Check Deed Before Renting Property

Some deeds contain restrictions prohibiting religious facilities.

Church Law and Tax 1997-09-01

Church Property

Key point. Churches should not rent or purchase property without carefully confirming that operation of a church will not violate any restrictions or covenants set forth in the deed to the property.

A Texas court ruled that a church was justified in abandoning a rented building upon learning that a restriction in the owner’s deed prohibited him from renting the property to a church. A development company developed a tract of property, and imposed various deed restrictions on sites that it sold. Those restrictions specified that the property was for the operation and maintenance of any lawful, commercial retail business or offices. Religious facilities were not approved for the location. An individual purchased a site and constructed a building which he later rented to a church, despite his knowledge of the restrictions in his deed. After signing the lease agreement on behalf of his church, the pastor testified that the owner said to him “by the way, now, I don’t know whether there was any truth to this matter, but I heard about the possibility that [the developer] may not allow a church here.” The pastor then asked what would happen if the developer found out about the church’s lease, and the owner stated, “you’ll have to depart; it’ll be broken.” A few months later, having learned that the church was operating on the premises, the developer informed the owner that he was in violation of the deed restriction because a church was on the premises. The letter stated that the owner had one month to correct the problem. The owner sent a copy of this letter to the church. The church responded by sending the owner a letter informing him that it was vacating the premises and enclosing a check with the notation “final payment, terminating our lease agreement,” written on it. The owner later sued the church for breaching the rental contract. A court ruled in favor of the church, concluding that it justifiably abandoned the property after receiving the letter from the developer informing the owner that the church’s lease violated the deed restrictions. The court ruled that its decision was not affected by (1) a letter from the owner to the church advising the church to remain on the premises because he had researched the issue and determined that the deed’s restrictions were not legally enforceable; and (2) the owner’s claim that the church had placed an earnest money deposit on another property and was looking for an excuse to abandon this lease.

Application. What is the significance of this case? Never rent or purchase property without first confirming that there are no legal restrictions on your intended use of the property for church purposes. Legal restrictions on the use of property can occur in a number of ways. These include restrictions in a deed to property that a church would like to buy or rent. Another common example is local zoning law. While the court in this case permitted the church to move out of the property without breaching its contract with the property owner, the church still had to endure the inconvenience of a move. Ruiz v. Hilley, 1996 WL 580940 (Tex. App. 1996). [ Property of Corporations, Zoning Law and Churches]

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