Jerusalemites on leased land fume over secret talks that could leave them in limbo

Leaked reports of negotiations between the Keren Kayemet LeIsrael – Jewish National Fund and Jewish-American real estate tycoon Gary Barnett have sparked outrage among Jerusalem residents concerned about the future of homes built on land once owned by the Greek Orthodox Church.

The talks revolve around 570 dunams (140 acres) of prime real estate in the upscale Talbieh, Rehavia, and Nayot neighborhoods of Jerusalem, where some 1,200 families live in apartments long stuck in limbo due to the murky ownership structure of the land their homes are built on.

According to a June 8 report in the financial daily Calcalist, the deal being hashed out between KKL-JNF and Barnett would see leases for the land the apartments sit on extended by only 50 years, far shorter than residents have sought.

Homeowners also expressed anger over the fact that the talks were taking place in secret, behind their backs, even though the reported deal also includes plans to tear down several buildings in order to build condos in their place.

“I’m disgusted that KKL-JNF is holding secret meetings about the fate of our homes,” said an apartment-owner, who declined to be identified. “We bought our apartment with the understanding that KKL-JNF would take care of those leases, and now they are going behind our backs.”

Following the Calcalist story, a group calling itself the Forum for Saving Apartment Tenants in Israel wrote a strongly worded letter to Jerusalem Mayor Moshe Lion calling the proposed deal a “terms of surrender.”

“These areas were purchased by Jews who donated large sums of money to the Zionist institutions for the purpose of redeeming the lands of the Jewish people,” the letter said. “These rights belong to the general public and future generations, and do not constitute the private property of real estate developers.”

KKL-JNF confirmed that negotiations are taking place, but said parties were still far from an agreement, contending that details reported in the Hebrew press were only partially true.

“KKL-JNF is working with all parties, including government ministries, tenants and their representatives, and other relevant parties, in order to reach the best solution in this complex matter, always seeking the best interests of the tenants and lessees,” it said in a statement.

Requests for comment sent to Barnett’s firm, Extell Development, were not answered by press time.

Time bomb

The negotiations concern one of the most prominent parcels of so-called Church land in Jerusalem, which includes such prominent public buildings as the Great Synagogue and the Israel Museum, a large plot of open land with a medieval monastery known as the Valley of the Cross, and luxury hotels like the Inbal and the Dan Panorama.

In the 1950s, the Greek Orthodox Patriarchate, which owned the land, leased it to KKL-JNF under long-term agreements, mainly 99-year contracts set to expire around 2051.

Since then, many extremely valuable buildings have been developed and sold in these areas, even as the land itself remained church-owned and KKL-JNF continued to hold the lease. The structure created a unique and complicated legal dynamic in which individuals owned their homes but not the ground beneath them.

The expiration of these leases has long been seen as a sort of ticking time bomb for property owners, who have no idea what will happen to their homes once the leases expire. Many have assumed that KKL-JNF will make sure everything works out well in the end, although this was never guaranteed.

The effects of this legal limbo are expressed clearly in the lower property values for such homes, and owners say they can’t commit to making large investments in their homes without more clarity regarding their future.

In 2011, the Greek Orthodox Church, tired of legal pressures to cut a deal and heavily in debt, sold its rights to the land to an investor group called Nayot Komemiyut, led by the Ben David family, for the bargain-basement price of $20 million. In 2023, the consortium sold it to Extell for $216 million.

Extell has indicated a strong interest in developing large housing projects on about a dozen different plots of land within the area zoned for construction, some of which are empty, though most already contain standing buildings.

With the leases still in effect, Extell must first reach an agreement with KKL-JNF, an extremely wealthy and powerful organization that owns about 13% of the total land in Israel.

The court has ruled that Extell is bound by the same terms that the church was, requiring it to offer KKL-JNF an option to extend the lease beyond 2051, giving the organization significant leverage in talks with Barnett.

Sources say there is legal uncertainty about the number of years for which KKL-JNF can extend the leases, with legal opinions ranging from 49 years to 99 or even 900 years.

Major lawsuits?

The terms of negotiations leaked in Calcalist provide for Extell to begin construction on about 12 plots zoned for building, while requiring it to hand over ownership of land on which public buildings stand to KKL-JNF. Meanwhile, leases would be extended by 50 years, to the turn of the next century.

The relatively short extension would leave in place the limbo that residents are currently in, depressing home values and making it unlikely that builders would be willing to invest in expensive redevelopment projects, homeowners complain.

“That would be terrible for us. If they extend it by 99 years, then we’d still have about 125 years left, and urban renewal companies would be interested in expensive pinui binui projects,” a member of the Forum for Saving Apartment Tenants in Israel said, referring to schemes in which developers tear down older apartment buildings and replace them with larger new ones, giving existing tenants new apartments in the process. “But if there are just 75 years left until Extell takes over, then it’s not a reasonable investment. It would just extend the state of limbo we are already in. There’s no reason for KKL-JNF to accept an offer like this.”

Another resident, who bought a home on Jabotinsky Street in 2014, called the negotiations “nasty,” even if she didn’t understand the exact terms under discussion.

“What makes me angry is that the whole thing even happened,” she said. “They gave our lease to outsiders, and now no one knows what is going to happen. There will be major lawsuits if this happens.”

Instead of providing long-needed certainty about her property’s future, the headlines made the situation of homeowners even more precarious, she added.

“Too many red flags are waving before our eyes,” The Forum for Saving Apartment Tenants in Israel wrote in its letter to Jerusalem’s mayor. “We see negotiations behind the public’s back, meetings in the dark outside the public eye, commitments of billions to developers, biased leaks to the media, and draft agreements that are formulated without consultation with the actual landowners — the city’s residents, in clear contrast to the public and municipal interest.”

A KKL source insisted that there is no reason for uproar. “Some people are saying that we are not negotiating strongly enough. Some say we are not doing enough to benefit the residents,” the source said. “We are working to secure the best deal possible for the residents while understanding that Extell needs to get a return on its investment.”