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Tuesday, September 04, 2007

Hundreds of Israelis to lose their homes due to Supreme Court decision

Israel's 'Supreme Court' ruled this morning that the IDF must re-route the 'security barrier' in the area of the 'Palestinian' village of Bil'in so as to place what is claimed to be agricultural land belong to the village on the 'Palestinian' side of the barrier. The result is also to place hundreds of apartments built mostly by the Heftziba construction company, but also some built by another company called Green Park, outside the security barrier.

The apartments are part of a new neighborhood in the city of Modiin Ilit (Kiryat Sefer), an ultra-Orthodox city that is one of the most rapidly growing towns in Samaria, just over the green line from Modiin (in fact, much of the town straddles the green line).

An injunction has been in effect since January 2006 prohibiting the people who bought the apartments on paper from moving into them. At the time when the injunction was issued, most of the apartments were complete. I have cousins who bought there and I have been told that their construction company - Heftziba - has been paying their rent in another part of Israel because their apartment is complete and due to the injunction they have not been able to move in. Until last month....

Heftziba went bankrupt last month. Some people claim that it went bankrupt from the expense of having to pay legal fees for all of the proceedings in the High Court of Justice over this particular project, but I find that hard to believe. The CEO of Heftziba, Boaz Yona, fled to Italy where he was arrested this past weekend. He is to be extradited to Israel and charged with a series of financial crimes (fraud, embezzlement and so on).

When Heftziba went bankrupt, many of the owners of the apartments, which were essentially complete, broke into them and moved in. The apartments had no electricity or water, and the people who broke in have brought in their own electricity and water privately through generators and water trucks. They have paid hundreds of thousands of dollars for these apartments.

The Supreme Court's ruling leaves these people up in the air. Some of them have bank guarantees for the money they paid in, and perhaps they will be able to collect on the guarantees (which construction companies are legally required to provide for people purchasing apartments on paper due to a series of bankruptcies twenty-five years ago), although that will depend on whether the guarantee requires delivery of an apartment in habitable condition or completion of the apartment. Chances are that the guarantee requires delivery of a Certificate of Occupancy and therefore those with guarantees will be able to collect because there is now no way these apartments will get a certificate of occupancy. But these people will have to start all over again - eventually - building or buying an apartment with their guarantee money. And the guarantee will not cover money they invested in - for example - improving the kitchen (which almost everyone does when you buy on paper), which is outside the general construction contract.

The bigger issue is for people who have no guarantees. In this project, Heftziba offered a 5% discount for those who waived their rights to the guarantee and paid 80% of the purchase price up front in cash. Many of these people did that. They are out the money, have no place to live and are (for you lawyers out there) probably unsecured creditors in the bankruptcy (unless someone decides to change the rules post facto and make them secured - things like that happen here). That's a terrible situation to be in and these are mostly not wealthy people.

The effect of today's Supreme Court ruling is to make hundreds of Jewish families homeless. Some of them may have the resources to find another home. Others will not and are financially ruined as a result of spending every last penny they had on an apartment that the Supreme Court has now taken away from them.

In a normal country, the government would resolve this by taking the land and paying compensation to the Bil'in villagers. But this is Israel and there is no compensation for land here.

I have been trying to avoid blogging on Heftziba for the last few weeks because it's mostly a legal, business and financial issue and not a political issue. As of today, I can no longer avoid it. I hope that those of you who are not lawyers or mortgage bankers did not find this too confusing. I tried to be as clear as possible. I suspect there will be a lot of questions in the comments.

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