Jerusalem court rules in favor of developers in case of former church land

The Jerusalem District Court has ordered the Jerusalem Municipality to release land sold by the Greek Orthodox Church several years ago to a group of private investors who had purchased it, clearing the way for the group to try to close deals with apartment owners before legislation might limit their room to maneuver.

The partnership, Nayot Komemiyut Investments, led by Jerusalemite Noam Ben David, has already been knocking on doors in the Talbieh, Rehavia and Nayot neighborhoods of the capital, reportedly offering to sell apartment owners the land on which their homes stand for hundreds of thousands of shekels.

Until Friday’s ruling, however, it did not have the legal authority to do so.

Alleging that the church still owed it taxes — a charge the church denied — the municipality has been refusing to issue the documentation that NKI needs in order to register at the Land Registry the 570 dunams (140 acres) of land that it bought in the Talbieh and Nayot neighborhoods and in and around the Valley of the Cross.

It was this row over taxes, as well as the threat of a Knesset member’s bill to confiscate the lands that had been sold, that contributed to the Greek patriarch’s radical decision in fall 2018 to shut the Holy Sepulchre Church for three days.

On Sunday, the Jerusalem District Court ruled in favor of the group and the church, which had jointly petitioned for the municipality to issue the necessary documents. The court sharply criticized the municipality for dragging things out, and fined it NIS 5,000 ($1,440).

Land sales that created a new situation in Israel

The Greek Orthodox Church sold a string of plots around the country several years ago in order to wipe out debt and balance its books. While it had traditionally leased land, this time it sold it, creating a new situation in the country.

The land sales particularly affected some 1,500 apartment owners in Jerusalem.

Most Israelis live on land managed by the Israel Lands Administration which, in recent years, has been giving leaseholders title to the land on which their homes are built, without charge.

Homeowners can be evicted under current Israeli law

The problem for people living on this former church land is that while they own their apartments, and have leases to the land, they do not own the land and therefore face potential limbo when the leases run out.

In the case of the Ben David group, the land will remain leased to the KKL JNF Jewish National Fund until the early 2050s. The KKL has so far shown no willingness to use its right of first refusal to extend the leases. It subleases the land to apartment owners.

In the Givat Oranim neighborhood, near Old Katamon, the leases signed directly between the church and some 240  apartment owners will last until 2069, even though the land itself has since been sold to a company that includes London-based Israeli businessman David Sofer and New York-based American billionaire Michael Steinhardt.

As Israeli law stands, apartment owners whose leases run out can be evicted, without compensation, either if the new land owners decide not to renew the leases, or if the price they demand is above what the homeowners can afford.

Pinning hopes on legislation

The roughly 1,500 Jerusalem homeowners therefore find themselves between a rock and a hard place. Many of them have invested the bulk of their savings in their homes and plan to pass them on as inheritance to  their children.

They can either sell before the leases run out, for a price that is up to 30% less than it was before the church sold the land — the uncertainty has caused property values to plummet — or wait to see what happens when the leases are about to end.

Two and a half years ago, a group of residents created the Citizens Property Rights Group in a bid to present a united front and campaign for a law that will give them the legal right either to extend the leases once they run out, or to buy the land, according to clear criteria.

Their hopes are pinned on Deputy Attorney General Erez Kamenitz, who in September 2017 was asked by then justice minister Ayelet Shaked to head an inter-ministerial committee that would find a solution for the leaseholders.

Existing Israeli law on leaseholds draws much on Ottoman as well as British law. In search of a solution, Kamenitz and his team are currently probing what rights and protections exist under British law for leaseholders who wish to buy the land on which their homes are built, known in the UK as the freehold.

Britain itself, though, is in the throes of trying to amend legislation to better protect leaseholders in their dealings with landowners.

And Israel has been without a functioning government since December 2018 — thanks to two inconclusive elections and a third held Monday, whose ramifications are not yet clear.  Even if a government can be formed, it will take time. When a leaseholder protection bill might be introduced to the Knesset is anyone’s guess.

Both Erez Kamenitz and the Citizens Property Rights Group have urged homeowners to sit tight and not sell, on the assumption that a leaseholder protection law will eventually pass.

In the meantime — either because of, or despite, the possibility of legislation — the two sets of investors who bought the land in Jerusalem from the church appear eager to salvage what they can and to get out with as high a return on their investment as possible.

