Legal Ground: The amazing maze of Israeli property

Can the church really take back my home?

By HAIM KATZ, SAM KATZ
A church in Jerusalem 150 (photo credit: Marc Israel Sellem)
A church in Jerusalem 150
(photo credit: Marc Israel Sellem)
The answer to the above, in a gist is: yes.
If you are really not careful when you’re buying property ultimately owned by a church, you can indeed lose your home.
In our previous columns we discussed the unique structure of property ownership in Israel, whereby most of the land in Israel is owned by the state and is leased, in long-term lease agreements, to private “homeowners.” More than 90 percent of the property in Israel is managed by the Israel Lands Authority (ILA, or Minhal). However, some significant areas in the country are actually owned by various churches. Homes in these areas are leased from the churches themselves, not from the ILA.
What happens, then, when the lease term comes to an end? Is the church obligated to renew the lease? Under what terms and at what price?
Can the church decide not to renew the lease and take away my home?
Again, the answer is yes, it can! The church may refuse to renew a lease. Unlike the ILA, a church, being a private body, is not bound by public-policy considerations and thus can, and in some ways must (because it is a nonprofit organization with a duty to its public) act to further its own interests.
This is one shocking discovery that the Leibmans, a family of new olim from Russia, learned the hard way. The Leibmans made aliya and purchased a home in Haifa in 1991. Being new to the country, they knew very little Hebrew and were unaware of the nature of home ownership in Israel. They employed a Russian-speaking lawyer but certainly did not realize that the lease term on their home would end shortly. You can imagine their shock, then, when in 1996, just a few years after they had settled into their home and adjusted to life in Israel, they received a letter from the landowner, the Greek Catholic church, that notified them that their lease was up and that they must promptly vacate their home.How can this happen and what can be done?
There is a significant difference between buying a property that is leased by the state, and buying a property that is leased by the church. Indeed, the ILA is a large governmental body laden with heavy bureaucracy and in dire need of drastic reform. Such reform is taking place but at a snail’s pace. So, one can lament the costs and headaches involved with dealing with the ILA. However, when purchasing a “Minhal” property, at the very least you can rest assured that when the lease term is up, it will be renewed and you may go about living happily in your home (except for in very rare cases). The ILA, with all its pitfalls, is not a private organization and, therefore, is bound by the rules of administrative law, including fairness, equality, reasonability and due process.
Leasing an apartment from the church, however, is an entirely different story. The church is a private body and is not bound by the same rules as the ILA. Many of these long-term lease agreements will be coming to an end over the next 20 years, and there is growing concern surrounding the renewal of the leases.
Will they all be renewed? If so, at what cost? The fact is that leasing property in Israel is a good source of income for the different churches, and, as such, one might expect them to renew the leases. However, in a free market, there is no ceiling on the renewal charges that could be exacted.
The amount of land owned by the various churches is unclear, but it is estimated at about 100,000 dunams throughout Israel, of which about 5,000 are located in Jerusalem. The largest owner among the churches is the Greek Orthodox Church, which owns 60% of all church-owned land in Israel. These lands include some key locations, including vast portions of Jerusalem’s Rehavia neighborhood as well as the land on which the Knesset was built.
Concern for the fate of church-owned property is what led the government to try and resolve the matter 13 years ago, by reaching an agreement with the Greek Orthodox patriarch, to lease the lands of Rehavia for 999 years.
This has morphed into one of the biggest scandals in Israeli legal history.
Negotiations were led by two men who claimed they had direct access to the Greek patriarch, who was an elderly and unwell man. All negotiations were kept confidential, under the guise of avoiding any obstruction from pro-Palestinian factions.
The Israeli government and the Jewish National Fund agreed to pay a lump cash sum of $20 million for the leases and considered the price to be very reasonable, giving the Israeli taxpayer excellent value. Almost too good to be true.
Unfortunately, it was just that.
The negotiations and the “agreement” were a daring scam.
The two negotiators fooled everyone and took the $20m. for themselves. The Greek Orthodox patriarch hadn’t agreed to an extension of the leases, and the entire “negotiation” had taken place under false pretenses. The two men were eventually brought to justice and sentenced (one was later acquitted by the Supreme Court of most charges, due to reasonable doubt), but most of the money was never found and the leases were never renewed.
Where does all this leave house owners who are actually leasing their homes from the churches?
On a practical level, the uncertainty surrounding these properties has led to a significant decrease in their value. As a very general rule of thumb, a church-owned apartment with under 30 years left on the lease term could be valued at up to 30% less than a similar privately owned apartment. This still leaves the price far too high and reflects certain disbelief by the general public (which is used to the Minhal automatically extending leases) that their leases will actually ever come to an end. But if you are interested in purchasing a home, and you specifically have your eye on a church-owned property, you must consider the risks involved. Moreover, rather than viewing the transaction as a final purchase of ownership rights, perhaps your purchase should be viewed as what it truly is: a long-term rental/lease with an expiry date.
As for the Leibmans, the Haifa District Court (and later, on appeal, the Supreme Court) awarded them compensation: 25% of the sum awarded came from the seller, who had taken advantage of their mistake; and 75% came from their own lawyer, who had been grossly negligent in not making these newcomers to Israel aware that they were buying a four-year lease rather than outright ownership as they thought. Still, the Leibmans learned an expensive lesson, as the compensation was far lower than the costs of battling in the courts for 10 years.
Note: The above provides general information only and detailed advice must be obtained prior to any action taken.office@drkatzlaw.com
Dr. Haim Katz is a senior partner in a law firm with offices in Tel Aviv and Jerusalem, specializing in real estate, inheritance, international trusts and family law. Sam Katz is a jurist living in Jerusalem.