7 Ways to Protect Your Church: Who Owns the Church's Property?

In today’s culture, legal threats to churches seem to be mounting on every side as many localities seek to restrict access to prime real estate through zoning, opponents of religious liberty attempt to dismantle tax-exempt benefits for churches and clergy, and disputes about church property and other issues increasingly wind up in the courts.

According to ChurchLaw&Tax.com, the top five reasons churches wind up in court include:

1. Property Disputes

2. The Sexual Abuse of Minors

3. Personal Injury

4. Insurance Coverage Disputes

5. Zoning Issues

In this changing legal landscape, how can you protect your church from harm and increase your chances of staying out of court? Here are seven ways to protect your church:

1. Leverage the Law in Your Favor

2. Strengthen Your Governing Documents: Is That in our Bylaws?

3. Minimize Your Liability Through Effective Policies: Three Policies Every Church Needs

4. Develop Effective Employment Practices: Hiring, Firing, and Living to Tell About it

5. Maintain Insurance Specific to Your Needs

6. Clarify Property Issues Early

7. Protect Your Children, Students, and Volunteers

To read any of the previous blogs in this series (1-5), click on the hyperlinks above. This blog focuses on protecting your church, clarifying issues around church property early, and maintaining appropriate policies regarding the church’s property.

As stated above, a property dispute is the most likely reason a church will find itself in court. Often, when a church chooses to leave a denomination, a dispute regarding who owns the property erupts and many times the dispute is only settled in the courts, where judges attempt to apply neutral principles of law to determine the property ownership. In so doing, the courts often look at the deeds, the governing documents, and the course of dealing between the local church and the denomination.

What’s in the Church’s Deed?

There are a few documents a pastor needs to be able to readily access, including the church’s articles of incorporation, constitution and bylaws, and, of course, the deeds to the church’s property. A deed is more than a mere conveyance of property, it often determines ownership of property in the event that a church chooses to disaffiliate from its denomination. Many deeds contain clauses that cause the church’s property to become the property of the denomination should the property no longer be used for denominational purposes. For example, a deed might state that “this property is conveyed to First Assembly of God so long at is it used as an Assemblies of God church, but if it ceases to be used as an Assemblies of God church then ownership reverts to the Texas District Council.” There are a variety of ways such clauses may be worded in the Deed and it is important for the church to understand such language.

What’s in the Governing Documents?

Many local churches have governing documents that contain a reversionary clause and/or a dissolution clause that states if the church ceases to function as a member of the denomination, the real property (and, sometimes the personal property—meaning, money and tangible things) reverts to the ownership of the denomination or if the church dissolves, all assets are conveyed to the denomination. In addition, many denominational bylaws may contain an express trust that states that all property held by local churches are held in trust for the denomination. This means that even though the local church is the record title holder to the real property and likely pays for all maintenance and improvements, it does so only as a trustee for the benefit of the denomination.

What is the Course of Dealing Between the Parties?

Finally, courts may look at the relationship between the parties and in at least one state that relationship may be used by the courts to determine that the church and the denomination functioned in an implied fiduciary relationship even though there was no express trust relationship between the parties. For example, in the course of dealing, was the church part of a hierarchical denomination, or was it part of a looser network of churches? Or, did the church have to obtain permission from the denomination to purchase, encumber, or sell the property? Or, who has actual control of the church’s board—the congregation or the denomination?

The key issue here for churches and denominational leaders is to understand these property issues early and ensure that the ownership of the property is properly vested and that the deeds, governing documents, and course of dealing between the parties reflect the understanding of both the local church and the denomination. That way, both can stay out of court regarding these issues.

To learn how Reynolds Law Group, PLLC can become a member of your team and help your protect your church and more, check us out at reynoldslawgroup.com or call 757.219.2500 to set up a free strategy session today.