Caveat in the Land Registry

Anyone buying an apartment in Israel, or reviewing a land registry extract before a deal, soon meets the term caveat (in Hebrew, hearat azhara). Sometimes the caveat is registered in the buyer's favor, and sometimes it is registered in favor of someone else against a property you are interested in buying. This article explains what a caveat is, what it is for, how the registration is carried out and how it is removed.

The information is general. The law and registration procedures change from time to time, so the up-to-date details should be checked in every transaction.

What is a caveat

A caveat is an entry in the land registry (Tabu) whose purpose is to protect the right of a person who has committed to a transaction in land, as long as the transaction itself has not yet been registered. It is anchored in the Land Law, 5729-1969.

The idea is simple. Between signing the contract and registering the property in the buyer's name, weeks and sometimes months go by. During that period the property is still registered in the seller's name. The caveat notifies third parties and anyone who checks the register that a prior right of another person exists, which requires the attention of whoever is checking.

What a caveat prevents, and what it does not give

Under the law, once a caveat has been registered, the registrar will not register a transaction that is contrary to the transaction the caveat was meant to secure, for as long as the caveat remains in force. In other words, if a seller signed a contract with one buyer and a caveat was registered in that buyer's favor, the seller has no ability to register the property in the name of someone else.

At this point, the limits of a caveat should be made clear:

• It does not transfer ownership. Ownership passes only upon completion of registration of the property in the buyer's name.
• It does not cancel debts or liens that were registered before it.
• It protects only the right recorded in it, not every understanding between the parties.

Which rights can be recorded in a caveat

A caveat is registered, among other purposes, to secure:

• A sale contract: the buyer's right to have the property registered in their name.
• A long-term lease.
• A future mortgage: sometimes a bank asks for a caveat to secure a lien that will be registered later.
• A right of first refusal, an option or another agreement for a transaction in land.

In developer projects, a caveat registered in the buyer's favor is one of the securities under the Sale Law and takes on extra importance. You can read more in Buying an Apartment from a Developer.

How a caveat is registered

The registration is usually made by a lawyer, by submitting an online request to the land registrar through the representatives system. The request may attach the contract, or an undertaking to register a caveat signed by the property owner, together with details of the property and the parties. Once the process is complete, the caveat appears in the registry extract, and you can verify it in an updated extract.

A few practical points:

• It is advisable to arrange registration as close as possible to signing, to reduce the risk that another lien or attachment, or another registration contrary to the transaction, will be recorded on the property between signing and registration.
• The contract should make sure the seller undertakes to sign the request for registration of the caveat and to provide the required approvals.
• After registration, check an updated extract to confirm that the caveat appears and describes the transaction correctly.

How a caveat appears in a registry extract

The registry extract shows, among other things, the details of the caveat, the date of registration, the right it protects and the name of the beneficiary in whose favor it is registered. When reviewing a caveat on a property you want to buy, ask three questions:

1. In whose favor was it registered? If it is registered for another buyer, find out the status of that buyer's transaction.
2. To secure which right? A caveat in favor of a bank is different from a caveat in favor of an earlier purchaser.
3. Is there a date or condition for its removal? Find out how and when the caveat will be removed, and make sure this is regulated in the sale contract and obliges the seller to arrange it.

A caveat that you do not understand is a reason to look deeper, not to carry on. It is best to go over the subject as part of the checks before buying an apartment.

How a caveat is removed

A caveat is removed, among other situations, in one of the following ways:

• With the consent of the person in whose favor it is registered, in line with the registration procedure. This happens, for example, when the buyer is registered as owner and the caveat is no longer needed.
• By a court order, when the parties are in dispute.
• Following registration of the transaction, when the right the caveat protected has been realized.

In many cases the caveat is removed as part of registering the property in the buyer's name. If the deal fell through and a caveat remained in the extract, steps should be taken to remove it so that it does not interfere with future transactions.

Common mistakes

• Relying on the contract without securing registration of a caveat. A contract alone is not recognized by third parties or by anyone who checks the register.
• Not checking the extract after registration. There may be a mistake in the details of the property or the parties.
• Not checking existing caveats on the property before signing. A caveat in favor of someone else is a material fact before a transaction.
• Assuming the caveat removes the need to register ownership. Final registration is what secures the right.

Frequently asked questions

Does a caveat protect me even if I have not paid the full price? The caveat protects, by giving notice to third parties, the right recorded in it. The scope and conditions of that protection depend on the contract and the circumstances, so they should be checked before payment.

Can a property with a caveat be sold? It depends on what the caveat is for. A caveat in favor of an earlier buyer makes a sale to another very difficult, and a caveat in favor of a bank usually requires taking the bank into account. In any case, check it against what is recorded in the extract.

Who is responsible for removing the caveat after the transaction? The contract usually sets the allocation of responsibility. Make sure it is clear so that removal is not delayed.

In summary

A caveat is an important legal tool for protecting a buyer in the period between signing and registration. It does not replace checks of the property, including planning and engineering aspects and legal ones, of the seller and of the contract, but it is an important part of the legal framework of a deal. If you are about to sign, you can contact us to have the registry extract and the contract reviewed, and for the field in general see Real Estate.

The information in this article is general, is not legal advice, and does not replace a review of your specific case.