Issues involving land under church, or former church, ownership are currently preoccupying the real estate world as well as the legislative branch. Over 120 acres of church land in Jerusalem have been leased over the years to the Keren Kayemeth LeIsrael-Jewish National Fund and private developers, who have developed neighborhoods such as Talbiyeh, Nayot, Baka, and Abu Tor.
KKL-JNF leased the rights to live in the apartments that were built, but upon the end of the primary lease period, the rights of the sub-lessees will also expire.
In the early 2000s, the Greek Orthodox Patriarchate began selling some of its land. Thus, the partnership of Nayot Komemiyut acquired ownership of the land that KKL-JNF leased in the 1950s in the Talbiyeh and Nayot neighborhoods. This sale caused a public uproar, although it did not change the tenants’ rights in practice. Later, due to internal disputes, ownership was sold to the American real estate magnate Gary Barnett’s Extell company.
As the lease expiration approached, the prices of sublease apartments (as of today) fell by about 30%-35% below market prices, due to uncertainty about the future of the lease and the fear of increasing the rent or even evicting the tenants. Tenants with less than 30 years of lease remaining are having difficulty selling their apartments, and many of them – especially the elderly population – find themselves without an alternative housing solution.
For illustration, an apartment in Talbiyeh with full ownership sells for about NIS 45,000 per square meter, while an apartment with a sublease sells for only about NIS 30,000-NIS 35,000 per square meter – a gap of over 30%, which will increase each year as the lease period approaches its end.
In order to resolve the crisis, Extell offered tenants the opportunity to purchase ownership rights for NIS 2,000-NIS 6,000 per square meter, depending on the tenant’s seniority and other parameters, some of which allow for unprecedented ownership for free. The proposal means that an investment of 5%-10% of the apartment’s value will return the tenants the full value of their assets.
On the other hand, the Leasers Headquarters group opposes the proposal and is pushing for the promotion of a “Fair Lease” law, claiming that it will protect tenants from losing their rights. The law, supported by several members of the Knesset, seeks to expropriate the land from the new owners and grant the tenants full ownership.
However, this initiative encounters constitutional and legal difficulties because it violates property rights protected in the Basic Law on Human Dignity and Liberty. In addition, the state will be forced to compensate the landowners, which could cost taxpayers billions of shekels.
Harming Christian orders
The heads of Christian churches have previously warned the Israeli government that such legislation would seriously harm Christian orders. If every time someone purchases land from a Christian denomination, the state will rush in and expropriate that land, no one will want to purchase land from the various churches anymore. This will harm the rights of the largest private landowners in the country – the churches.
A similar legislative attempt in 2017, led by then-MK Rachel Azaria, even led to the closure of the Church of the Holy Sepulchre for three days in protest. Therefore, it is highly doubtful whether there is any real feasibility for such a bill. In any case, the struggle against it will last for many years, including in the High Court, during which the value of the apartments will decrease further and further.
The Land Appraisers Bureau has proposed an alternative solution: transferring ownership to the tenants in exchange for attributing the remaining building rights to the landowners. This will allow landowners to exercise building rights immediately, without waiting for the end of the lease period, while tenants will receive free ownership.
In addition, it was proposed to amend the Real Estate Taxation Law so that such a transfer of ownership would not be subject to taxes, which would make it easier for the parties to reach an agreement.
This solution – transferring ownership free of charge or symbolic ownership to the subtenants, leaving the rights to the owners, releasing KKL-JNF lands that are lying idle to the owners, and granting tax exemptions in these transactions – is the correct, fair, balanced, and most effective solution to this complicated issue, and it is much better and cheaper for the public purse.
The writer is an attorney and real estate appraiser, and an expert in church leases. He prepared the proposal for the Israel Real Estate Appraisers Bureau.
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