My client informed me that he wanted to purchase an apartment in Talbieh between Jabotinsky Street (home of the Inbal Hotel) and King David Street. I mentioned to him that most apartments in this area are on land owned by the Greek Orthodox Church of Jerusalem (the “church”), which surprised him as he had never heard about this before.
I then explained that over 130,000 dunam (32,500 acres) of land in central Jerusalem neighborhoods - primarily in Rechavia and Talbieh - is owned by the church. Furthermore, thousands of apartments are built on church land and many famous Jerusalem buildings, such as the Knesset, the Great Synagogue and the Israel Museum, are built on church owned land.
The Knesset (Photo: CC-BY-SA Beny Shlevich, Wikipedia)
If that’s the case, asked my client, does one have to make rental payments to the church, and are there any other implications of buying on church land? I first explained that the lease has been prepaid by the State of Israel and therefore individual homeowners do not pay the church any rent. I then proceeded to give him the following overview:
The Ottoman (Turkish) Empire controlled Israel from 1516 until 1917. Towards the end of its reign, the Ottomans sold chunks of Jerusalem land to the church.
In the 1920s, the church suffered major financial troubles and decided to raise funds by selling many of its Jerusalem properties. To sidestep church rules prohibiting the outright sale of real estate, the church leased most of its land to the Jewish community and received a large up-front payment in exchange for the right to use the land on a long-term basis.
The Great Synagogue (Photo: CC-BY-SA Ariel Horowitz, Wikipedia)
In 1952, the state and the church executed a 99-year lease with one 49-year lease renewal option, and in 2011 a group of private Jewish businessmen signed an agreement with the church to extend the land lease until 2150. Both of these leases included large up-front payments to the church, and no further payments to the church will be required for the next 137 years.
To buy or not to buy?
Some people will not purchase an apartment on church land as they are uncomfortable with the risk, albeit small, of losing their apartment in 2150. In addition, they are concerned that in 2050 they may have to make a payment to the leaseholders, and no one knows how large that payment might be. Others will not buy because they are philosophically opposed to buying on church-owned land. And many people do not share these concerns and are happily buying these apartments. I would add two points:
The Israel Museum's Shrine of the Book (CC-BY-SA Berthold Werner, Wikipedia)
First, it is against Israel’s best interests to allow these large portions of land to revert back to the church. If the church will refuse to renew the land leases in 2150, many expect that Israel will pass legislation similar to the US laws of eminent domain, and force the church to sell the land to the state.
Second, this article focused on the vast majority of church owned land that is leased directly to the State of Israel. In the rare situations where the church leases the land directly to the apartment owners, the individual owners have less protection against the whims of the church and many attorneys would discourage these purchases.
Presently, apartments on church owned land tend to sell for a 5-10% discount to similar properties on state-owned land. G-d willing the Mashiach will come long before the lease agreements end in 2150, but this is an issue that purchasers should carefully consider with their attorney before signing a contract of sale.
Gedaliah Borvick is the founder of My Israel Home, a real estate agency focused on helping people from abroad buy and sell homes in Israel. To sign up for his monthly market updates, contact him at firstname.lastname@example.org. Please visit his blog at www.myisraelhome.com.