict the tenant after the purchase?
Not because of the sale alone. The buyer steps into the landlord’s shoes and is bound by the lease terms until the end of the term, unless the lease contains an early exit clause or the tenant agrees to leave.
Must the tenant allow buyer viewings?
That depends mainly on the lease. Many leases include a clause requiring viewings to be allowed by prior arrangement and at reasonable times. Where there is no such clause, it is better to agree with the tenant on fixed time windows.
Does a rented apartment sell for less?
Not necessarily. An apartment with a stable tenant at market rent suits investors, but the buyer pool is narrower and bank financing for an investor is lower. It is therefore worth valuing the apartment both as vacant and as an income property, and comparing.
Does letting the apartment affect the capital gains tax exemption?
Residential letting does not in itself rule out the single apartment exemption. When the sale is taxable, the Tax Authority may deduct depreciation for the years of letting, so the calculation should be checked in advance with a tax advisor.
What happens to the tenant’s security deposit when the apartment is sold?
The law does not set a single transfer mechanism. The seller and buyer agree in the sale agreement whether the security passes to the buyer or is returned to the tenant and replaced with new security, and the tenant receives clear notice of this.
Before you list a rented apartment
A well executed sale of a rented apartment begins with reading the lease, choosing the route and pricing that takes into account both the tenant and the buyer pool. RS Nadlan represents apartment owners in Tel Aviv, Ramat Hasharon, Herzliya, Ra’anana and Kfar Saba, with a specialization in the neighborhoods of north Tel Aviv. If you are considering selling a rented apartment, we would be glad to talk. You can read more on our page for property owners interested in selling, contact us here or call 077-500-4600 (+972 77 500 4600).
