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Transferring Church Property

§ 7.05
Key point 7-05. An incorporated church generally can transfer title to church property, following authorization of the transaction pursuant to the church's governing document, by means of a deed that identifies the church by its corporate name and that is signed by one or more authorized officers. In most states, an unincorporated church can transfer title in the same manner as an incorporated church. In some states unincorporated churches must select trustees to hold and transfer title to church property.

Since one of the attributes of a corporation is the ability to hold title in the corporate name, it is a good practice for an incorporated church to identify itself as a corporation in deeds, mortgages, contracts, promissory notes, and other legal documents. For example, identifying a church as "First Church, a nonprofit religious corporation duly organized under the laws of the state of Illinois," ordinarily will suffice. Such a practice will indicate that the church is incorporated and therefore capable of executing legal documents in its name by its officers or other authorized persons.

In some states, an unincorporated church must execute such documents in the name of church trustees since the church itself lacks authority to execute legal documents. It is a common practice for unincorporated churches to execute such documents in the name of the church with the signatures of only the minister and church secretary. Such documents may be invalid in some states absent ratification by the church membership. Deeds to property present the greatest problem, and many title examiners will object to a deed executed by an unincorporated church in such a manner even if it is later ratified.

In most states, a business corporation is required to include terminology in its name identifying itself as a corporation. Such terminology may include such words and abbreviations as corporation, corp., incorporated, or inc. This practice ordinarily does not apply to religious corporations. The absence of such a requirement, of course, makes it imperative for a church corporation to identify itself as a corporation following reference to its name in legal documents to avoid any suggestion that it might be an unincorporated association and thereby incapable of conveying title to property in its own name.

A few states have statutes restricting the transfer of property by religious organizations. To illustrate, a New York law specifies that "a religious corporation shall not sell, mortgage or lease for a term exceeding five years any of its real property without applying for and obtaining leave of the court. …"[106] N.Y. RELIGIOUS CORPORATIONS § 12. A New York court upheld the constitutionality of this statute. A church had argued that this requirement not only violated the First Amendment's ban on the establishment of religion but also violated the First Amendment's guaranty of religious freedom by involving the government in the internal decisions of churches. In rejecting the church's "establishment clause" argument, the court applied the United States Supreme Court's three-part "Lemon test" for determining whether or not the New York law constituted an impermissible establishment of religion. Under this test, first announced in a 1971 decision, but later overturned in a 2022 decision, [107] Lemon v. Kurtzman, 403 U.S. 602 (1971). a law or government practice challenged as an establishment of religion will be valid only if it satisfies the following three conditions—a secular purpose, a primary effect that neither advances nor inhibits religion, and no excessive entanglement between church and state (learn more about the legal standard now used for determining Establishment Clause cases in Chapter 12).

The New York court concluded that all of these tests were met. First, the New York law had a secular purpose—"to insure that such [sales are] in the best interest of the corporation and its members and that the proceeds are properly disbursed." The court noted that the New York law was prompted by "several instances of questionable practices resulting in lawsuits to enjoin and set aside transfers of religious property within congregational-type religious churches." Second, the notice requirement did "nothing to convey any message whatsoever that could be construed to advance or inhibit any religion or religious belief." Third, the notice requirement did not result in an excessive entanglement between church and state since it was a mere "routine regulatory interaction" involving "no inquiries into religious doctrine … no detailed monitoring and close administrative contact between secular and religious bodies."

The court also concluded that the notice requirement did not violate the First Amendment guaranty of religious freedom. It noted that a violation of this guaranty requires proof that a law or government practice "burdens the adherent's practice of his or her religion by pressuring him or her to commit an act forbidden by the religion or by preventing him or her from engaging in conduct or having a religious experience which faith mandates." Such was not the case here, the court concluded. It further noted that "any inquiry by the attorney general involves only the terms of a real estate transaction; it involves no inquiry into religious beliefs nor does it involve the regulation or prohibition of conduct undertaken for religious reasons."[108] Greek Orthodox Archdiocese v. Abrams, 618 N.Y.S.2d 504 (Sup. 1994).

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