Due to the Cheftziba disastor in Eretz Yisroel – which left many people homeless (reported HERE on YW), two MK’s have put forward an amendment to the Sales (Housing) Assurance of Homebuyers’ Investments Law (5756-1996), that will secure homebuyers money in the wake of the crisis following the collapse of real estate company Heftsiba Building Development & Investments Ltd.

The proposed amendment is designed to close the existing gaps in the law which came to light during the course of the sessions of the Knesset Finance Committee, which heard that company managers were using these loopholes to siphon off homebuyers’ money into their own personal accounts.

The amendment proposes that any project must have a designated bank account earmarked solely for the funds to finance it. Any sum forwarded by a buyer will immediately be deposited in the designated account, which will also be the sole channel for any activity by the bank. A bank that allows any unrelated transfer of funds from such accounts would be liable to a penalty of NIS 1 million.

The amendment also calls for the provision of bank guarantees from the outset. It will also provide for the repayment of guarantees in circumstances arising from negligence on the part of the vendor or a stay of proceedings by a court, and not just in extreme cases such as a company bankruptcy or winding up. At present, bank guarantees are given solely on amounts exceeding 15% of transaction value.

In addition, vendors will also be required to notify homeowners in writing the legal safeguards for their investment.

(Source: Globes)