Security Deposits and Unpaid Electricity Bills: The Rules in Israel

In Israel, the security deposit does not cover unpaid electricity bills. This amount is reserved strictly for the physical restoration of the apartment. To recover unpaid utility bills, you must rely on the shtar ’hov, a promissory note signed by the tenant and their guarantor upon move-in. This document serves as the sole legal basis for demanding payment of consumption debts without going through a lengthy trial. Arbitrarily withholding the security deposit to settle an electricity bill exposes the owner to a lawsuit by the tenant for restitution.

The fundamental distinction between the security deposit and the shtar ’hov

Many owners make the mistake of confusing the security deposit with a general guarantee fund. Under Israeli law, the security deposit has a strictly limited purpose. It covers physical damage caused to the apartment or the cost of professional cleaning upon move-out. It does not constitute rent insurance or a payment guarantee for basic services such as electricity, water, or gas.

The true instrument of protection against unpaid bills is the shtar ’hov. This document, signed by the tenant and their arev (guarantor) at the time keys are handed over, is a conditional acknowledgment of debt. It stipulates that if the tenant fails to meet their obligations, the guarantor must pay. This document gives the owner an enforceable title. Without it, you only have a standard legal claim, which is much harder to enforce. Confusing these two mechanisms is the primary source of disputes. If you withheld the security deposit to pay for electricity, you acted outside your legal rights. The tenant can sue you for the return of the funds, while also claiming payment of the bill via the shtar ’hov.

• Security Deposit: Covers physical damage (holes in walls, broken windows) and cleaning. Does not cover bills.
• Shtar ’hov: Covers unpaid rent, fees, and services (electricity, water). Enforceable if properly drafted.
• Common Error: Withholding the security deposit for unpaid bills. This is illegal and can be challenged by the tenant.

It is crucial to understand that the security deposit is a sum deposited to guarantee the condition of the property, not to guarantee payment for services. If you wish to explore the management of this sum in case of damage, see our article on Damage in Netanya: Withholding the Tenant’s Security Deposit.

Identifying the account holder with the electricity company

Before taking any recovery steps, you must verify who the official customer is with the electricity company. In Israel, it is customary and strongly recommended to transfer the subscription to the tenant’s name upon move-in. This practice, unlike in many other markets where the landlord often remains the account holder, isolates the tenant’s consumption and payment responsibility. If the account is in the owner’s name, the electricity company will send reminders and shut off power to you. The tenant cannot then be directly pursued by the company for bills issued to a third party, even if they consumed the energy.

If the subscription is still in the owner’s name, you are the legal debtor. You must pay the bill to avoid a power cut, then seek reimbursement from the tenant. This is a disadvantageous position. If the subscription has been transferred to the tenant’s name, the company considers them solely responsible. In this case, you do not have to pay the bill, but you must use the shtar ’hov to compel payment. To contact customer service, you will need the account number (often a 9-digit number) and the registered phone number. Companies like the Israel Electric Corporation (IEC) or municipal providers like Hachlaha in Netanya offer online portals where payment history is accessible. Check the history to precisely identify unpaid months and exact amounts due. These statements will serve as evidence in your formal demand letter.

• Account in Owner’s Name: You pay the company, then claim from the tenant via the shtar ’hov.
• Account in Tenant’s Name: The company reminds the tenant. You use the shtar ’hov to compel payment.
• Key Document: The official account statement from the electricity company listing unpaid amounts.

This distinction is vital for your cash flow. Never pay a bill that is not addressed to you without first verifying the account holder. If you manage your property through our property management, we systematically verify subscription ownership upon tenant move-in to avoid this type of blockage.

The recovery process via the shtar ’hov

Once the debt is proven by unpaid electricity bills, the shtar ’hov becomes your primary tool. This document is not a simple promise to pay; it is an enforceable title. If it is correctly drafted (tenant signature, guarantor signature, defined maximum amount or debt determination clause), you can proceed directly to the execution phase without initiating a trial on the merits. The process begins with sending a formal demand letter, which serves as a notification of payment default. You must send this registered letter to the tenant and their arev. It must specify the exact amount of unpaid electricity bills, attach the invoices as an appendix, and set a short payment deadline (often 7 to 14 days).

If payment does not occur within this deadline, you can petition the competent court to order the execution of the shtar ’hov. The court will issue an order to seize the assets of the tenant or the guarantor. This process is much faster than a standard judicial procedure. It is not about proving the debt exists (the invoices do that), but about forcing payment. The guarantor is jointly liable: if the tenant does not pay, the guarantor must pay. This mechanism is specific to the Israeli market and allows for the recovery of routine consumption debts without a lengthy trial. It is essential that the shtar ’hov was signed before the tenants moved in. If it was signed after, its legal value is reduced. Ensure the demand letter is sent by a bailiff or via registered mail with proof of delivery to prove notification.

• Step 1: Gather unpaid electricity bills.
• Step 2: Send a demand letter to the tenant and the arev with the bills.
• Step 3: If unpaid, petition the court for execution of the shtar ’hov.
• Step 4: Seizure of the debtor’s or guarantor’s assets.

This method is effective if the document is solid. If you have doubts about the validity of the shtar ’hov, see our article on Dispute over Security Deposit Withholding: Owner Abroad, Property in Israel to understand the limits of your remedies.

