Lease and Sale of Real Estate
Procedure and Forms in Real Property Transactions
I. LEGAL REQUIREMENTS
The Canons of the Episcopal Church (National and Diocesan) and New York State law provide that religious corporations must obtain two separate consents—from the Bishop and the Standing Committee—as well as the permission of the appropriate New York State court in order to
- Sell real property. (This includes transfer of development rights and granting of easements.)
- Lease real estate (including development rights) for a term exceeding five years. (This includes leases for fewer than five years with renewal terms that extend the lease beyond five years.)
- Mortgage real property.
A. Provisions of the New York Religious Corporations Law (RCL)
Attached to these procedures are the provisions of the RCL that apply to Episcopal congregations. The requirements for property transactions are found in §12.
B. Provisions of the Canons of the Diocese of New York
In addition to the requirements of the RCL, the Canons of the Diocese of New York require that, if the property to be sold, leased or mortgaged “is used by the Congregation for regular religious services, the Standing Committee shall not give its consent until it shall appear to its satisfaction that notice of the application has been given to the Congregation” (Canon 18, Sec. 4). Therefore, if the property in question is the church building or a chapel, the Standing Committee will want to see evidence that the matter was presented to a regular or special parish meeting.
C. Need for competent professional counsel and advice
It is essential for an applicant to obtain competent legal counsel and professional real estate advice at the earliest stage of consideration of a real estate transaction.
II. APPLICATION TO THE STANDING COMMITTEE AND THE BISHOP
The application procedure is in two parts.
A. Notice of Intention
Because the Bishop and the Standing Committee deal regularly with property matters from all parts of the Diocese, they constitute a valuable source of experience and analysis.
As soon as the outlines of a potential property sale, mortgage or lease take shape, the parish sends a Notice of Intention to the Bishop and Standing Committee. The Notice of Intention is a letter describing the transaction in enough detail so that financial considerations and implications for mission strategy can be assessed.
The congregation will receive a reply that may offer suggestions, raise questions or flag potential areas of concern.
B. Application for Consent
When the proposed sale, mortgage or lease is in final form, the congregation makes formal application to the Bishop and Standing Committee for consent.
- Letter of transmittal from an attorney or responsible person itemizing the documents submitted and describing fully the pertinent details of the transaction.
- Copy of the complete signed contractual agreement.
- Copy of the Certificate of Appraisal and the appraiser’s report for property sales. For leases, there should be a statement from a licensed real estate rental agent stating the fair rental value of the property to be leased.
- *Copy of the Vestry resolution authorizing the property transaction. The Vestry resolution should also state the purposes for which the funds received will be used. The Clerk of the Vestry must certify the Vestry resolution, and the certificate must be authenticated.
- Evidence required by Canon 18, Section 4, if the property to be sold, leased or mortgaged is used for regular religious services,
- *Copy of the petition to the Supreme Court of the State of New York
- *Consent form for the signature of the President of the Standing Committee
- *Consent form for the signature of the Bishop of New York
* Sample forms are attached. These should be modified as needed to fit the precise circumstances.
The above are the documents absolutely required. The Standing Committee and the Bishop may, in certain circumstances, request additional documentation before consenting to the proposed transaction. Especially in cases that involve the church building or ancillary buildings adjacent to the church, additional information may be required. See Section II.B.3 below.
Timing and Distribution of the Application
Timely applications are those which are distributed to the members of the Standing Committee at least seven business days prior to the next regular meeting. It is the responsibility of the applicant to see that a complete copy of the full application is sent by that date to each member of the Standing Committee. The Property Support Director or the staff support to the Standing Committee can provide a list of the current members of the Standing Committee and their addresses. In addition, one complete copy should be sent to the diocesan office to the attention of the Property Support Director.
Additional Review Considerations
- Summary of the parish’s purpose in entering into the transaction.
- Summary of the buyer’s or lessee’s purpose in acquiring the property.
- Statement of the potential effect upon the parish’s tax-exempt status.
- Statement of current zoning designation and associated restrictions for the property and the surrounding area.
- Copy of zoning analysis, the proposed use of the property, and a description of all available utilities.
- Summary of any legal restrictions on the use or disposition of the property (landmark status, deed or donor restrictions, etc.)
- Financial needs analysis and exploration of alternative funding resources.
- Copy of parish financial reports for the preceding three years, the present annual budget and year-to-date income and expense report, and proposed budget for the next year if available.
- Copy of most recent parochial report and audit.
- Evidence that the parish is in good standing with the Diocese, that diocesan assessments have been paid and parochial reports and audits filed.
- Documentation to substantiate buyer’s or lessee’s capacity to comply with the financial terms of the transaction, including project pro forma.
- Summary of the steps by which the economic terms of the transaction were determined, including consultants used, studies made, fees paid and by whom.
- Summary of proposed use and/or distribution of the proceeds.
- Space needs analysis.
- Description of total church property, including condition and present uses.
- Description of property included in transaction if less than total holdings.
- Surveys—boundary, building, and topographic.
- Location map or plan showing properties within 500 feet of church property with owners indicated.
- Photographs to show neighborhood character and the condition of church properties and adjacent properties.
- Written description of project with alternative analysis, including “no-build” scenario.
- Site plan @ 1” = 50’ minimum, building plans @ 1” = 16’ minimum, and a model, if available, to show proposed project. Drawings should indicate materials and relation to surrounding buildings or open space.
- If no building plans were prepared as part of the transaction, a written description of future building and proposed design guidelines to protect parish aesthetics and neighborhood character. Proposed maximum future building envelope should be illustrated, showing location and relation to existing buildings.
- Description of alternatives explored, including diagrams, drawings of alternative site plans, land use diagrams, pro formas or other studies.
- Market studies and analysis.
- Physical and economic comparison of project with and without church property (including air rights) to analyze benefits to purchaser of use of church property and/or air rights. This study will assist in determining sale price, substantiating appraisal and evaluating project impact on church property.
- Mission Review
- Description of Planning/Steering Committee selection, composition, start date, meeting frequency; evidence of interaction with congregation and community.
- Description of condition and use of church property 10 years ago and today, with statement of anticipated needs in 10 years.
- Description of the surrounding community 10 years ago, today, and in 10 years to the extent possible.
- Description of parish role in the community, its history and present direction.
- List of parish goals and priorities, short- and long-term.
- Description of how transaction fits with stated goals and priorities.
- Analysis of benefits of the transaction to the parish other than financial, such as additional program space, etc.
- Analysis of advantages and disadvantages of the transaction to the parish and the community from social, cultural, and aesthetic points of view (e.g., displacement, gentrification, community development)
- Description of parish mission without proposed transaction.
Real Estate Inquiries
As per Standing Committee Policy - All inquiries before submitting applications concerning church real estate property to Standing Committee should be sent to Standing Committee Secretary (see sidebar for contact information).