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Church Loses Property after Violating Deed Restriction

Why a New York court said a diocese’s building and land must be returned to the previous owner.

New York
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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.

A New York court enforced a provision in a deed of property to a Catholic diocese that called for the return of the property to the prior owner in the event it ceased to be used for religious purposes.

Background

In 1896, the president of a business corporation (the grantor) executed a deed by which the grantor transferred property in New York to a Catholic diocese.

The deed stated that the property was to be used “for [c]hurch purposes only . . . and in case the said premises shall be devoted to any other use than for [c]hurch purposes . . . this conveyance shall be void and the [grantor] shall have the right to re-enter and take possession of said premises and every part thereof.” Shortly thereafter, a church was erected on the property.

In 1937, the last surviving son of the grantor died. The will created a college and transferred to it all assets and legal interests. This included the right to reenter the property in the event the diocese no longer used it for religious purposes.

Appeals court: the property “reverted” to the grantor

In 2015, the diocese issued a decree that relegated the property to secular use and directed the removal of sacred objects. The college subsequently filed a lawsuit seeking a determination that these acts of the diocese caused title to the property to revert to the grantor and his successors. A trial court ruled in favor of the diocese, and the grantor appealed.

A state appeals court reversed the trial court’s ruling and concluded that the diocese was not the rightful owner of the property. It noted:

The main issue upon appeal is what interest, if any, remains in the [grantor and his heirs] as a result of the provision in the 1896 deed limiting [the diocese’s] use of the property to “[c]hurch purposes only.”

The court concluded:

[T]he 2015 decree from the Bishop . . . relegated the church “to profane but not sordid use,” and indicated that parishioners would be served by a nearby parish. The stained-glass windows and the altar were later removed, leaving only the pews. Under the canon law of the Roman Catholic Church, “if a church cannot be used in any way for divine worship and there is no possibility of repairing it,” it can be relegated to profane but not sordid use. “Profane use means use for purposes other than a Roman Catholic worship service,” and “sordid” limits that use, prohibiting any use that is disrespectful to the Catholic Church. Contrary to [the diocese’s] contentions, we find that [its] use of the property for church purposes ceased pursuant to the 2015 decree, thus violating the limitation in the 1896 deed. Accordingly, it reverted to [the grantor] which now owns the property . . .

[The diocese] took possession of the property and erected and enjoyed full use of the church for well over a century, fully aware of the limitation contained in the 1896 deed to use the property only for such purpose; upon ceasing to so use it, the property reverted . . . to [the grantor and his heirs], together with the fixtures thereon.

What this means for churches

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.

Deeds to property may contain restrictions

Deeds to property may contain restrictions on the future 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 Owner A transfers land to Church B with a deed specifying that title is transferred “so long as” Church 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 Owner A and his or her heirs.

The significance of this is that the reversion of title to Owner 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.

Know what your deed says about reverter or right of reentry

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 its property.

Courts generally dislike deed restrictions that limit property owners

The courts generally have a negative attitude toward any restrictions placed on deeds. 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.

Conditions could be “released” by the previous owner

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.

Discourage restrictions

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.

Note: For case studies and additional information, see “Reversion of Church Property to the Prior Owner,” the section in our Legal Library from which the above points were taken.

Paul Smith’s College of Arts and Sciences v. Roman Catholic Diocese, 130 N.Y.S.3d 547 (N.Y. App. 2020).

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  • June 17, 2021

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