In the Talbieh, Nayot and Valley of the Cross areas, people claiming to represent the partnership or to be connected with it in some other way have been knocking on doors for some time, reportedly trying to tempt apartment owners (sub-leaseholders) with various deals.

There are reports of homeowners being told that the Kamenitz legislation is unlikely to happen and will take years if it does.

Two years ago, within days of the death of Israeli poet and writer Haim Gouri, someone turned up at his house on Pinsker Street in Talbieh asking to speak to Gouri’s elderly widow about what she intended to do with the apartment. He was sent packing.

He subsequently tried to persuade her neighbors to agree to have their old building replaced by a modern high-rise, but to no avail.

There are similar reports from other streets.

Ben David himself met recently with apartment owners from a building in Talbieh where he offered to sell the land for around a quarter of the value of the apartments as it was before the church sold the land, on the basis of around NIS 40,000 ($11,650) per square meter, which is at the upper end of prices for this highly desirable neighborhood. This translates into a purchase price for the land of NIS 800,000 ($230,000) for an 80 square meter (860 square foot) home. By comparison, Nayot Komemiyut Investments and its predecessor, Nayot Komemiyut, invested roughly NIS 140 million ($40 million). This means that the acquisition cost them around NIS 245 ($70) per square meter.

Agree to live in high-rise buildings and get land, for free, in return

As revealed by the Times of Israel in 2017, David Sofer is the main partner in Kronty Investments Ltd.

Between 2010 and 2015, Kronty Investments Ltd — registered in the British Virgin Islands and including another British Jewish investor — bought several plots of land from the Greek Orthodox Patriarchate in the capital — on Tzruya Street in Abu Tor, Gad and Lifschitz streets in the southern neighborhood of Baka, Hess Street in the city center (since sold on to the plot’s Israeli leaseholders) and the upscale King David and Ben Sira streets nearby.

It was Kronty Investments that in 2012 also bought 27 dunams (6.7 acres) of Greek church land in Givat Oranim, for just $3.3 million. Kronty subsequently sold this on to Oranim Ltd, registered in the Isle of Man, in which Sofer partners with Steinhardt.

Givat Oranim Ltd. owns plots on the streets of Shai Agnon (the neighborhood’s main traffic artery), Hama’apilim, Hashayarot and Mevo Ha’oleh, as well as a commercial center that includes a supermarket on Shai Agnon Street, and a stretch of open land in the San Simon Park that includes the lease to a complex that once housed the Patriarchate and after that, people with disabilities.

Two-thirds of the roughly 240 homes located in this green and leafy neighborhood bordering the park are included within three four-story buildings and two seven-story ones. The remaining third are in three-story semidetached cottages, many of whose owners have private gardens.

Last year, at a meeting with Jerusalem Mayor Moshe Lion, Sofer and Steinhardt, Shlomo Wolfson — a local developer promoting urban regeneration projects — proposed a solution. Sofer and Steinhardt reportedly expressed interest in his idea and asked him to check whether it might appeal to homeowners in Givat Oranim.

In January, Wolfson met with the representatives of the buildings affected to float the idea of urban regeneration. This would mean pulling down all the existing apartment buildings and cottages and replacing them with more densely packed high-rise buildings. The upshot: 240 apartments would be replaced with around 800.

One possibility would be to do this under National Outline Plan 38/2, better known by its Hebrew acronym as Tama 38/2, Wolfson said. Through this, each owner could theoretically get a brand-new and bigger apartment with a balcony, storeroom and parking place and — most importantly — title to the land, without having to pay a dime. Sofer and Steinhardt would be able to walk away with a profit from sales of the additional new apartments. Everyone would gain and the uncertainty would end.

Some of those present pointed out that most apartments in Givat Oranim already have storerooms and parking lots, and that elderly residents would be loath to move under any circumstance. Owners of homes with gardens said there was nothing to talk about unless they were offered the same, or better, somewhere close by in the neighborhood. Furthermore, Givat Oranim has not been zoned for Tama 38/2 and the planning authorities would have to agree to it.

The building representatives, who cannot decide on behalf of others, will now report back to all the apartment owners in their buildings.

Steinhardt and Sofer have also obtained leases to Greek church land at the capital’s First Station complex, via a company called SMS Ltd,  and at an undeveloped hilltop in the neighborhood of Abu Tor, through a company called Abu Tor Properties Ltd.

Following a lengthy campaign by Abu Tor residents, Abu Tor Properties Ltd. withdrew plans to build luxury apartments on the hilltop.