The legal organization and operation of religious organizations have always been something of a confusing area for many transactional attorneys. The State must tread a fine line between exercising some sort of regulatory control while at the same time not violating the organization’s First Amendment rights. Because of this loose control, religious organizations may take many different and disparate forms, from regular Not-for-Profit corporations to unincorporated associations, to corporate soles. Consequently, these different organizational forms involve different legal and title issues. This bulletin will examine some of the more common problems that may be encountered.

For the basic organizational requirements, see this article.

Some congregations will incorporate under the general Not-for-Profit statutes (805 ILCS105/101.01, et seq.). These congregations will have more formalized charters and by-laws that must be examined to determine who has the authority to convey the organization’s property and what authorization that person needs. As with a for-profit corporation, upon sale or mortgage of the not-for-profit religious corporation's property, certified copies of the resolutions of the governing board authorizing the sale and appointing the officers who are to execute the documents must be obtained.

If the organization is incorporated under the Religious Corporation Act (805 ILCS 110/0.01, et seq.), then it most likely will have a more informal structure, but the organization should have a charter and possibly by-laws that will specify how title to the church’s property is to be held and conveyed or mortgaged. Pursuant to the statute, the organization must have at least two trustees, wardens, vestrymen, or other designed persons with powers similar to that of a trustee. 805 ILCS 110/35. Upon incorporation, all property being held by the trustees on behalf of the church shall immediately vest in the corporation. 805 ILCS 110/41.

The trustees are charged with the "care, custody, and control" of the organization's property, and may convey or mortgage the property “when directed by the congregation, church, or society,” but only if such conveyance or mortgage complies with any restriction or limitation in the original grant to the organization. 805 ILCS 110/43. The organization should provide a record, certified by the organization’s keeper of the records, of the meeting at which the congregation approved the sale or mortgage.

If the organization is part of a larger ecclesiastical body, then the sale or mortgage of the property will be governed by the organizational documents of the ecclesiastical body. The act provides that the ecclesiastical body may appoint two or more persons in the local congregation as trustees to act with the “presiding officer” or representative of the ecclesiastical body. 805 ILCS 110/46a. The trustees and the presiding officer may hold title to the property of the local congregation, and may mortgage or convey the property as necessary for the purposes of the religious organization, provided that such use, mortgage, or conveyance is in compliance with the provisions in the organizational documents, and does not violate a restriction contained in the original gift or legacy of the property. 805 ILCS 110/46e and 46g. A certified record of the approval of the sale or mortgage should be obtained.

Prior to the enactment of the Property of Unincorporated Association Act (765 ILCS 115/0.01, et seq.) in 1949, an unincorporated association was held to be a non-entity and any conveyance to it in the association’s name was void. Chicago Grain Trimmers Ass'n v. Murphy, 389 Ill. 102, 58 N.E.2d 906 (1945). Under the 1949 Act, any unincorporated lodge or subordinate body of any society or order, having been duly chartered by its grand lodge or society, may take, hold, convey, and mortgage property in its own name. 765 ILCS 115/1. The members of the lodge or subordinate body must authorize the conveyance or mortgage by a vote at a regular meeting of the body held after at least a ten days' notice that has been mailed to all members at their last known address. 765 ILCS 115/2. The conveyance or mortgage must be in the name of the lodge or subordinate body, and attested to by the presiding officer, and the secretary or other keeper of the records. 765 ILCS 115/2.

Alternatively, unincorporated religious societies may hold title to property by conveyance to two or more members of the society that have been elected or appointed to act as the trustees of the organization. 805 ILCS 110/46g. In order to convey or mortgage the property, the requirements set forth in the society’s charter or by-laws for selling or mortgaging the society’s property must be satisfied. If the charter or by-laws are silent or non-existent, then all of the members of the organization must approve such mortgage or conveyance. As with an incorporated organization, the unincorporated society must provide a certified record of the meeting at which the conveyance or mortgage was approved.

If a congregation has disbanded and trustees for the congregation are no longer acting, the remaining members of the congregation may appoint new trustees for the purpose of winding up the congregation’s affairs. All of the remaining members must consent to the sale of the property and the distribution of the sale proceeds. If the property was originally obtained by gift or devise and the grant contained a possibility of reverter in the event the property is no longer used as a church, then upon disbanding, the property would revert to the grantee and his or her descendants. North v. Graham, 235 Ill. 178 (1908). If the church is a member of a larger ecclesiastical church, then upon dissolution of the local church, the property, subject to any restriction or limitation in the original grant or devise, will become the property of the parent church. Lowe v. First Presbyterian Church of Forest Park, 56 Ill. 2d 404, 308 N.E.2d 801 (1974).

A special case exists for the Archdiocese of Chicago. By act of the Illinois legislature, the Catholic Bishop of Chicago and his successors are a body politic and corporate sole. Private Laws of Illinois, 1861, pg. 78. Title to all property in the diocese is vested in the Archbishop and his successors, who have the sole authority to convey and mortgage the property, subject to any limitation or restriction contained in the original conveyance to the Archdiocese. Galich v. Catholic Bishop of Chicago, 75 Ill. App. 3d 538, 394 N.E.2d 572 (1979). In other Catholic dioceses, the bishop acts as trustee of the diocesan property. The deed or mortgage may be executed by the bishop, and the pastor and trustees of the local church. See, Kurowski v. Burch, 57 Ill. 2d 292, 312 N.E.2d 284 (1974).

Finally, if a religious organization has no charter, constitution, or by-laws, then any action regarding the property of the organization must be approved by all of the members of the organization at a meeting called for that purpose. A certified record of the meeting and the actions approved by the members should be obtained.

Although unusual in certain cases, title to property of religious organizations should not pose any significant issues. As always, if the unusual does occur, contact your friendly, neighborhood ATG underwriter.