New Covenant Baptist Church v. Sark, 2003 WL 21544248 (Tenn. App. 2003)
Background. A church purchased vacant land as a site for a new sanctuary. The church also purchased adjacent property to construct a driveway connecting the site of the new sanctuary to the nearest roadway. Neighbors complained that this use of the adjacent property violated a restrictive covenant that limited the property to residential use. A court later ruled that the church’s proposed construction of a driveway across the adjacent property would violate the restrictive covenant, and it prohibited the church from proceeding with its plans.
The neighbors asked a court to compel the church to pay their attorney’s fees pursuant to the following provision in the restrictive covenant: “In any proceedings at law or equity to enforce these restrictions or for violation thereof, the losing party shall pay the attorney’s fees of the prevailing party in such amount as may be fixed by the court in such proceedings.” The court ruled that the church had to pay all legal fees incurred by the neighbors in opposing the church’s construction of the driveway.
Relevance to church treasurers. This case illustrates the importance of church leaders being aware of the existence of any restrictive covenants that apply to church property. A restrictive covenant is a restriction on the use of property. Usually, such covenants appear in deeds (as was true in this case). Property owners, including churches, are legally bound by such restrictions. Here are some practical tips that will assist church leaders in dealing with restrictive covenants:
1. Never purchase property without a clear understanding of the existence of any restrictive covenants, and how such covenants may limit the church’s use of the property. As the church in this case found out, the presence of a restrictive covenant can prevent a church from using property for its intended purpose. In most cases, restrictive covenants will be spelled out, or referenced, in the deeds to church property.
2. If you already have acquired property, be sure you are familiar with any restrictive covenants before you plan any changes in the use of that property.
3. In some cases, restrictive covenants can be modified or ignored because of widespread disregard by property owners, or because of substantial changes in the properties subject to the restrictions. The courts are reluctant to apply either of these exceptions to a clearly worded restrictive covenant, and so church leaders should never assume that a covenant can be ignored. Check with a real estate attorney for an opinion regarding the current viability of a covenant.
4. Church leaders also should be aware that restrictive covenants often provide that a property owner who violates the restrictions is required to pay the legal fees incurred by other property owners in enforcing them. In other words, restrictive covenants not only may prevent a church from using property for a purpose that violates the covenant, but they also may force the church to incur an unbudgeted and possibly substantial expense in paying the legal fees of neighbors who successfully sue to enforce the covenant.
This article first appeared in Church Treasurer Alert, July 2004.
