End of Church Leases Sparks Real Estate Storm in Jerusalem

Hundreds of families may be forced to sell for a pittance, or even lose everything, due to expiry of leases – or shady deals in which developers extended them but are demanding sky-high fees from residents.

Jerusalem's upscale Rehavia neighborhood, in which property was leased by the church in the 20th century for long periods of time.
Emil Salman

Residents of a stately building in Jerusalem’s Rehavia neighborhood have been advised to sell their apartments cheaply and move out in advance of their eviction. In 18 years the lease on their property will expire and it will revert to its owner, the Catholic Church. In fact, hundreds of Jerusalem families will face a similar problem in coming decades when their buildings' leases run out.

In January 1936 the Ratisbonne Monastery in Rehavia leased a plot in the neighborhood to Jewish developers, for 99 years. The developers built a building named Rosh Rehavia, in the International Style, located today behind the post office on Keren Kayemet Street in the upscale neighborhood, surrounded by blossoming rose bushes.

But the lease on the structure, with its 32 apartments, is due to end in 18 years, and despite the battle they have waged against developers and the bureaucracy – a good number of the residents have been forced to sell their apartments for as little as half their value. Those who decided to stay put until 2034 may end up with virtually nothing after the church retakes possession of the land.

“All my pension funds have gone, after 30 years of work,” says Prof. Gideon Freudental, whose grandfather lived in the building since its construction; later on, he himself bought an apartment there.

“This is the apartment I wanted to die in. I didn’t think I’d ever sell it. I’m attached to this building. For me it’s home,” he says.

The goings-on in this particular building are but a prelude to a real estate storm that is about to shake up the lives of hundreds of Jerusalem families in the next few decades in this and other neighborhoods.

It all began in the mid-19th century, when the Greek Orthodox Church and various Catholic orders based in Jerusalem started buying up large plots of land outside the Old City. A rare map of all the lands owned by the churches is in the possession of Israel Kimchi, a senior researcher at the Jerusalem Institute for Israel Studies.

When Rehavia and Talbieh and other neighborhoods were subsequently built, the churches leased the lands for 99 years. Most of these deals were signed in the 1950s and will expire around 2050. According to the law and, specifically, to a verdict handed in a similar case in Haifa, the residents are not entitled to any compensation – the land and the buildings return automatically to the church’s ownership, or to whoever obtained an extension of the lease.

Thus, several hundred Jerusalem families living in such buildings will be forced to give up their homes in the coming decades.

In contrast, the state and the Jewish National Fund, which also lease land for 99 years, extend the expiry date almost automatically for a symbolic fee.

Rosh Rehavia, an International Style building in the upscale Rehavia neighborhood of Jerusalem, which has been leased through 2034 by the church.
Olvier Fitoussi

For their part, the JNF and the state tried to buy the lease or the rights to the properties in question from the churches, but failed. In 2000 a man named Yaakov Rabinovich carried out a brilliant scam. He persuaded the JNF to pay him millions of dollars as part of an agreement to extend the lease for most of the lands owned by the Greek Orthodox Church in West Jerusalem.

Later it transpired that this agreement – involving the participation of a JNF official, attorney Yaakov Weinroth and the Greek patriarch – had not been formally authorized. Rabinovich was the one who signed off on it while the patriarch, who was on his deathbed, nodded. Apparently the church leader had been confused, and thought the others present had come to see how he was doing and offer holiday greetings.

One way or another, the properties in question remained in the churches' possession and they weren’t particularly eager to strike any new deals with the state authorities, for fear of being seen by their Arab parishioners as collaborators with Israel.

Clinching deals

There was one exception: Some 20 years ago the state managed to buy the rights to the land on which the Knesset now stands and avert a blow to Israel’s national dignity, according to Yaakov Bir, a real estate expert.

In general, the churches don’t want to be seen responsible for evicting people and prefer to sell their land and buildings to private investors. Thus, for example, the Greek Orthodox Church in recent years has clinched two huge deals, which called for transferring substantial numbers of properties in West Jerusalem to private hands.

These deals did not solve the residents’ problems; in fact, they made them worse. One of them involves the Rosh Rehavia building. Most of its current residents are descendants of old, wealthy Jerusalem families who have been aware of the problem for some time.

“Already in the '80s there was a suggestion to extend the lease by another 100 years,” says Freudenthal. “The price then was $5,000 a room, but it didn’t come about because not everyone wanted to pay. Some of them were old and also at the time [the lease’s expiry] seemed far away.

In 2000 another attempt was made to head off this predicament – this time to bring in a developer who would build another story on the roof and, with the residents’ agreement, would arrange a deal with the Catholic Church to extend the contract.

