Does This Property Belong to Me or to Us All?
A True Case
Mr. Smith knew he was in trouble. Therefore he decided to “solve” his serious financial crisis in a very peculiar way. He decided to sell his apartment; not only to one person but to a few people simultaneously. For this purpose he drew up a plan.
Mr. Smith knew that appearances would be important. He decided not to look like a businessman but rather like a regular person with a pleasant wife. He set the scenario in his apartment that was now almost empty because his family had already fled. He brought in a “friend” to pose as his wife. His real family was not to be involved.
The property was well located and the demand was great in the area. Mr. Smith checked the market, the prices and put an ad in the largest newspaper. The next day at 7 am he already received his first phone call. He knew he had to work fast and sell the property as many times as he could that same day.
Mr. Smith knew he would have to make the appointments at night when people are more amicable, generally there are no lawyers involved and there is no possibility to register any transaction after working hours.
He received the first couple, who were in their 30’s. After explaining to them that he had a job offer to be started immediately, he agreed on a lower price to sell the property fast and he was also offering to vacate the apartment in few days. Another advantage was the property being free of any mortgage as he told everyone.
The papers appeared to be ingeniously in order, or at least inexperienced people would think they were.
The couple was very excited because it was a bargain: immediate evacuation and almost $ 15,000 less than the market price. After half an hour they reached an agreement and the couple gave Mr. Smith a small advance but a substantial one. A total of 100,000 Shekels was paid and a memorandum was signed.
Mr. Smith advised the couple – and even stipulated in the memorandum – that the check must be cleared by the bank at 8:30 am because he had to be sure the check was not to bounce. They set a meeting at the couple’s lawyer’s office the next afternoon.
The next couple came an hour later and again the same story. This time Mr. Smith received a check for 150,000 Shekels.
The third couple came already late in the evening and they also paid 100,000 shekels.
The next day, early in the morning, Mr. Smith went from bank to bank and yes, he cashed all those checks. He left the country that afternoon with the 350,000 Shekels and was never to be found again.
The last couple contacted their lawyer first thing in the morning and he was hysterical to hear they cleared the check. The lawyer instructed the couple to call the bank and put a stop on the check but it was too late. The lawyer asked for the documents and met the couple in the registrar’s office before noon. They asked and received permission to put a lean on the property.
It took a day before they all found out the transaction was a fraud. The litigation was very long including appeals until the court decided who would be the owner of the remaining property. Why the remaining? Because there was a huge mortgage on the property but somehow Mr. Smith succeeded in forging a few lines in the papers to make it appear there were no leans or any impediments on the property.
The bank was to have first priority among all the parties. The remaining amount after selling the property or paying the mortgage and legal expenses would be no more than 100,000 Shekels.
The first couple proved beyond any doubt they were the first to sign a memorandum therefore in their opinion they were to have priority.
The second couple claimed they paid the largest amount (150,000) therefore as in a bid they were to have the first priority.
The third couple claimed they were the last to buy but the first to register the property.
The court decided as a general rule that the property belongs to those who register first therefore the third couple was to be reimbursed their 100,000 Shekels by the bank after selling the property.
In the end, the couple ended up buying the property from the bank for the same amount they had originally agreed on with Mr. Smith, less the legal costs.
The first and second couple actually lost all their down payment in addition to the large sum they spent in legal fees. One of the couples sued their lawyer, claiming he was required to have warned them as soon as they spoke with him on the phone about the deal on that fateful morning, rather than wait until their afternoon meeting.
Some settlement was reached outside the court between the lawyer and the couple but no details are available. Mr. Smith never came back to Israel.
This, along with many other cases, is why I always ask people: do you think it is wise to sign any legal paper concerning real estate without representation?
