THE BAIS HAVAAD HALACHA JOURNAL: Volume 5776 Issue XI Vayigash FORECLOSURE IN HALACHA When the lender takes possession on improved property. By Dayan Dovid Grossman Rosh Bais Havaad L'Inyonei Mishpat, the Center for the Study and Practice of Monetary Halacha
Case Study: Improved Property in Rechavia
Many years ago, a man named Reuven owned a small fixer in the Rechavia neighborhood of Yerushalayim. Reuven needed some capital for a timely investment, so he approached his friend Shimon and asked for a $250,000 loan. Shimon agreed, but asked for a collateral to secure the loan.
Reuven, who needed the funds desperately, was willing to offer his Rechavia property – which was worth well over $300,000 – as collateral for the loan, granting Shimon a lien on the property. This would be a non-recourse loan, secured by the property. Reuven and Shimon drafted a proper Heter Iska, along with a valid Shtar detailing the terms of the loan – and the deal was finalized.
Many years later, land values in Yerushalayim rose dramatically. Reuven sold the property in Rechavia to Levi, who tore down the old house, and invested a sizable sum of money into building a beautiful new house. Levi’s property was now valued at well over $1 million.
One day, there was a knock at Levi’s door, by none other than Shimon – who came to collect the original $250,000 he was still owed by Reuven. Shimon produced the Shtar which stated that he had a lien on the property, and expressed his intent to collect his debt by taking possession of the property.
Obviously, Levi was not about to just walk out of his home and the large sum of money he had invested in building it. Levi offered to try and persuade Reuven to repay Shimon his $250,000 but Shimon refused, claiming that he had a right to this property which was subject to his lien. Instead, Shimon offered to reimburse Levi for his investment in the property which he would take for himself.
Levi did not agree to this proposal. The land itself had shot up in value, in addition to the improvements which Levi had made, and, more importantly, Levi did not want to lose his home.
What is the Halacha in this situation? Does Shimon have the right to take Levi’s home?
Case Study: Improved Property in Rechavia
Many years ago, a man named Reuven owned a small fixer in the Rechavia neighborhood of Yerushalayim. Reuven needed some capital for a timely investment, so he approached his friend Shimon and asked for a $250,000 loan. Shimon agreed, but asked for a collateral to secure the loan.
Reuven, who needed the funds desperately, was willing to offer his Rechavia property – which was worth well over $300,000 – as collateral for the loan, granting Shimon a lien on the property. This would be a non-recourse loan, secured by the property. Reuven and Shimon drafted a proper Heter Iska, along with a valid Shtar detailing the terms of the loan – and the deal was finalized.
Many years later, land values in Yerushalayim rose dramatically. Reuven sold the property in Rechavia to Levi, who tore down the old house, and invested a sizable sum of money into building a beautiful new house. Levi’s property was now valued at well over $1 million.
One day, there was a knock at Levi’s door, by none other than Shimon – who came to collect the original $250,000 he was still owed by Reuven. Shimon produced the Shtar which stated that he had a lien on the property, and expressed his intent to collect his debt by taking possession of the property.
Obviously, Levi was not about to just walk out of his home and the large sum of money he had invested in building it. Levi offered to try and persuade Reuven to repay Shimon his $250,000 but Shimon refused, claiming that he had a right to this property which was subject to his lien. Instead, Shimon offered to reimburse Levi for his investment in the property which he would take for himself.
Levi did not agree to this proposal. The land itself had shot up in value, in addition to the improvements which Levi had made, and, more importantly, Levi did not want to lose his home.
What is the Halacha in this situation? Does Shimon have the right to take Levi’s home?
No comments:
Post a Comment