The residents started negotiating with a group of four developers and the plan appeared to be working. However, two-and-a-half years ago, three of the developers pulled out of the talks, and the remaining one, Moshe Idan, ended up buying the lease for the next 200 years – but wasn’t interested in continuing the negotiations with the residents on the construction plans.

Prof. Gideon Freudental, a resident of the Rosh Rehavia building in Jerusalem that has been leased by the church through 2034.
Olivier Fitoussi

Idan told the residents they could either sell him their apartments for 50 to 60 percent of their value, or purchase the leasing rights from him for another 200 years for a similar sum. A third option was for them to remain in the building, but it was clear that the value of the apartments would decrease while the rental prices would rise ־ until, in 18 years' time, the apartments would be worth nothing and the residents or their children would leave home with nothing.

Idan, a developer and political activist in the Jerusalem branch of the ultra-Orthodox Shas party, bought the lease from another businessman, after making a deal with the church. He refuses to say how much he paid, but a source claims that the sum was $1.2 million. In other words, if he decides to sell the extended lease to owners of just three of the apartments there (for $400,000 each), he’ll get his investment money back. If he does nothing, in 18 years he’ll be the sole owner of 32 luxury apartments in Rehavia, worth tens of millions of shekels.

“I’m not throwing anyone out onto the street,” Idan tells Haaretz. “At worst, they’ll become renters. True we bought a business, but there’s a line we won’t cross; we’re Jews, we won’t throw people out. I’m not exploiting anyone.”

Idan says the residents found themselves in this predicament because they were unable to reach an alternative agreement over the years.

“If they had gotten together to negotiate with the church they would have made a deal, but they were stupid,” he says, adding that anyone who won’t make a deal with him today – either to sell him the apartment or buy the longer lease – “should be hospitalized.”

One resident called him in tears not long ago, Idan recalls: “I said to her, why are you crying? She said she wants to leave something to the grandchildren. I said you don’t have to live here if you don’t want to, sell and you’ll have something for the children.”

Idan admits he made a good deal, but says there’s a chance, albeit a small one, that the state will change the law so that the residents will be given the rights to the property. The deal he made was risky, he insists.

Bureaucratic obstacles

The Rosh Rehavia company, which built the structure and owns eight of its apartments, is run by attorney Yonatan Zvi, the man who tried to save the day with the failed plan to build on the roof. He says bureaucratic obstacles by the Jerusalem Municipality and difficulties created by some of the residents, who objected to the scheme, prevented a deal from being struck.

The Rosh Rehavia case is merely one of many; in the coming decades the residents of numerous other buildings will face the same dilemma.

“We won’t let the church be a weapon used to threaten the tenants,” a senior church official tells Haaretz. But the tendency of these religious bodies to sell the rights to the land to private persons and companies is a problem.

“The church doesn’t want to evict people so they give it to private businesspeople so they can get their hands dirty,” says Bir.

Idan says a church representative told him he didn’t want to negotiate with each resident separately. The result: a windfall for wealthy, patient entrepreneurs who are willing to invest now and reap unimaginable profits of hundreds of percent on their investment in 20 to 40 years.

A large investors’ group headed by the veteran Jerusalem family Ben David made such a purchase some three years ago, assuming ownership of a number of Greek Orthodox Church properties in West Jerusalem in a deal estimated at 80 million shekels ($20.8 million).

A more worrisome deal is the one signed by the church with an anonymous group of investors, which purchased 10 dunams (2.5 acres) in the city's Givat Oranim neighborhood, where dozens of families live. The company in question is registered in a tax shelter on the Virgin Islands and nobody knows who its owners are. Speculations in Jerusalem are that it could be an Arab from the Gulf or Jewish investors from England.

The repercussions of this phenomenon on real estate in the capital are already perceptible. Many potential buyers are afraid to purchase apartments, even for low prices, due to the uncertainty of the future. A resident who was forced to sell his apartment in Rosh Rehavia said it could affect the neighborhood.

“This process will lead to an ethnic purge of secular people,” he predicts. “As soon as people of a certain age leave, they are replaced by ultra-Orthodox people. This will affect all of Jerusalem."

Another resident who had to sell her apartment recently bought a home in Tel Aviv instead, and explains, “I didn’t plan on moving but since I had to choose, I preferred not to stay in Jerusalem.”

On the other side of Ratisbonne Monastery lies Gan Rehavia, a large residential compound that was leased a year after Rosh Rehavia. Its 40 families have 19 years before their rental agreements expire.

Bir says past efforts of the residents to join forces to negotiate a deal fell through and a number of developers have already shown interest in buying the lease’s extension from the church. For their part, the distressed residents don’t know against whom, if anyone, they will have to fight.