Church Property – Part 2

A church’s deed that gave the prior owner of the church’s property an option to purchase the property in the event that the church ever discontinued using it for church purposes.

Church Law and Tax 2006-09-01

Church property – Part 2

Key point 7-13. A restrictive covenant is a restriction on the use of property. Such restrictions often are noted in deeds to property, but they may appear in other documents as well. Such restrictions apply to a church’s use of its property.

* A Michigan court upheld the validity of a provision in a church’s deed that gave the prior owner of the church’s property an option to purchase the property in the event that the church ever discontinued using it for church purposes. A landowner sold several acres of property to a church in 1962. The deed contained the following clause: ‘[This conveyance is] subject to the express condition, to which the church agrees in accepting this deed, that should the church fail to use, or discontinue using said property for a church, parsonage … or other religious purpose, said church, its successors and assigns shall, at a price of no more than $1,000 per acre, sell property to grantor, his heirs, devisees or assigns, at latter’s option.’ The church asked a court to determine if this provision was legally enforceable. It argued that the provision was no longer enforceable because it was an unlawful ‘restraint on alienation,’ it exceeded a ‘reasonable time,’ and the $1,000 per acre option price was unreasonably low.

A state appeals court ruled that the provision was enforceable. It rejected all of the church’s arguments for challenging the validity of the provision. In rejecting the church’s claim that the provision was an unlawful restraint on alienation, the court noted that the provision did not prohibit the church from selling its property. For example, ‘the church’s sale of the property would not trigger the option if it leased the premises from the buyer and continued using the property for the specified purposes.’ The court also rejected the church’s arguments that the option price was too low, and that the option did not expire within a reasonable time. First Apostolic Lutheran Church v. Bekkala, (Mich. App. 2005).

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