This clause in effect establishes priority over the first transaction in time, unless the second transaction was concluded in good faith, in return and the right was registered in good faith.
- The applicability of the clause was classified in the well-known Ganz judgment (CA 2643/97 Ganz v. British & Colonial Company Ltd., IsrSC 57(2) 393), in which the court dealt with the consequences of not registering a warning note by the first buyer of the property on the competition between conflicting rights. It was held that if the first buyer refrained from registering a warning note even though he had no impediment to doing so, the second buyer's right in time may prevail, even if he did not complete the transaction by registration.
In the Ganz judgment, the Honorable President Barak ruled that "... In principle, good faith requires that a person who has been obligated to make a transaction in real estate do everything in his power to register a warning note regarding the transaction that was made in the Land Registry ("Land Registry")" and it was also determined that "in refraining from doing everything possible to register the warning note, the owner of the first transaction laid the groundwork for the 'legal accident' in the conflicting transactions. He could have prevented it, and he didn't. This, in principle, constitutes an omission that is not in good faith" (paragraph 19).
- However, it was emphasized that failure to register a warning note will not always constitute bad faith towards the second buyer, and in any event, this rule is subject to the fact that the second purchaser was in good faith and purchased for consideration; "On the level of the relationship between the first purchaser and the second purchaser at the time, there may be situations in which the failure to register a warning note by the first purchaser will not impede the priority that was established for him in the competition between him and the second purchaser... Thus, for example, if the second purchaser acted in bad faith at the time, then there is no effect on the failure of the first purchaser to register the warning note, and he should not be considered as the one who caused the contradictory transactions through his fault" (CA 3099/10 Raif Abu Shakra v. Nakla Haddad et al. [Nevo] (October 9, 2012), paragraph 11 of the judgment).
- So far when it comes to competition between two equal transactions. According to the prevailing approach in case law, section 9 of the Real Estate Law relates to transactions of equal weight, and this assumption does not apply when it comes to competition between a gift transaction and a sale transaction, which are not equal in weight. In a sale transaction, the strength of the buyer's interest is much higher than that of the recipient of the gift, due to the fact that the buyer paid consideration for the right he purchased, while the recipient of the gift receives a gift of kindness. In Cell (Hai) 56946-05-20 Hamad Mahmoud Gadir v. Ibrahim Ben Ali Hujairat [Nevo] (8 June 2021) it was held "...There is certainly room to consider giving preference to a sale transaction, even if it is a later transaction than a gift transaction" (paragraph 15 of the judgment). These words were based on the words of the Honorable Justice Amit, sitting in the District Court, in Civil Appeal (Hai) 297/04 Diab v. Diab [Nevo] (April 9, 2006), according to which when the first undertaking is to give a gift, there is room to prefer a sale transaction late in time, if it was made in good faith and in consideration, even if the late transaction did not end in registration. (See also the article by Nina Salzman, "Undertaking to Gift Real Estate 'Conflicting Transactions' and the Right to Equity," Sefer Daniel, 2008, p. 255, p. 274).
The Honorable Justice Amit reiterated this opinion in the judgment given in CA 1405/19 Estate of the late Yosef Na'amneh, his sons v. Na'amneh Omar Hamada [Nevo] (November 16, 2020), saying: "... As for the classification of the first agreement in time as a gift transaction, in my opinion, the right of the first person who did not register a warning note is deferred because of the second's right to time, even if the second did not refine his right to registration."