52,000 ‘Price Resident’ Apartment Sales May Have Been Illegal, Official Says

The state is facing the possibility of massive lawsuits by Israelis who did not win the opportunity to buy a lower-cost apartment in a Price Resident lottery, according to an assistant state attorney – because the Finance Ministry never received a permit from the state’s Lottery Authority to conduct a lottery. So far, five such lotteries have been held, with about 50,000 out of 130,000 applicants to the program winning the right to buy an apartment at a price lower than the going market rate.

A report in TheMarker said that state attorneys are now considering what to do in the event that they are faced with lawsuits from some of the 80,000 applicants who were told they did not win the chance to buy a discounted home.

The Price Resident program provides contractors and developers with lower-cost, or even free, parcels of land where they can build projects. In return, they commit to selling a percentage of the housing units in their projects at a discounted price, which can be bought by eligible families – usually young couples or families with children who do not own an apartment.

The discounts for Price Resident apartments can amount to 30 percent or even more off the market price of an apartment.

While the program has had its successes, it has also faced criticism. Many of the lotteries in outlying towns are under-subscribed and the state has a hard time selling the apartments, while there is great demand for apartments in the center of the country. In addition, the program has been criticized by chareidi MKs for failing to provide sufficient units in chareidi towns, with most of the projects built in mixed or secular towns.

The first lotteries were held about two years ago, based on an opinion by the Justice Ministry that the Finance Ministry did not need a license to run their Price Resident lotteries. With that, according to Assistant State Attorney Erez Kamenitz, the law clearly states that any lottery that provides as a prize money, or something worth money – like a discount on an apartment – requires a license from the Lottery Authority.

Kamenitz’s opinion, handed down several months ago, is concurred with by many officials in the Justice Ministry, it turns out, and thus there is now great apprehension on not just the future of the program – but its past as well. As a result, officials believe, any one of the tens of thousands of families who lost the lotteries could sue, demanding that the results of the lotteries be canceled. The first thing the court would be likely to do, the officials believe, is issue an injunction against the program while it considers the matter – a process that would essentially hold up all construction, as the builders are contractually obligated to provide the Price Resident program apartments as a condition for the continued construction of the rest of their project.

A lawsuit, political observers told Haaretz, would also likely politically finish off Finance Minister Moshe Kahlon, who has made the success of the Price Resident program a centerpiece of his political campaigning. In a statement, the Finance Ministry said that the issue was “considered by the various legal authorities, and it was decided that as government offices were running this lottery, there was no need for a permit.”

The Justice Ministry said that “upon initial investigation, it does not appear that the status of the lotteries that have already been held will be damaged, and the Ministry will certainly not support a legal stance that would seek to cancel them retroactively.”