Reversion of Church Property to the Prior Owner
Key point 7-14. Some deeds to church property contain a "reversion" clause stating that title will revert back to the previous owner in the event that a specified condition occurs. The courts will enforce such provisions, so long as they can do so without interpreting church doctrine.
Property owners sometimes sell or give property to a church with a deed specifying that the property will revert to the previous owner if the church violates a specified condition. For example, a deed may convey title to a church "for so long as the property is used for church purposes." Or, a deed may convey title to a church "for so long as the property is used as a Baptist church." Such deeds vest only a "determinable" or "conditional" title in the church, since title will immediately revert back to the previous owner (or such person's heirs or successors) by operation of law upon a violation of the condition. It is essential for church leaders to be aware of any such conditions in the deed to their property. Unfamiliarity can lead to unexpected and harsh consequences.
- The Georgia Supreme Court ruled that the property of a church "reverted" to the previous owner when the church moved to another location. In 1947 a landowner transferred property to a local 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. 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." First Rebecca Baptist Church v. Atlantic Cotton Mills, 440 S.E.2d 159 (Ga. 1994).
- A New York court ruled that a church could transfer its property despite a provision in its deed that required the property to be used forever for religious purposes. In 1891 a family sold a parcel of land to a church. Pursuant to a restriction contained in the deed, the premises were conveyed to the church "and its successors forever for the use of the Protestant Episcopal Church in the Diocese of Long Island but without any power, right, or authority to grant, convey, or mortgage the same or any part thereof in any way or manner whatsoever." A court found that the church was entitled to sell its property despite the deed restrictions. It relied on a state law giving the civil courts the authority to extinguish restrictions on the sale of property by charities. It noted that one of the criteria courts are to consider in deciding whether or not to extinguish such a restriction is "whether the existence of the restriction substantially impedes the owner of the property in the furtherance of the purpose for which the land is held." The court concluded that this test clearly supported the elimination of the deed restriction, since continued ownership of the property by the church "was a burden and a drain on financial resources that could otherwise be used to provide programs and services to the community." Cathedral of the Incarnation v. Garden City Company, 697 N.Y.S.2d 56 (1999).
- The Washington Supreme Court ruled that a clause in a church deed limiting any future conveyance of the property to "Protestant evangelical churches" was not enforceable. The court began its opinion by observing: "This case requires us to consider whether an alleged restrictive covenant in a deed … prevents the receiving church from selling [its property] in order to relocate to a larger, nearby property." The court concluded that the doctrine of equitable deviation allowed it to approve a deviation from the deed's original purpose if (1) changed, unanticipated circumstances occurred, and (2) a deviation would further the purposes of the trust. As to the first requirement, the court described "present-day material circumstances not anticipated by the grantor" including significant congregational growth; limitations with the building and property; stricter development and building codes; drastic changes in the community; and changes in the attitudes, expectations, and needs of parishioners. The court also concluded that the second requirement (deviation would further the purposes of the condition) was met. It noted that "growth is an essential and necessary part of a successful evangelical church," that the previous owner "subscribed to growth being one of the obligations placed upon an evangelical Christian church," and that there was numerous problems with the current property making it impracticable for the church to carry out its mission. Niemann v. Vaughn Community Church, 113 P.3d 463 (Wash. 2005).
Reversionary Clauses in Deeds: A Checklist
Many churches received title to their property by means of a deed containing a restriction. It is imperative for church leaders to be aware of such conditions. Consider the following points:
▯ Never purchase property without a clear understanding of the existence of any restrictive covenants and how such covenants may limit the church's use of the property. The presence of a restrictive covenant can prevent a church from using property for its intended purpose. In most cases, restrictive covenants will be spelled out, or referenced, in the deeds to church property.
▯ If your church owns property, be sure you are familiar with any restrictive covenants before you plan any changes in the use of the property.
▯ Deeds to property may contain restrictions on the sale of the property. Two common restrictions are "powers of reentry" and "possibilities of reverter." These interests are very similar, but they have very different legal consequences. A possibility of reverter arises when one person transfers property to another by means of a deed containing language clearly providing that title will automatically revert to the prior owner if the current owner violates a restriction in the deed. Language creating a possibility of reverter includes words such as "so long as," "until," or "until such time as." To illustrate, assume that A transfers land to B with a deed specifying that title is transferred "so long as" B uses the property for church purposes. Here, the language is clear that if the land ceases to be used for church purposes, it will automatically revert to A. The significance of this is that the reversion of title to A is automatic, and requires no action by a court. On the other hand, deeds often contain conditions that do not call for an automatic reversion of title to the previous owner upon the occurrence of some condition. In such cases the prior owner has a "right of reentry." Such a right does not vest automatically in the prior owner. Rather, the prior owner must go to court to have his or her interest recognized. As this case illustrates, this is a more uncertain interest in property, since it does not operate automatically.
▯ Churches should check their deeds to see if they contain a condition that may give the prior owner either a possibility of reverter or a right of reentry. In either case, the prior owner may attempt to claim title to the church's property in the event the specified condition is violated. However, if the prior owner retained a possibility of reverter, the transfer of title back to the prior owner occurs immediately. This can cause major problems for a church when it belatedly discovers that it no longer owns the property.
▯ The courts generally have a negative attitude toward restrictions on the sale of property by charities. Some states have enacted laws giving the civil courts some leeway in extinguishing such restrictions. If your church deed contains restrictions on the sale of property, you may want to consult with a local attorney concerning the existence of such a law in your state.
▯ In some cases, restrictive covenants can be modified or ignored because of widespread disregard by property owners, or because of substantial changes in the properties subject to the restrictions. However, as the church in this case learned, establishing such an exception can be a very costly legal battle that may take years. The attorneys fees you incur ordinarily will not be covered by any insurance policy, so they will be an expense the church must bear. Church leaders should never assume that a covenant can be ignored. Check with a real estate attorney for an opinion regarding the current viability of a covenant.
▯ It is possible in some cases to have conditions "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.
▯ Be sure your church complies with any deed restrictions to the extent you are unsuccessful in getting them removed.
▯ When acquiring property through purchase or gift, discourage the property owner from encumbering the title with any restrictions that could later create substantial inconvenience for the church.
▯ Church leaders also should be aware that restrictive covenants often provide that a property owner who violates the restrictions is required to pay the legal fees incurred by other property owners in enforcing them. In other words, restrictive covenants not only may prevent a church from using property for a purpose that violates the covenant, but they also may force the church to incur an unbudgeted and possibly substantial expense in paying the legal fees of neighbors who successfully sue to enforce the covenant.