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In this issue of the Newsletter, we will take a look at Religious Corporations and Real Property. In the Fall 2009 Newsletter, we addressed New York State and New York City Real Property Transfer Tax Exemptions for Religious Organizations. At one time or another, you will be faced with a transaction involving a Religious Corporation selling, leasing, buying and/or mortgaging real property.
A Religious Corporation is a corporation created for religious purposes. Religious Corporations are governed by both the Religious Corporations Law and Non-For-Profit Corporation Law- in cases of conflict between Religious Corporations Law and Non-For-Profit Corporation Law, Religious Corporations Law will prevail.
Whenever Religious Corporations and Real Property come up, almost invariably the case Greek Orthodox Archdiocese of North and South America v. Robert Abrams (618 N.Y.S. 2d 504) comes to mind. In Greek Orthodox Archdiocese of North and South America v. Robert Abrams, the Greek Orthodox Archdiocese obtained court approval for the sale of real property. Subsequently, the Archdiocese modified the contract of sale and later also changed the terms and conditions of the mortgage. A member of the Greek Orthodox Church challenged the Archdiocese’s authority to modify the court approved contract and mortgage without further court approval. The Supreme Court, New York County held that once a contract of sale is made and approved by the Court, any modification of terms constitutes a new contract and must be re-approved by the Court.
Therefore, it is important to remember that the sale, mortgage or lease of real property of Religious Corporations is governed by Section 12 of the Religious Corporations Law. Section 12(1) provides that a Religious Corporation shall not sell, mortgage or lease for a term exceeding 5 years any of its real property without applying for and obtaining leave of Court.
The petition for leave of court must comply with the provisions of Section 511 of the except for the requirement for giving notice to the Attorney General under Section 9(b) of Non-For-Profit Corporation Law. (Every Religious Corporation is considered a Type B corporation under the Non-For-Profit Corporation Law.) Certain Religious Corporations do not have to give notice to the Attorney General: Protestant Episcopal Church, Roman Catholic Church, Ruthenian Catholic Church of the Greek Rite, African Methodist Episcopal Zion Church, Presbyterian Church of the General Assembly of the Presbyterian Church U.S.A.., United Methodist Church, Reformed Church of the General Synod of the Reformed Church in America. However, notwithstanding this exemption for giving notice to the Attorney General, it is best to provide notice to the Attorney General and obtain a “No Objection Letter.”
Proceedings to sell, mortgage or lease real property owned by a Religious Corporation cannot be maintained unless the specified church first acquires the consent of the governing bodies or higher ecclesiastical authorities who are specified in the statute (Religious Corporations Law Section 12 (2-6). The petition by a Religious Corporation for leave of court must be verified and contain the following:
The Court in which application must be brought/commenced is the Supreme Court of the Judicial District or the County Court of the County where the Religious Corporation has its office or principal place of carrying out the purposes for which it is formed.
Failure to obtain leave of court to sell/mortgage the real property of a Religious Corporation renders such a sale a nullity and the conveyance/mortgage invalid. However, if the court approval to sell has not been obtained, the court may, upon application of the Religious Corporation or the Grantee or Mortgagee or any person interested in the property, confirm the sale and direct the execution of a confirmatory deed or mortgage. In addition, there are some Religious Corporations which were formed by Special Acts of the Legislature many years ago and under such statutes have the power to dispose of real property without requiring leave of Court and are therefore, exempt from the requirement of Section 12(1) of the Religious Corporations Law.
Under Section 12 of the Religious Corporations Law, a Religious Corporation may execute a Purchase Money Mortgage without obtaining leave of court. This exception only applies to a Purchase Money Mortgage.
A Religious Corporation may acquire property without leave of court-for example for the acquisition of associate houses, church buildings, chapels, missions houses, schoolhouses, medicine dispensaries, home for the aged and residences.
Prior to September 1, 1972, Foreign Religious Corporations were not subject to New York Religious Corporations Law and did not need a court order to convey or mortgage real property (Muck v. Hitchevck 212 N.Y. 283). After September 1, 1972, and pursuant to Chapter 956 of the Laws of 1971, Foreign Religious Corporations authorized to conduct business in New York State must comply with the Religious Corporations Law as well as being subject to any restrictions contained in.
If you have any questions or would like further information regarding this article, please contact Michael Alfieri, Esq. at (212) 651-1200 or malfieri@prestitle.com.
Also, if there are any topics that you would like us to include in future newsletters, please feel free to e-mail us with suggestions at info@prestitle.com.
Corporations -The NYC Department of Finance is requiring that as of October 1, 2009, under Section 1003 of the Business Corporation Law, dissolving corporations that have done business in and incurred tax liability to the City of New York, must obtain tax Clearance from the NYC Department of Finance. The Corporation is required to complete the “Request for Consent to Dissolution” and mail the Request to NYC Department of Finance. In return, NYC Department of Finance will send a Dissolution Request to the address provided on the Request. A Dissolution Consent will be forwarded to the address provided on the Request and this Dissolution Consent has to be attached to the Certificates of Dissolution which are filed with the New York State Secretary of State. Any filing of a Request for Dissolution on behalf of the corporation must be accompanied with a signed and dated Power of Attorney.
Mortgage Recording Tax - The Mortgage Recording Tax rate in Dutchess County on December 1, 2009 has been changed from $1.30 to $1.05 for each $100.00 of the principal indebtedness secured.