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“Religious Covenants on Former Church Property”

Patrick E. Reidy, C.S.C.

When faith communities sell their property, they often impose land-use restrictions on future owners. Many of these use restrictions, memorialized in deeds transferring title, flow from communities’ moral and religious commitments. In May 2019, the Roman Catholic Archdiocese of Chicago sold its surface parking lot outside of Holy Name Cathedral to JDL Development, a Chicago-based real estate developer, for 110 million dollars. JDL’s project, known as One Chicago Square, includes street level retail space and two landmark, luxury residential towers overlooking the church. Despite its lucrative per-unit price tags, the property remains subject to extensive covenant restrictions binding current and future developers. 

For Catholics and non-Catholics alike, many of these covenant restrictions might seem unusual. The deed for One Chicago prohibits any future owner from using the property for abortion, in vitro fertilization, surrogacy, euthanasia, assisted suicide, gender reassignment, human cloning, embryonic and fetal stem cell research, Satanism, atheism, recourse to mediums, palm-reading, astrology, or pornography. But JDL Development also agreed that the cathedral’s former parking lot would not be used for any pawn shop, tattoo parlor, gambling facility, car wash, flea market, trailer park, or “restaurant, bar or club that encourages or requires personnel to be shirtless or to wear provocative clothing . . . (e.g., so-called hot pants, shorts not covering the entire buttocks, tight fitting or otherwise revealing tank tops or halter tops).” Property owners “will not use nor permit the use of the name ‘Roman Catholic Church’ or ‘The Catholic Bishop of Chicago’ or any derivative.” And “[a]ny activity not listed” that is “inconsistent with or contrary to the tenets of the Roman Catholic Church” may be prohibited at One Chicago Square based on “the sole discretion of the then-sitting Bishop or Archbishop [of Chicago] with jurisdiction over the Property.”1Cook Cnty. Recorder of Deeds, No. 1913022048, Special Warranty Deed exhibit C (May 10, 2019).

Cook Cnty. Recorder of Deeds, No. 1913022048, Special Warranty Deed exhibit A (May 10, 2019).

The Archdiocese of Chicago is far from unique in crafting and imposing religiously motivated covenants on property it chooses to sell. Many faith communities impose use restrictions that differ in breadth and detail, but not in kind, from those imposed on Holy Name Cathedral’s former parking lot. In fact, the First Church of Christ, Scientist also sold one of its surface parking lots in Boston for development as high-end apartments. The church received 21.9 million dollars for title to the asphalt spaces behind Christian Science Plaza, imposing use restrictions that prohibit “the sale, display, manufacture or distribution” of alcohol, tobacco, narcotics, or pharmaceuticals, as well as medical products, equipment, or services, in any nonresidential portions of the property. 2Suffolk County Registry of Deeds, Deed bk. 53581, p. 309, Quitclaim Deed 1 (Oct. 19, 2014). The Church of Jesus Christ of Latter-day Saints restricts future uses that involve alcohol, tobacco, coffee, tea, or any other substance considered harmful in the “Word of Wisdom.”3Interview with Loyal C. Hulme, Shareholder, Kirton McConkie (June 11, 2020) (describing use restrictions incorporated into property deeds by the Church of Jesus Christ of Latter-day Saints). The Episcopalian Trinity Church in Manhattan uses 99-year ground leases that preclude leasing to any person “convicted of a hate crime or a crime involving fraud, theft, embezzlement, misappropriation of funds, breach of trust or moral turpitude which, in the reasonable judgment of [the] Landlord, has or may reasonably be expected to have a material adverse effect on the Building, Landlord’s Fee Estate or Landlord’s reputation.”4Interview with Sujohn Sarkhar, Managing Director of Asset Management, Trinity Church Wall Street (May 26, 2020); Episcopalian Trinity Church, “Prohibited Person & Prohibited Use (Negotiated 99-Year Ground Lease, Not Yet Closed).”

Use restrictions reveal tensions between religious conscience and secular markets as they converge on property. These tensions between sacred and secular define the content of religious covenants, though not all faith communities seek to advance the same goals through them. Some religious covenants prohibit future land uses on alienated property — both beside and beyond property still owned and used for religious purposes — that faith communities consider illicit, spiritually or morally. The faith community may believe themselves to be bound by theological mandates requiring that property once used for or dedicated to sacred purposes be protected. For example, Roman Catholicism allows the repurposing or selling of a church, though canon law forbids property consecrated for ritual worship from any involvement in immoral activities.5The Code of Canon Law permits Roman Catholic churches “no longer . . . used for divine worship” to be repurposed or sold for “profane [secular] but not sordid use.” 1983 Code c.1222, § 2.

Even where use restrictions are not theologically required, faith communities may strive to protect themselves from complicity or association with activities that contravene their spiritual and moral commitments. Some religious owners may see deed restrictions as an opportunity to advance the common good by limiting disfavored uses.

