If you are renting in Israel, you will meet the phrase arvut bankait, a bank guarantee. It is the strongest security a landlord can ask for, which is precisely why it is the most burdensome for a tenant. Understanding it matters because the difference between it and the alternatives is not technical: it is the difference between money leaving your account today and a promise on paper.
Disclosure: Educational information only, not legal advice. The terms of a guarantee and its fees are set in your agreement with the bank and in the lease. Where a substantive dispute arises, consult a lawyer.
What it actually is
The bank undertakes to the landlord that it will pay a defined sum if the tenant fails to meet their obligations. The undertaking is the bank's, not the tenant's, and that is exactly why landlords value it so highly.
Here is what most tenants discover late: for the bank to give that undertaking, it demands security of its own. In practice this usually means depositing the full amount into a pledged deposit in your account. Your money is removed from use for the entire rental term.
So the guarantee is not merely a piece of paper. It freezes capital. For a tenant to whom the sum is significant, that is the central consideration, and it is often larger than the fee.
What it costs
Two components:
The bank's fee for issuing the guarantee, charged as a percentage of the guaranteed sum, usually periodically and subject to a minimum. The rate is negotiable, particularly for an established customer.
The opportunity cost of the frozen capital. This is the larger and less discussed component: a sum sitting in a pledged deposit is unavailable for anything else for a year or more.
One reassurance: the money in the deposit remains yours and earns whatever the deposit pays. It is pledged, not confiscated.
How it compares with the alternatives
| Security | What it is | Effect on the tenant |
|---|---|---|
| Bank guarantee | An undertaking by the bank | Freezes capital, carries a fee, strongest for the landlord |
| Promissory note (shtar chov) | An undertaking by tenant and guarantors | Frees no cash, enforcement requires a legal process |
| Guarantor (arev) | A person who undertakes personally | Frees no cash, places the burden on a third party |
| Cash deposit | Money held by the landlord | Freezes cash, and holds it with an unregulated party |
That last row deserves attention. A cash deposit held by the landlord is worse for a tenant than a bank guarantee: the money is frozen just the same, but it sits with a private individual rather than in a bank, and getting it back depends on their good faith.
Israeli practice commonly combines instruments, for example a promissory note with guarantors alongside a smaller bank guarantee. The level of security is negotiable, like any other clause in the lease. Newcomers to Israel often assume the landlord's opening demand is a fixed requirement. It is not.
When a landlord may call it in
This is the main point of friction, and the drafting decides everything.
A bank guarantee is usually autonomous: the bank pays the landlord on demand in accordance with the terms of the guarantee document, without examining the underlying dispute. The bank is not a judge; it is an executor.
The practical consequence: your protection does not sit with the bank, it sits in the wording of the lease and the guarantee document. Three things to confirm before signing:
Exactly which events permit a call. A closed, itemised list is far better than a general formula.
Whether written notice and an opportunity to remedy are required before any call. This is the single most protective clause for a tenant.
Whether partial calls are permitted, limited to the actual loss, rather than the whole sum for any breach.
Common grounds include unpaid rent, outstanding municipal tax (arnona), utility or building committee debts, damage beyond fair wear and tear, and failure to vacate on time.
Duration, and getting your money back
The validity period should match the lease with a short margin after it. A guarantee that expires while the lease is still running must be renewed, and renewal attracts a fresh fee.
At the end of the tenancy the sequence is: vacate the property, close the arnona, electricity, water and building committee accounts, obtain the original guarantee document back from the landlord or their written confirmation of cancellation, and return it to the bank to release the pledged deposit.
The practical trap: the money is not released automatically when the lease ends. As long as the landlord has not returned the document or confirmed cancellation, the deposit stays pledged. Arrange the handover of that document at the same meeting where you hand over the keys.
Summary
A bank guarantee is the bank's undertaking, backed by your own money, frozen for the whole tenancy. Its true cost is not only the fee but the capital you cannot use. Because it is usually autonomous, your protection lies in the drafting: a closed list of grounds, a requirement of prior written notice, and the possibility of a partial call. And at the end, do not forget to collect the document. See banking and credit in Israel and rental income tax. We provide the knowledge, the decisions remain yours.
The information on this page is for educational purposes. Please consult a professional before making financial decisions.
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