Rent Increase and CPI Indexation in Israel - What Is Allowed
Within a fixed lease term, rent can be raised only if the contract explicitly allows it - typically via a consumer-price-index (CPI) indexation clause or a defined option condition. Between contracts (or when exercising an option on new terms) the landlord is free to propose any market amount, and Israel has no general legal cap on rent increases.
Increases within the lease term
The rent set in the contract is fixed for the term unless a clause allows updating - usually CPI indexation. Without such a clause, the landlord cannot unilaterally raise rent mid-term.
How CPI indexation works
An indexation clause ties rent to the consumer price index published by the Central Bureau of Statistics. You set a "base index" (the index at signing), and at each update you compare to the new index and adjust rent by the change.
It is customary to update at a fixed interval (e.g., every 12 months) rather than monthly. The contract should state the base index, update frequency, and whether indexation is one-way (increase only) or two-way.
Exercising an option and between-term increases
Common option terms: same rent, +3%, +5%, or an agreed amount. Our tool lets you pick the option type in the financial-terms step, and drafts the contract accordingly.
At the end of the contract, if the parties sign a new one, the landlord may propose a new market price - there is no general legal cap. The tenant, in turn, is free to refuse and leave at the end of the term.
Note: a proposed ~2% increase cap that was discussed during the Fair Rental Law legislation was ultimately not enacted, so as of today there is no such percentage limit in the law.
Frequently asked questions
Can the landlord raise rent mid-lease?
Only if the contract explicitly allows it, usually via a CPI indexation clause. Without such a clause, rent cannot be raised unilaterally in the middle of a fixed term.
Is there a legal cap on rent increases in Israel?
There is no general legal cap. Between contracts the landlord may propose a new market price, and the tenant is free to refuse and leave at the end of the term.
How do you set CPI indexation in the contract?
Set a "base index" at signing, an update frequency (e.g., every 12 months), and whether indexation is one-way or two-way. At each update you compare to the new index and adjust rent by the change.