In Favor of the Creditor

In Israeli real estate transactions the purchaser is protected by registering a warning notation in the land registry shortly after the signing of the contract but before the registration of title.

The law states that in the event of another transaction for a piece of property that conflicts with the first transaction, the rights of the purchaser of the first transaction take precedence over the rights of the second purchaser if the first purchaser registered such a notation in the land registry.

This prevents the seller from selling the apartment to two different purchasers.  Over the years the courts have even gone so far as to prefer the rights of a purchaser over the rights of a creditor even if the purchaser did not manage to register the notation on the property.

In a recent court decision this case law was partially overturned.  In this particular case the purchasers did not register the notation for fear that creditors of the seller would find out about the sale.  The parties even held off from reporting the sale to the tax authorities.

In this case the court did not recognize the rights of the purchaser over the creditor since the purchaser cooperated with the seller in hiding the transaction in order to prevent a creditor from collecting a debt.

It is important to note that had the purchaser registered the notation as he should have, his rights would have taken precedence over those of the creditor. However the creditor could have placed a lien on the money paid by the purchaser to the seller.

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