Even where use restrictions are not theologically required, faith communities may strive to protect themselves from complicity or association with activities that contravene their spiritual and moral commitments. Some religious owners may see deed restrictions as an opportunity to advance the common good by limiting disfavored uses. Others seek to limit use or ownership of former church property to members of their own faith community, bolstering continuity within their religious tradition. A few even grant interpretive discretion over covenant terms — particularly terms that involve religious doctrine — to their own religious authorities.

Just the same, some religious covenants are neither motivated nor required by theological commitments. Some restrictions reflect a desire to disassociate the previous religious owner from future owners. Imposed for reputational and expressive reasons, these covenants signal public disaffiliation from future land uses, both to members of the faith community and to anyone who might occupy the former church property. Many other deed restrictions imposed by faith communities are not “religious” at all; rather, they reflect an age-old desire to protect neighboring property held by the faith community, and neighboring landowners, from potential nuisances.

Religious covenants are more than mere agreements between buyers and sellers of property. Unlike simple contracts, these religiously motivated use restrictions are ownership interests that bind current and future purchasers of alienated religious property. In property terms, they “run with the land.”6See Restatement (Third) of Property (Servitudes) § 1.1 (Am. L. Inst. 2022). Faith communities transfer title to their property but keep a nonpossessory interest in its use. Because that interest may extend into perpetuity, it can bind future owners who are far removed — both in time and in religious commitment — from the property’s original owners, the buyer and (faith community) seller who initially created the covenant.

The American legal system inherited rules developed by English courts to address some of the concerns arising from this potentially remote and indefinite relationship between property owners. These concerns involve notice and information, as well as renegotiability and value.7See, e.g., Carol M. Rose, Servitudesin Research Handbook on the Economics of Property Law 296 (Kenneth Ayotte & Henry E. Smith eds., 2011); Molly Shaffer Van Houweling, The New Servitudes, 96 Geo. L.J. 885 (2008); Thomas W. Merrill & Henry E. Smith, Optimal Standardization in the Law of Property: The Numerus Clausus Principle, 110 Yale L.J. 1 (2000).

First, notice and information. How do you know that there are certain restrictions on your property? If you’re the original buyer or seller of the property, you made the agreement, you know what it involves. But if you’re two or three owners removed from the original property sale, it may not be obvious what the covenant involves, or whether it’s still desirable. Common law rules sought to promote notice by only enforcing covenants made between parties who wrote down the obligations in some major transfer document, like a deed. 

But even if you’ve recorded the covenant restriction in your deed, it may not always be clear what the terms require. This is especially true when covenants include idiosyncratic terms. The developer who bought Holy Name Cathedral’s parking lot, for instance, agreed that any activity “inconsistent with or contrary to the tenets of the Roman Catholic Church” would be prohibited at One Chicago Square. Even if she knows everything that term might include (I’ll confess, I don’t), how likely is the person who buys One Chicago Square from her? Or the next owner . . . or the next owner?

Many use restrictions contained in religious covenants are rooted in moral or spiritual commitments that are unique to faith communities and not necessarily shared by the wider society — prohibitions involving alcohol, pornography, pharmaceuticals, or “so-called hot pants.” For larger, well-known religious institutions like the Roman Catholic Church, prohibitions involving abortion or Satanism may not surprise purchasers of church property; though use restrictions that preclude tank tops and short-shorts might. And purchasers may have no idea what to anticipate from faith communities with limited membership or enigmatic teachings. Church-property purchasers need not share the religious commitments of faith-community sellers to accept their use restrictions; those restrictions can be imposed by contract. But once they become property, unusual or idiosyncratic restrictions affect future purchasers of the faith community’s former property, as well as third-party buyers.

If judges determine that these religious covenants impose an “unreasonable restraint on alienation,” in violation of public policy, they may choose not to enforce them.

Insofar as religious covenants impact subsequent sales of church property, courts may be skeptical of them. Future buyers surprised to discover use restrictions on property not explicitly affiliated with organized religion — for example, successors in title to One Chicago Square who purchase from JDL Development, rather than the Archdiocese of Chicago — seem likely to challenge them as “arbitrary” or “capricious.” If judges determine that these religious covenants impose an “unreasonable restraint on alienation,” in violation of public policy, they may choose not to enforce them.8Restatement (Third) of Property: Servitudes § 3.1 (Am. L. Inst. 2022).

Second, renegotiability and value. What happens if you want to renegotiate the covenant, or the covenant becomes obsolete? Common law rules also sought to ensure that property owners could modify or escape their land-use obligations, particularly when those obligations became obsolete. Because of the possibility for indefinite relationships between property owners — many of whom may be complete strangers to each other — courts sought to limit the number and types of people who could claim an interest in the property of others. This makes sense: If there are too many people who have an ownership interest in the property, or you can’t locate some of them, it becomes difficult to renegotiate the terms.

