In attempt to end longstanding dispute, Jerusalem Municipality orders JNF and Greek Orthodox Patriarchate to jointly pay outstanding taxes

The issue of property ownership and the taxes resulting from improvements to those properties have long been contentious topics in the city of Jerusalem.

Many Jerusalem properties were purchased long before the State of Israel was founded in 1948. That is especially true of properties owned by churches, the oldest of which date back to land grants from the late Roman and Byzantine Empires. 

Israeli law exempts churches from paying property taxes if those properties are used for religious activities, such as places of worship or cultural enrichment. However, church properties used for other purposes, or leased to other entities, are subject to taxation. 

This exemption is rooted in long-standing agreements before the founding of the state and local laws that recognize the churches' role in maintaining religious and historical sites.

Some of these rules go back to the British Mandate period, others to the Ottoman period. However, the management and use of these properties sometimes lead to disputes, particularly when it comes to real estate development or leasing. 

One example is a group of properties owned by the Greek Orthodox Patriarchate in the Jerusalem area, which were leased to the Jewish National Fund (JNF or Keren Kayemeth le-Israel) in 1951 under a 99-year lease agreement. 

Most of these lands are used for commercial or residential purposes – including over 100 apartments – as well as public institutions, offices and hotels. The property was sold to the Nayot Investment Group in 2016, and then to Extell in 2023, in one of the largest real estate deals in Jerusalem’s history. 

Extell, owned by Jewish-American real estate businessman Gary Barnett, bought the property for NIS 750 million (over $201 million). Since being leased to the JNF in 1951, the group of properties has undergone improvements, thus increasing its value.

The Jerusalem Local Planning and Construction Committee assessed that the plans for improvements were approved when the Greek Orthodox Patriarchate owned the properties. Therefore, the municipality submitted a request for payments of the betterment levies. 

The Patriarchate filed an appeal, claiming that the levy should be paid by JNF since it had control of the lands. The JNF, however, argued that it was not the owner of the properties and, therefore, should not be expected to pay. 

Recognizing the “irregular situation,” the committee appointed an advisory appraiser to determine both the value of the betterment levy, and the amount that each party should pay. 

There have been several property disputes in the Jerusalem area over the years arising from the unique ownership status of lands belonging to the churches before the establishment of the nation. In Israel, land is generally considered government property, but the Israeli government has chosen to recognize the ownership claims of churches to properties they held at the time of the nation's founding.