How is Your Title?

Legal strings can tie your hands when your church begins to build, relocate, or even take out a mortgage. Here's how to forestall such unwelcome complications.

WILLIAM KINCAID NEWMAN, Attorney-at-Law; Reprinted by permission. "Church Management"

[This contribution from Church Management has real point. Although church and school proper­ties are usually held by the conference, and con­sequently some of the situations mentioned would not prevail, yet the principles laid down here are worth noting. Mr. Newman is Secretary of the Church Building Department of the Board of Home Missions of the Congregational and Christian churches.]

All too often ministers and trustees take it for granted that they have a clear legal title to the land on which their church and parsonage have been erected. Questions seldom arise on this kind of ownership, but when they do they usually come at an awkward moment, and they can cost the church a great deal of money before all the legal knots are untied.

One unhappy situation into which a congre­gation can stumble is to find—halfway through the building of a new church—that additional funds must be borrowed to complete the con­struction. A bank agrees to make a loan, using the church's land as collateral, and a search of the title is made. What is discovered is that there are half a dozen "defects" in the title, all of which will have to be remedied before clear ownership can be established. As a result, while the mortgage is held up, the half-built church is literally left hanging in the air.

There are any number of legal "defects" which can cloud an otherwise clear title of ownership. A congregation, for example, may have never had its property surveyed. When it finally does it finds that a corner of its church is resting on a neighbor's property—or that half the neighbor's house is on church property. Another defect may be an old and forgotten mortgage. A loan—secured by a grant mortgage, a trust deed or an ecclesiastical mortgage, may have been made to a church by its denomina­tion. Since the loan was made sixty years ago, no one in the present congregation finds out about it until the congregation tries to sell its land or get another mortgage on it. Most denom­inational loans provide that if a church sells its land and ceases to be an active unit in the denomination, it must repay the loan immediately. Denominational boards are invariably co­operative in straightening out loan problems, but since such problems are often complicated, a board must be given considerable time in which to weigh all the angles. As a result, before a title company can satisfy itself that a church has clear title to land which it wishes to sell or mortgage, a church may have to wait a long while for money that it could use im­mediately.

Other obstructions to a clear title are old tax liens, paving liens or sewer assessments which sometimes date back to the time before the land was purchased by the church. Although such obligations should be cleared up the moment a church takes title to a new piece of property, they are often ignored until they are long past due and have accumulated a sizable penalty interest.

Although land normally becomes tax-free once a church is built on it, the church's officers often forget to have the necessary notation entered on the tax collector's records. And while tax officials are usually lenient with a church, they're not always able to effect a compromise settlement after a great many years have passed —with the result that the church may then have to undertake an expensive court procedure to clear its title.

Occasionally a church pays off a mortgage, receives a formal discharge from the mortgagee. and then forgets to record the discharge at the local courthouse. The church then proceeds to destroy the discharge and mortgage at a mort­gage-burning celebration, instead of using blank pieces of paper. Fifty years later the congrega­tion discovers that because the mortgage was never properly "satisfied," it is now necessary to locate the mortgagee's heirs and obtain from them a "quit-claim deed" or similar instrument of "satisfaction." Heirs not only have a way of scattering to the four corners of the world, but they sometimes turn out to be minors—for whom a guardian must be appointed by the court before any legal documents can be signed on their behalf.

One particularly frustrating legal situation is to have land donated to a congregation by means of a deed which the donor has filled with what he feels are desirable restrictions. One common restriction is that the property is to be used only for religious purposes. While this seems reasonable enough to a congregation about to erect a church, what is seldom fore­seen is that fifty years hence it may become necessary—because of unusual changes in the community—for the congregation to sell the property and relocate the church. Since the property can be sold only to another church, however, and since the other churches in town may also be planning to relocate, the first congre­gation may then discover that, because its land is virtually worthless, it now cannot raise the money needed to relocate the church in another area.

A donor may also stipulate in his deed that the property is never to be mortgaged. While no church is anxious to get into debt, it may find that, to minister adequately to its growing community, it will have to undertake a con­siderable expansion of its worship and educa­tional facilities. Even after its members have made the most generous contributions, the church may still find that it has to take out a mortgage. But this it cannot do because of the donor's restriction. In short, in seeking to pro­mote the ministry of a church, a donor, through a shortsighted restriction, may actually succeed in doing precisely the reverse.

The moral, therefore, is that property rendered unto God should be made God's com­pletely—without any legal strings which can either tie a church's hands or keep a sword of insolvency dangling over its head.


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WILLIAM KINCAID NEWMAN, Attorney-at-Law; Reprinted by permission. "Church Management"

December 1955

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