Court decision on the issue of guarantees for Heftsiba home buyers: Bank of Israel's position

9.10.07

Court decision on the issue of guarantees for Heftsiba home buyers: Bank of Israel's position

At a joint forum of the Knesset Economic and Finance Committees on August 21, 2007, the Supervisor of Banks, Rony Hizkiyahu, presented how the Banking Supervision is going to treat the complaints by home buyers that have been affected by the collapse of the Heftsiba company, inasmuch as they touch on banking matters, and he invited them to approach the Banking Supervision in order to deal with their complaints that touch on banking matters.

The Supervisor of Banks referred to six particular cases, all of which were characterized by the flawed behavior of the banks concerned, which, in the opinion of the Supervisor, caused damage to the buyer. These six cases in which assistance would be provided to the home buyers were: where there is no dispute that the money of the home buyer was deposited in the project account, and the bank did not take out a guarantee, as stipulated in the Sales (Housing) Law; where the home buyer has a Sales Law guarantee conditional on the deposit of money in the project account; where a check was written out to "Heftsiba + name of the bank and the number of the project account to credit", and the check was deposited in an account other than the project account; where the buyer paid Heftsiba through a loan taken from a bank and the bank which provided the loan to the buyer did not transfer the money to the project account; where a check was made payable to "Heftsiba Ltd." on which it was also written "to the payee only" and which was not deposited in the project account; and where the buyer returned the guarantees to the financing bank against the transfer of possession only.

Immediately after the August meeting, the Supervisor of Banks turned to the Official Receiver's special manager, attorney Molcho, in order to inform him of his position, which, in light of the fact that the Heftsiba group is currently under a stay of proceedings, the Supervisor believed he may require the approval of the court for solvency in order to fully implement. Attorney Molcho consequently asked the court to approve the issue of guarantees, and the court, in its decision of Sunday October 7, acquiesced to this request.

Following the Supervisor's address to the joint forum, hundreds of home buyers turned to the Public Enquiries Unit of the Banking Supervision department at the Bank of Israel, and presented their complaints. This week's court decision, which in effect rules that the status of a stay of proceedings does not prevent the issue of guarantees, gives a green light to the Supervisor of Banks to instruct the banks to issue such guarantees, in accordance with the principals he presented. This sweeping decision, which refers to all the cases that the Supervisor presented in his letter to attorney Molcho, avoids the cumbersome process that could have resulted if each and every Heftsiba home buyer had been required to make an individual approach. The decision also opens the door to further treatment of the public's complaints, in line with the individual circumstances in each case, which will lead to providing a fast and efficient service, free of charge, to a considerable number of home buyers who have been hurt in the Heftsiba affair.

​