Analysis: What are the legal rights of Heftsiba clients?

There's no chance that those who purchased homes inside the Green Line will occupy them legally.

Heftsiba 224.88 (photo credit: Ariel Jerozolimski [file])
Heftsiba 224.88
(photo credit: Ariel Jerozolimski [file])
There is no way for the purchaser of an apartment that has not yet been built to obtain an iron-clad guarantee that he will some day gain occupancy, according to attorney Uri Yamin, head of the real estate department in the Yehuda Raveh law office in Jerusalem. Therefore, at this moment, there is no chance that the thousands of families who purchased homes inside the Green Line from the Heftsiba construction company, which has apparently gone bankrupt, will occupy them legally. On Sunday, the Tel Aviv District Court declared that purchasers of apartments from Heftsiba in Kfar Yona who broke into the mostly unfinished units after hearing of the company's alleged collapse had taken the law into their own hands. While construction is in progress and the apartments have not been registered in their names, the purchasers do not own them. Yamin told The Jerusalem Post that the Knesset passed a law in 1974 that, for the first time, provided a certain degree of protection to purchasers. This happened after the bankruptcy of a building company in Rishon Lezion that left home purchasers without a penny of the money they had paid for their homes. The law, which is called Purchase Law (Apartments) (Guarantee of Investments of Apartment Purchasers), states that the contractor may not accept any money over the value of 15 percent of the purchase price of an apartment unless he provides the purchaser with a guarantee for the money invested. The law provides five types of guarantees. Yamin said the most common was a bank guarantee purchased by the contractor on behalf of the purchaser that obliges the bank to return to the purchaser the entire sum of money he has invested in the apartment. Attorney Yosef Tamir, a partner in the Tel Aviv-based Schein-Tamir law firm, told the Post there were two categories of purchasers in the Heftsiba affair - those who had received bank guarantees and those who had not. Those who received bank guarantees are obviously in a better position. The bank will return to them the money they have paid in. The problem for these purchasers is that in the meantime, the prices of homes have gone up and so the money they will get back will not go as far as it did when they originally paid it to the contractor. Those who do not have bank guarantees are in far more serious trouble. They are in the position of "regular" creditors and will join a long list of Heftsiba creditors. "There is only a small chance they will see their money again," said Tamir. How is it that if all or some of these purchasers have already paid the company 15% of the purchase price, the contractor did not give them a bank guarantee? The answer, said Tamir, was that often the contractor did not make arrangements with the bank when he was obliged to by law. In failing to do so, the contractor has committed a criminal offense, but that is of little help to the home purchaser. The fact that the contractor was at fault does not entitle the purchaser to the bank guarantee retroactively. The situation may change when the court appoints a receiver to manage the affairs of the company until all of the fallout from the collapse has been taken care of. It is possible that the receiver will find an investor who is ready to take over the company and complete the construction work. If so, the contractual relationship between the purchaser and the company will remain and the purchaser will eventually be able to register ownership and move in. The problem in this case is that the procedures for appointing a receiver, finding an investor and carrying out the bureaucratic necessities will take a long time. In the meantime, the purchaser will remain in limbo. If, for example, he is paying rent while waiting for his home to be finished, he will have to continue paying that much longer than he planned. Tamir said it was possible that the banks, which have to pay the guarantees to the purchasers, would prefer to pick up where Heftsiba left off in order to avoid paying the guarantees, completing the projects and receiving the balance of payment for the completed apartments. Are those purchasers who broke into the apartments better off than they would have been had they obeyed the law? From a legal point of view, the answer is no. However, from a practical point of view, the move could pay off. The "squatters" can be evicted from the apartments without any complicated legal action during the first 30 days. After that, however, it becomes much more difficult to remove illegal squatters and their persistence could eventually pay off and convince the government to step in and solve their problems without forcibly evicting them.