Many religious covenants are likely to become obsolete over time. That’s true of most idiosyncratic covenants. Imagine the unique religious commitments of a faith community with limited membership. On the one hand, courts want to help property owners renegotiate covenants that are no longer valuable. On the other hand, judges are typically uneasy about assessing the value people place on their property. That judicial uneasiness seems likely to be compounded by covenant holders claiming moral or spiritual value in their nonpossessory interests. Courts are ill-equipped to evaluate subjective property value and typically avoid engaging religious questions.9See, e.g., Holt v. Hobbs, 574 U.S. 352, 361–62 (2015); Hosanna-Tabor Evangelical Lutheran Church & Sch. v. EEOC, 565 U.S. 171, 185–88 (2012); Church of the Lukumi Babalu Aye, Inc. v. City of Hialeah, 508 U.S. 520, 531 (1993); Emp. Div. v. Smith, 494 U.S. 872, 886–87 (1990); Thomas v. Rev. Bd., 450 U.S. 707, 714 (1981); Wisconsin v. Yoder, 406 U.S. 205, 215 (1972).

Courts may also remain concerned about excessive property fragmentation (i.e., too many people claiming an ownership interest in the same property) and its impact on subsequent sales of church property. When former church properties retain multiple owners — some of whom may be difficult to identify or track down, others with property interests that are ambiguously defined — potential purchasers looking to buy an entire parcel of church land may incur prohibitive transaction costs attempting to reassemble the parcel. Nonpossessory interests that faith communities might have enforced under contract would face greater judicial skepticism when imposed as real covenants that act as an “unreasonable restraint on alienation” of their former property.

In many cases, if not most, religious covenants are enforceable as a matter of private law. Where some covenants may be suspect under traditional servitude law, other property devices — specifically, defeasible fees and lease arrangements — might prove more effective for faith communities seeking to protect themselves from certain forms of complicity with activities that contradict their spiritual or moral commitments, rooted in sincerely held religious belief. 

When the time comes to sell their property, faith communities would do well to weigh the need for use restrictions against the need for additional revenue.

Ultimately, this article recommends that faith communities and courts both exercise prudence in considering whether to impose, and to enforce, religious covenants. Faith communities selling property should consider the costs of religious covenants, both economic and political. Economically, faith communities stand to lose significant amounts of money from the sale of their property by restricting its use. The kinds of religiously motivated use restrictions imposed on One Chicago Square are unlikely to benefit future owners of that property, regardless of whether they embrace Roman Catholicism. Purchasers will pay less for property with restrictions that offer them little to no advantage. This lost income from the sale of property that faith communities have no intention of repurchasing — especially property never used for religious purposes and holding no sacred value — should give their religious leaders pause. Many faith communities seek to advance the common good by educating children in schools, feeding the hungry in soup kitchens, welcoming the homeless in shelters, caring for the sick in clinics, and burying the dead in cemeteries. Their ministries on church property flow from the same religious beliefs given ritual expression in worship. When the time comes to sell their property, faith communities would do well to weigh the need for use restrictions against the need for additional revenue.

Politically, religious covenants could incite backlash against faith communities. Use restrictions imposed on former church property aim to control the activities of people who may not share the spiritual or moral commitments of their property’s prior owners. Increased attention could motivate lawmakers to reevaluate many of the liberties that faith communities currently enjoy with respect to land-use regulations, potentially hindering their ability to purchase, sell, own, or use property. Just because most religious covenants are enforceable does not make them advisable. Religious institutions own tremendous amounts of property in the United States, much of which is underutilized. That church property could (and often should) be repurposed. Judicially-created obstacles to religious covenants may prevent the efficient transfer of property from faith communities to secular owners, many of whom may convert empty parking lots to apartment buildings, shuttered schools to senior housing, churches into soup kitchens and art galleries and music venues. Courts have good reasons to enforce most religious covenants. Faith communities should discern whether, and how extensively, to use them in selling church property.♦

Patrick E. Reidy, C.S.C. is Associate Professor of Law at Notre Dame Law School and an ordained Roman Catholic priest with the Congregation of Holy Cross. He serves as co-Faculty Director of the Church Properties Initiative within the Fitzgerald Institute for Real Estate at Notre Dame. His essay is based on “Religious Covenants,” which he published with Nicole Stelle Garnett in the Florida Law Review, 74 Fla. L. Rev. 821 (2022).

Recommended Citation

Reidy, Patrick E. “Religious Covenants on Former Church Property.” Canopy Forum, May 3, 2023. https://canopyforum.org/2023/05/03/religious-covenants-on-former-church-property/.