Construction in progress
Construction in progressIsrael news photo: Arutz Sheva

With memories of the fall of the Heftsiba construction company still resonating among many Israelis, dozens of people entered unfinished apartments in a project being built by Neot Hapisga in Modi'in Ilit (Kiryat Sefer) – after rumors began circulating over the weekend that the company was close to bankruptcy. The now-former CEO of the company has essentially confirmed the rumors – and blamed the company's financial straits on the government's undeclared building freeze in Judea and Samaria

Most of the apartments in the project are still unfinished, with many missing windows and tiles on their floors. Most do not have electricity and running water. Still, dozens of families entered their apartments late Monday, in order to prevent a lockout by creditors if Neot Hapisga should go into bankruptcy.

Under Israeli law, a creditor to a third party cannot evict a resident of an apartment in order to satisfy a debt. If the apartment is unoccupied, however, the creditor can get court permission to seize the asset in order to satisfy the debt. In 2007, hundreds of people were locked out of apartments they had bought from the Heftsiba construction company when the company went bankrupt, and it took many long months for them to regain control of the property they had, in many cases, paid for. Buyers in the Modi'in Illit project have in many cases nearly finished their payments for the apartments, and many decided to occupy the apartments in order to ensure that they do not find themselves entangled in an endless court case, trying to wrest their hard-earned money from the hands of creditors.

Rumors regarding the poor financial state of Neot Hapisga began circulating over the weekend, when the company's CEO, Amir Zaken, stepped down. In a statement, Zaken said he was quitting because he felt that “in the circumstances the company finds itself with a shortfall of funding, I cannot continue to direct the company.”

Zaken went on to describe the background of the company's problems. “I believe we have done everything possible on behalf of our stockholders, but unfortunately the authorities ignore their own responsibilities, and they seem to have only one purpose – causing damage to others. For over two years, work on the project was suspended, when the IDF Central Command issued a stop work order for the Modi'in Illit project because of issues with the location of the security fence, and afterwards, and then with the first declared and now undeclared building freeze in Judea and Samaria, despite the government's stated policy of ending the freeze." Since no buyers have been paying in money while the legal disputes continue, Neot Hapisga has been squeezed for money – and the company is now indeed in danger of folding, another victim of the building freeze in Judea and Samaria. On Tuesday, the company informed the Tel Aviv Stock Exchange that it had received a demand from Bank HaPoalim that it repay a loan of NIS 8 million within 14 days.

In 2008, the government ordered that the project, consisting of several thousand apartments, be suspended pending a lawsuit by the neighboring Palestinian Authority village of Bil'in regarding the location of the security fence between Modi'in Illit, built in areas liberated by Israel in the 1967 Six Day War, and Bil'in. Neot Hapisga sued the state, demanding compensation for work already done. That case is still pending. Construction began again in late September 2010, after the end of the building freeze, but it appears that the previous two years of no construction have dealt a severe blow to the stability of Neot Hapisga, analysts said.

Analysts noted that it was the government's foot-dragging on building in liberated areas of Jerusalem that essentially did in Heftsiba, as well. The company had been heavily invested in a construction projects in Maale Adumim and in Har Homa - and had been forced to suspend construction often due to various edicts issued by the government that halted building for long stretches.

Neot Hapisga filed a complaint with police, and informed the TASE and the Modi'in Illit municipality that purchasers illicitly entered the apartments, demanding that they be removed.