Shtar Chov, deposit, guarantor: which guarantee covers what

An owner letting property in Israel is handed a stack of documents before the keys change hands: a deposit, cheques, a guarantor’s undertaking, a promissory note, an insurance certificate. Many wonder whether all of it is really necessary, or whether the tenant is being put off for nothing.

The answer is that each guarantee covers a different risk, and none replaces the others. Here is what each one does, and the order in which they come into play.

The security deposit

What it covers: small shortfalls at the end of the tenancy. A month of unpaid rent, unpaid charges, a clean that has to be redone, a broken cupboard door.

The deposit is usually one to three months’ rent, depending on the tenant’s profile and the state of the property. It is collected before the keys are handed over, not merely promised.

That distinction matters. We regularly see files where the deposit appears in the contract but was never actually paid, because the tenant was going to sort it out « on moving day » and nobody checked. A deposit that has not been collected does not exist.

Its limit: it is capped by nature. Faced with a flat returned with walls to redo and six months of arrears, one or two months’ rent covers nothing.

The guarantor

What they cover: the tenant’s inability to pay. The guarantor undertakes to pay what the tenant will not.

A useful guarantor is a checked guarantor. Their proof of income deserves the same scrutiny as the tenant’s, and they must be reachable. A guarantor living abroad, or whose number nobody has kept up to date, is decorative.

This is the check most often rushed, because it comes at the end of a process where everyone is keen to sign. It is also the one that decides everything if the tenant stops paying in month six.

The Shtar Chov

The Shtar Chov (שטר חוב, literally « promissory note ») is the most distinctly Israeli guarantee, and the one overseas owners understand least.

What it is: an acknowledgement of debt signed by the tenant and their guarantor, for an amount fixed in advance in the contract. Nothing is paid at signature.

When it bites: it becomes enforceable if the tenant causes damage or leaves a debt that the other guarantees do not cover. It is an instrument that lets recovery start without going back to square one.

Its amount: set by reference to the value of the property and what a proper reinstatement would cost. A token amount makes the document pointless; an excessive one drives away good applicants.

A Shtar Chov is only worth its drafting. Signed on a generic form, with the parties loosely identified and no clear amount, it loses most of its force at the exact moment you need it. That is one of the reasons our guarantees are prepared by a law firm.

Guarantee cheques

What they cover: unpaid arnona and vaad bayit, mainly.

The practice is to hand over undated or postdated cheques which are held rather than banked. They allow a charge debt to the municipality or the building committee to be settled quickly, without waiting for a discussion with the tenant to conclude.

The tenant’s third-party liability insurance

Known as צד ג׳, it covers what the other guarantees do not: accidental damage caused to third parties.

The textbook case is a water leak. A washing machine overflowing on the fourth floor damages that flat, the one below, and sometimes the common parts. Without the tenant’s cover, that damage travels back to the owner.

The lease must require this insurance and require it to be maintained throughout. In practice that means checking the certificate before the keys are handed over, and again at renewal. Cover taken out on day one and cancelled in month two is common.

What each guarantee covers, in one table

The order in which they come into play

Faced with an incident, you do not fire everything at once. The usual progression is this.

1. Chase from the first day of delay. Most situations stop here.
2. Formal notice to the tenant, then to the guarantor.
3. Deduction from the deposit and presentation of the guarantee cheques for charges.
4. Calling the Shtar Chov if the loss goes beyond that.
5. Proceedings, with the lawyer, if the tenant stays put or disputes.

Each step taken without result makes the next one heavier. Which is why the speed of the first chase matters more than the severity of the guarantees: arrears dealt with in the first week are almost always resolved, the same arrears left for three months become a file.

What an owner should verify

• Has the deposit actually been collected, not merely promised?
• Has the guarantor produced their own paperwork, and is their number current?
• Does the Shtar Chov amount match a realistic reinstatement cost?
• Is the insurance certificate in force, with the right name and address?
• Is all of it in hand before the keys are handed over?

If the answer is no to any of these on a running tenancy, the next renewal is the moment to put it right. We do this regularly on files that owners hand to us mid-lease.