Jerusalem (AFP) - The Christmas tree is up at the entrance to the Imperial Hotel in Jerusalem, but for its Palestinian hosts there is little festive cheer amid fears they could be evicted in favour of Israeli settlers.

The hotel, at the corner of Jaffa Gate in the Christian Quarter of the walled Old City, is at the centre of a years-long ownership dispute between the settlers and the Palestinian tenants.

In June, Israel's Supreme Court finally concluded that the settler organisation Ateret Cohanim had legally bought the hotel, along with two other nearby buildings, from the Greek Orthodox Church in a controversial and secret 2004 deal.

The church has long denied this, however, and the tenants say they have continued to pay rent monthly to the church authorities.

Amid fears they could be turfed out at any moment, the tenants were last week given a temporary reprieve when another court froze the sale for at least 30 days, the Imperial's lawyer, Maher Hanna, said.

While it appears he will still be there at least for Christmas, the proprietor of the 48-room hotel, Abu Walid Dajani, said he didn't know whether the decision would be a turning point or just another obstacle in the 15-year legal battle.

"The story can end forever and go to the garbage of history," he said, or "the settlers complete the process for their own benefit."

The family has rented the hotel since 1949 and currently pays 200,000 shekels ($57,000) a year to the Greek Orthodox Church, he said.

But Dajani says Ateret Cohanim is now demanding he pay rent retroactively for the past 15 years, 10 million shekels (2.62 million euros) in all -- money he says he simply doesn't have.

Ateret Cohanim said it didn't comment on an ongoing court case, while the church said it believed the ruling meant the entire eviction notice should be annulled.

Tricky property market

Property sales in Jerusalem are some of the most politically fraught in the world.

Israel seized then entirely Palestinian east Jerusalem in the Six-Day War of 1967 and later annexed it in a move never recognised by the international community.

It now considers the whole city its capital, citing Jewish historical and biblical links. 

The Palestinians see east Jerusalem, including the Old City, as the capital of their future state, and view the growing Israeli Jewish presence as an existential threat.

The Greek Orthodox Church is the largest and wealthiest church in the Holy Land, commanding massive riches, largely in land portfolios dating back hundreds of years.

It has faced repeated accusations of facilitating settlement growth by selling or leasing properties in Palestinian areas to Israel.

In the 2004 deal, it is alleged to sold properties to Ateret Cohanim, which works to "Judaise" east Jerusalem by purchasing real estate through front companies and then moving Jewish settlers in.

When it was revealed, the sale triggered widespread Palestinian anger and led to the 2005 dismissal of Patriarch Irineos I.

The Church and the tenants have been fighting back ever since.

Many Greek Orthodox Palestinians still accuse their Church's leadership of undermining Palestinian connections to Jerusalem by selling property.

 - Christmas gift -

The Israeli government is often wary of angering the Christian population in the city, aware both of Jerusalem's delicate balance and the need to retain the support of Christians in the United States and other countries.

Hanna said the freeze is for only 30 days and was ordered due to Ateret Cohanim's failure to file some court papers in time. 

The Orthodox Church said in a statement it believed the court's latest decision means that "all decisions and demands by settlers to Palestinian tenants to vacate the property became null and void" as the original supreme court ruling was "based on invalid court decisions."

Elif Sabbagh, a researcher specialising in the investments of the Greek Orthodox Church, said the delay was convenient for the current Patriarch Theophilos III.

"It allows him to appear as a victor on the eve of Christmas celebrations," he said.

Yet Sabbagh said it may yet prove a pyrrhic victory, and a source close to Ateret Cohanim said the organisation was confident that the settlers would ultimately still take control of the buildings.

A few metres (yards) from The Imperial, the Petra Hostel, another hotel in the case, is rapidly sliding into disrepair.

The walls are peeling, the tiles broken and the bathrooms smell of mould. There are hardly any guests, and the few there are look unimpressed.

The Israeli authorities have banned all repairs until the case is finalised, a representative of the Petra Hostel said.

Speaking on condition of anonymity, he said he didn't hold out much hope the latest decision would mean an end to their woes, saying he no longer trusted any party.

"They are all liars, from 2004 until today we are fighting," he said.

"We may have won this battle, but not the war."