• Real Estate

• In the country

The Supreme Court ruled: A warning note on the property will make its owners secured creditors

The court reversed the decision of the district court in Lod, which ruled that the warning note recorded on an apartment owned by a bankrupt loses its force.

Thus, holders will have the status of a secured creditor similar to a mortgage.

Meaning of the decision: The warning note gives priority and must be resolved before dividing the balance of the property to other creditors

Tags

• warning label

David Rosenthal

Tuesday, 20 July 2021, 09:02 Updated: 12:03

• Share on Facebook

• Share on WhatsApp

• Share on general

• Share on general

• Share on Twitter

• Share on Email

0 comments

The Supreme Court recently ruled that a 'warning note' about an apartment whose owners have gone bankrupt - gives its holders the status of a secured creditor similar to a mortgage.

This revolutionary decision was recently made as part of an appeal, filed by a couple from the center of the country, through Adv. Inbar Lev. Buy them no special status so that they will have to huddle in line along with the rest of the creditors, and get, at best, a small fraction of the money they deserve.

The significance is enormous.

So far a cautionary note has not given priority to its holders over other creditors.

The implication of the Supreme Court ruling is that holders of the cautionary note are given priority over other creditors in repaying the debts.

More on Walla!

NEWS

It's time to find out: Do you really need to "eat for two" during pregnancy?

To the full article

The couple can breathe a sigh of relief - illustration (Photo: ShutterStock)

According to Adv. Lev, the affair began in 2012, when her clients sold an apartment they owned, and were left with a large financial balance in their account. The company that the accountant presented to the couple, Advocate Lev claims, needed a business loan at the time, and in return was willing to provide attractive interest rates. As personal security for the loan, it was agreed between the parties that a warning note would be written on the apartment of the guarantor of the loan (the brother of the company owner) - in the amount of the loan.

The couple first transferred a million shekels as a loan to the company, and they received a warning note about the apartment at a similar rate. In November 2015, an additional business loan of NIS 600,000 was agreed between the parties, and about a year later, the lenders transferred an additional loan of NIS 200,000 to the company. In respect of all loans, a mortgage was also registered with the Registrar of Pledges.

However, according to Adv. Inbar Lev, shortly after the date of the third loan, the company's owners violated the loan agreement, and stopped transferring interest-bearing monthly repayments to its clients. a claim later amended financial claim.

Two months after the filing of the suit, the company entered the dismantling and owner of the Company and evening the proceedings of bankruptcy, and in February 2017 set Magistrates Court that the financial claim that the couple filed against the owners of the company should be dismissed - because of the protection from creditors that can be sheltered Under bankruptcy proceedings.

The district ruled: The registration is invalid

The couple applied to the special administrator eight on the eve of the loan agreement, requesting to acknowledge the warning note recorded to their credit on his home, and to allow them to enjoy the status of a secured creditor similar to the mortgage bank. The bank, in whose favor a mortgage was registered, objected to this request. To ensure that the couple will not be recognized as secured creditors, the bank asked the special administrator to order the sale of the apartment through the bank, and not in the free market, because, according to bank representatives, the couple's warning note would lose its validity. The special administrator acceded to the bank's request and the two were appointed receivers and sold the house.

The couple filed an appeal against this decision of the Special Administrator to the Central District Court in Lod. In their appeal, the couple argued that deleting the warning note in their favor emptied the meaning and content of the use of the warning note tool. the couple. Among other things, Judge Tamir ruled, the appellants had the option of using an irrevocable power of attorney, to sign on behalf of the debtor and his wife an agreement to sell the property, pay the mortgage and transfer ownership of the property in their name. Since the appellants chose not to exercise this option, which would have granted them a registered mortgage on the actual property and the status of secured creditors, the cautionary note recorded in their favor is not positive, nor does it grant them the status of secured creditors.

Judge Tamir further ruled that the pledge was registered close to the filing of an application for a debtor receivership order, while he was already in debt, and therefore by virtue of the provisions of the Bankruptcy Ordinance, it is sufficient to determine that the pledge should withdraw from ordinary creditors' debt claims.

In addition, in registering a warning note on the property, the apartment owners acted in violation of the mortgage agreement they signed with the bank, which states that they are not allowed to do so - and therefore, this registration is illegal, and void in principle.

Adv. Inbar Lev (Photo: Moshe Ron)

The couple did not say desperate, and appealed the district court's ruling to the Supreme Court, sitting as an appellate court.

Attorney Lev argued that the district court erred in ruling that the couple lost their right to a guaranteed oblivion because they did not exercise the cautionary note and applied for the sale of the apartment.

"This determination is problematic and empties the institution of the warning note. A creditor in whose favor a warning note is registered does not have to fulfill the obligation given to it by virtue of it, in order to gain a special status in the order of oblivion."

Advocate Lev further argued on behalf of the appellants that the court erred in holding that the registration of a mortgage close to the date of issuance of a receivership order in bankruptcy proceedings is a prohibited grant. According to her, in accordance with the ruling, the initial burden of proof for the cancellation of a grant rests with the applicant, in this case the special administrator. The recipient is then given the right to argue, in order to prove that he meets one of the exceptions to the law. In this case, not only did the Special Administrator not at all claim that the pledge was an improper grant, and therefore the appellants were not given an opportunity to oppose this determination, and this reason alone is sufficient to set aside the District Court's decision, "but even if the Special Administrator were to grant It is forbidden, since his claim must be rejected because the registration date of the pledge is not relevant, since the relevant date is the date of the loan agreement by virtue of which the pledge was registered and the loan agreement was created in 2012 more than 4 years before the receivership order. "

In addition, she argued, the court erred in holding that the cautionary note and pledge recorded in favor of the appellants were null and void because they were registered in violation of the provisions of the agreement with the bank. According to her, the remaining mortgage debt was set at about NIS 1.5 million, and the apartment itself was sold for NIS 3.15 million.

The three Supreme Court justices - Justice Anat Baron, Justice David Mintz and Justice Alex Stein, discussed the couple's appeal of the district court's decision in their case.

After delving into the parties' arguments, the three judges ruled that the judgment given in the district court is invalid, and that the appellants are secured creditors by virtue of the warning note recorded on the property, as security for repaying the first loan of NIS 1 million. Any creditor who has a warning note registered in his favor is a creditor, even if the rights holders in the apartment are in bankruptcy proceedings.

• Share on Facebook

• Share on WhatsApp

• Share on general

• Share on general

• Share on Twitter

• Share on Email

0 comments