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Court orders $13m paid to Jewish National Fund over 21-year-old botched lease deal

Company that subsequently bought Jerusalem land from Greek Orthodox Church will have to pay up; hundreds of homeowners still worried about future of their leases

Sue Surkes is The Times of Israel's environment reporter.

The Jerusalem neighborhood of Talbieh, viewed from the Old City of Jerusalem.  (Pinybal, CC BY-SA 3.0, Wikimedia  Commons). The Inbal Hotel can be seen in the foreground.
The Jerusalem neighborhood of Talbieh, viewed from the Old City of Jerusalem. (Pinybal, CC BY-SA 3.0, Wikimedia Commons). The Inbal Hotel can be seen in the foreground.

A Jerusalem court has ordered the Greek Orthodox Patriarchate to pay the KKL-JNF Jewish National Fund $13 million, plus NIS 250,000 ($80,000) in costs, to compensate for the theft of $20 million over 20 years ago by two fraudsters who were subsequently convicted of embezzling the church.

The ruling was made despite the fact that the patriarchate was also tricked at the time.

A private company — Nayot Komemiyut Investments — will have to pay the bill, as per the agreement it signed with the patriarchate a few years ago to acquire the land involved, in the upscale Nayot and Talbieh neighborhoods of the capital.

The lawyer acting for the company, Avraham Aberman, a partner at Ephraim Abramson, told The Times of Israel that no decision had been made yet on whether to appeal.

Pointing out that the sum, while large, paled in comparison to the value of the land that the company now owns in these neighborhoods, he said there were no plans to sell the assets.

The KKL hailed the judgment, saying the compensation was actually for the church’s failure to sign an earlier $13 million compromise deal agreed in 2008.

Burla Street in the Jerusalem neighborhood of Nayot. (Gilabrand, CC BY 3.0, Wikimedia Commons)

The story dates back to 1951 and 1952, when the Greek Orthodox Church signed three contracts to lease the Talbieh-Nayot land in Jerusalem to the KKL for 99 years.

Those contracts give the KKL the right to extend the leases when they run out in 2050 and 2051 — in the case of one contract for a further 49 years, and in the case of the other two, for periods to be negotiated. The agreements also spell out the mechanisms for pricing those lease extensions.

As houses and apartment buildings were built on the land, the KKL, as leaseholder, subleased individual plots to house and apartment owners, using contracts that clearly stated when the leases would expire.

In 2000, the KKL agreed to enter into a process to extend the leases beyond the 2050s, but were conned into parting with $20 million by two criminals, Yaakov Rabinowitz and David Morgenstern, both later jailed, who promised to get the church to agree to extend the leases for that price. The two managed to persuade the aging patriarch at the time, Theodorus, to sign a contract by telling him, while he was on his sickbed, that he was signing an Easter card.

In its ruling last week, the Jerusalem District Court also ordered Rabinowitz and Morgenstern to repay the $20 million that they stole, although the likelihood of this happening is slim.

Once the ruse was exposed, a criminal court ruled that the lease extension deal had to be canceled because it was put together illegally, and the KKL set about trying to get its money back from the church.

Why KKL failed to extend the lease in the years that passed following the fraud conviction remains unclear. The KKL and Nayot Komemiyut Investments give different versions. What is certain is that the latter will take over the land when the KKL leases run out, and that its financial leverage over the residents will only grow as the dates for the end of the current leases near.

Aberman denied reports that Nayot Komemiyut Investments had been knocking on doors to do deals. He said, “We don’t offer anything, the tenants turn to us. Then we tell them what the price is” for buying the rights to the land on which their homes are built.

Refusing to give numbers, he claimed that “quite a few” tenants had already signed with the company to buy these rights, paying “between 20 and 30 percent, definitely less than 30%” of the value of their apartments to do so.

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