When the shtar ’hov is absent or insufficient

Sometimes, the shtar ’hov has not been signed, or it is poorly drafted. This is the case if the tenant has no guarantor, or if the document does not specify the potential debt amount. In this scenario, you cannot use the rapid execution procedure. You must initiate a standard lawsuit for debt recovery. This procedure is longer and more expensive. You will need to prove the existence of the debt and the causal link between electricity consumption and the tenant. If the meter is separate, consumption readings are strong evidence. If the meter is shared (rare for individual apartments but possible in some buildings), you may need to hire an expert to estimate the tenant’s share of consumption. This is a complex step.

Evaluate the cost of this procedure against the amount of the debt. If unpaid electricity bills are low, attorney fees and procedural costs may exceed the amount to be recovered. In this case, it is sometimes more economical to abandon the claim or negotiate an amicable settlement. You can ask the tenant to sign a written acknowledgment of debt. This document, while not enforceable like a shtar ’hov, can serve as evidence in court and encourage the tenant to pay to avoid a trial. If the tenant is untraceable or has no assets, recovery may be impossible. This is the inherent risk of lacking a valid shtar ’hov. Prevention remains the best solution: never rent without a properly signed shtar ’hov and a solvent guarantor. Verify the guarantor’s solvency by requesting their pay stubs or bank statements before signing the lease. This diligence is your only protection in case of major payment default.

• Document Absent: Standard lawsuit, slow and expensive.
• Document Poorly Formed: Risk of rejection of the execution request.
• Required Proof: Invoices + proof that the consumption belongs to the tenant.
• Alternative: Written acknowledgment of debt + amicable negotiation.

If you find yourself in this situation, do not withhold the security deposit to compensate. This does not resolve the legal issue and creates a new dispute. Focus on debt recovery through appropriate legal channels.

The question of the security deposit: can it be withheld?

The answer is no, not for unpaid electricity bills. The security deposit is a sum that belongs to you until restitution, but its purpose is strictly defined by the lease agreement and the law. It covers physical damage and cleaning. If the tenant has left the apartment and you have observed damage, you can withhold part of the security deposit to cover repairs. You must then provide an estimate or invoice for the work. But you cannot use this sum to pay the unpaid electricity bill. These are two distinct matters. If you withhold the security deposit for electricity, the tenant can sue you for the return of the funds, while also claiming payment of the bill via the shtar ’hov. You thus place yourself in the position of a debtor, which is counterproductive.

The only exception is if the lease contains a specific and clear clause authorizing the withholding of the security deposit for unpaid services. But this clause is rare and its validity can be challenged. Standard practice in Israel is to separate the two. To clarify the situation, you can ask the tenant to sign a debt assignment agreement or an acknowledgment of debt. This document stipulates that they acknowledge the electricity debt and accept that you use the security deposit to cover it. But this does not change the legal nature of the deposit. It is an additional contractual agreement. If the tenant refuses to sign, you must return the security deposit (minus any damage) and recover the electricity debt via the shtar ’hov. Do not mix the two. The return of the security deposit must be made within a reasonable time after the tenant’s departure, once any damage has been assessed. If you have doubts about the legality of a withholding, see our article on Dispute over Security Deposit Withholding: Owner Abroad, Property in Israel.

• Legal Withholding: Physical damage, cleaning.
• Illegal Withholding: Unpaid rent, unpaid electricity, unpaid water.
• Risk: Lawsuit by the tenant for restitution + interest.
• Solution: Return the security deposit (minus damage) + recover the debt via shtar ’hov.

This separation is fundamental to protecting your legal position. Do not rely on automatic assumptions. Each case must be handled separately.

Prevention: securing subscriptions and guarantees upon move-in

The best way to avoid this type of dispute is to properly prepare the tenant’s move-in. Require the signature of a complete shtar ’hov before handing over the keys. This document must be signed by the tenant and by a solvent arev. The guarantor must have stable income and seizable assets. Verify their identity documents (teoudat zeout) and proof of income. Do not settle for a family guarantor without means. A guarantor without assets is just a signature on paper. Transfer the electricity subscription to the tenant’s name from the first day. This isolates their responsibility. Provide them with a copy of the subscription contract and the account number. Clearly explain that non-payment will result in a power cut and legal action via the shtar ’hov. This transparency often deters non-payment behavior.

Establish a joint inventory of the property upon move-in and move-out. This inventory must be detailed and signed by both parties. It will serve as the basis for the return of the security deposit in case of damage. Do not confuse this inventory with the issue of unpaid bills. The two are distinct. If you hire a professional to manage your property, such as our property management, we implement these protocols systematically. We verify the guarantor’s solvency, transfer subscriptions, and manage the shtar ’hov. This significantly reduces the risk of disputes. Prevention is always less costly than recovery. Take the time to do things right at move-in. This is where the security of your investment is determined. A well-secured lease with a solid shtar ’hov is your best insurance against unpaid electricity bills and other consumption debts.

• Before Move-in: Signature of the shtar ’hov + verification of the guarantor.
• Day 1: Transfer of the electricity subscription to the tenant’s name.
• Inventory: Joint, detailed, signed.
• Communication: Explain the consequences of non-payment to the tenant.

These simple and rigorous steps avoid the majority of problems. Do not leave anything to chance. Legal security is built before the problem arises.