The Hidden Threat of Reverter Clauses

Churches may lose property if they accidently trigger a reverter clause.

Key point: The deeds to some church property specify that the church shall remain in possession so long as the property is used for church purposes, and that if the property ever ceases to be so used it shall revert to the person who conveyed the property to the church. The effect of such deeds can come as an unpleasant surprise to church leaders.

Can a church lose its property if it ceases to use it for religious purposes? That was the issue before the Georgia Supreme Court in a recent case.

The court ruled that the property of a Baptist church "reverted" to the previous owner when the church moved to another location. In 1947 a landowner transferred property to a Baptist church with a deed that contained a "reverter clause." This clause specified that the church would own the property "only so long as said lot is used for church purposes, it being expressly provided that if said lot of land should ever cease to be used for such church purposes, then the title thereto … shall immediately revert to the [previous owner]."

The church constructed a building on the property and used it continually as its place of worship. In 1979 the majority of the church's membership voted to move to another location. A minority continued to worship at the original site, with the permission of the majority. Shortly after the majority of members vacated the property, the prior owner filed a lawsuit claiming that the majority's relocation triggered the reverter clause—meaning that neither the majority nor minority of church members had any further right to the property.

A trial court rejected the prior owner's claim, and the case was appealed to the state supreme court. The supreme court ruled that the reverter clause had been triggered by the majority's relocation, and that the prior owner was entitled to the property. It observed:

[T]he language of the reverter clause is clear that the property is to be used for the "sole use, benefit and enjoyment of [the church] and the members thereof, the same to be used as a place of divine worship by the congregation of said church," and that title reverts when the property is not used "for such church purposes." The use of the property by the minority which formed its own congregation … is not a permitted use of the property by [the majority] under the plain language of the reverter clause, even though that use is with the permission of the majority …. Accordingly, the property reverted to [the prior owner] in 1979 when it was no longer used by the majority for its church purposes.

What this means for churches

What is the significance of this case to your church? Consider this—many churches received title to their property by means of a deed containing a similar restriction. It is imperative for church leaders to be aware if such a condition exists. This can be easily determined by inspecting the deed to the church property.

While the language of these conditional deeds varies, it is common to condition a church's ownership of deeded property on continuous use of the property for religious purposes. Such a condition would mean that a church could not sell its property to a buyer who did not plan on using the property for religious purposes. Some of these conditional deeds are even more restrictive, conditioning a church's ownership on continued use of the property as a church of a specified religious denomination. Under such a clause, a church could not sell its property to a buyer other than another church of the same denomination.

In some cases (as in the Georgia case) a deed conditions a church's ownership on continued use of the property for religious purposes by the congregation that purchased the property. This is even more restrictive, for a church could not sell the property to anyone without triggering a reversion in favor of the previous owner. Obviously, this is a matter that must be taken very seriously.

Our recommendation—check the deed or deeds to your church property to determine if any conditions exist. If they do, it is possible in some cases to have them "released" by the previous owner (if he or she is willing to do so). Often this is done by having the previous owner execute a quitclaim deed. If the previous owner is no longer living (a fairly common circumstance) then the condition can be released only by all of the legal heirs of the deceased owner. This can be a very cumbersome process. First Rebecca Baptist Church v. Atlantic Cotton Mills, 440 S.E.2d 159 (Ga. 1994). 8B4, 9C1

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