knesset finance 88 298.
(photo credit: Ariel Jerozolimski)
At a stormy meeting of the Knesset Finance Committee on Monday, the government was urged to establish a system that will protect the investments of thousands of Heftsiba customers who purchased apartments from the bankrupt construction company.
The committee also charged the Housing Ministry with failing to recognize the telltale signs of a floundering real estate company and it accused the Tel Aviv Stock Exchange of not failing to provide sufficient oversight of the company.
Heftsiba had been in the process of constructing some 4,000 apartments when rumors of its impending bankruptcy sparked a surge of panic Thursday. While there had been rumors for weeks that Heftsiba was in trouble, concern escalated dramatically late last week when it was learned that Electra Real Estate had pulled out of two business deals that would have given it a 90 percent stake in Heftsiba.
"This is not at all a good situation and it can't be that the appropriate offices are unaware of what is going on," said MK Ya'acov Litzman (UTJ ), a member of the Finance Committee. "We think that the Stock Exchange did not do its due diligence in examining the company's activities and feel that the Housing Ministry should have a better idea of just how many people this crisis is going to effect. Ahead of last week's events, they had no idea of what was happening."
Representatives from the stock exchange and the Housing Ministry at the meeting strongly denied Litzman's allegations. Having heard from these representatives, the committee will now meet again to draw up specific recommendations.
Under the Purchase Law (Guarantee of Investments of Apartment Purchases), contractors may not accept any money over the value of 15 percent of the purchase price of an apartment unless they provide the purchaser with a guarantee for the money invested. But this procedure was not adhered to by Heftsiba, leaving many apartment-buyers facing major losses.
The Finance Committee additionally requested the establishment of a special office to process the claims of Heftsiba's customers on an individual basis. It also called on the country's largest banks to open an investigation into how Heftsiba customers' mortgage payments were transferred to the company without the proper guarantees.
The special office will be tasked with finding the means to assist those Heftsiba customers who did not receive a bank guarantee purchased by the contractor on behalf of the purchaser. A bank guarantee can obligate the bank to return to the purchaser the entire sum of money he has invested in the apartment in circumstances such as those now involving Heftsiba.
Some buyers in the Heftsiba affair did receive the bank guarantees, and so will have their money returned to them by the banks. Those that did not, however, will join a long list of Heftsiba creditors, not all of whom are likely to have their money returned to them, unless there is intervention on their behalf.
On Sunday, the Heftsiba Group asked a Jerusalem court for protection from creditors as bond holders and at least one bank sought to recover debt that has been estimated to total NIS 1.6 billion.
The stock exchange suspended trading of Heftsiba's shares earlier this week and said that the company had one week to attempt to straighten out its financial affairs or else face the possibility of being permanently barred from trading on the exchange.
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