When is a Church not a Church - Can a Religious Organization Limit who May Purchase their Real Estate (or Future Use)
I was posed an interesting question. In Tennessee, if a church desires to sell their land and building, are they able to state in the listing agreement that the buyers must agree to never operate a different religious organization on the property? Alternatively, can the religious organization put a covenant or restriction on the land to prevent a future owner from operating a different religious organization on that land/building.
The answer to both is, NO! A church, or any landowner for that matter, in Tennessee is not legally able to include a provision in a listing agreement or any other instrument relating to real property stating that the buyers must agree to never operate a differing religious organization on the property. Likewise, they cannot put a covenant or restriction on the land that would limit a protected class, and religious beliefs are a protected class.
Statutory Prohibition on Discriminatory Real Property Restrictions
Under Tennessee law, written or oral agreements that restrict the use, occupancy, or transfer of real property based on religion are void and constitute illegal discrimination. Specifically, Tennessee law dictates that every provision in a written instrument or oral agreement relating to real property that purports to restrict the conveyance, occupancy, or lease of the property to individuals of a specified religion is void. See Tenn. Code Ann. § 4-21-604.
Furthermore, any condition, restriction, or prohibition—including rights of entry or possibilities of reverter—that directly or indirectly limits the use or occupancy of real property on the basis of religion is void. Tennessee law explicitly declares that inserting such a void provision into a written instrument relating to real property, or honoring (or attempting to honor) such a provision in the chain of title, is an illegal discriminatory practice. See Tenn. Code Ann. § 4-21-604.
The Inapplicability of the Religious Organization Exemption
While Tennessee statute provides a narrow exception allowing religious institutions or organizations to limit the use of real property based on religion, this exception applies strictly to property that is currently "held by a religious institution or organization... and used for religious or charitable purposes". Once a church seeks to divest itself of the property by selling it to a third-party buyer, it cannot legally bind future owners with a restrictive covenant restricting other religions.
Additionally, statutory exemptions permitting a religious organization to restrict facilities to persons of the same faith apply only to organizations whose primary purpose is to serve members of a particular religion, allowing them to restrict membership or facilities to promote their religious principles Tenn. Code Ann. § 4-21-806. This exemption does not extend to creating permanent, discriminatory restrictive covenants that run with the land after the property is sold to the public.
Constitutional and Public Policy Boundaries
In Tennessee, contracts that contravene established public policy are unenforceable. This was discussed heavily in the TN Supreme Court case Copeland v. HealthSouth Methodist Rehab Hospital. The public policy of Tennessee is determined primarily by its legislative enactments, and when a statute directly addresses a subject, the policy reflected in that statute must prevail. Because the legislature has explicitly declared property restrictions based on religion to be void and discriminatory, any contract incorporating such a restriction violates public policy. This is discussed in the TN case Blackwell ex rel. Blackwell v. Sky High Sports Nashville Operations, LLC.
Furthermore, Tennessee courts strictly construe restrictive covenants because they are in derogation of the right to the free use and enjoyment of property. Tennessee common law disfavors restrictions on the free use of land by private owners. Any doubt or ambiguity regarding the applicability or validity of a restrictive covenant must be resolved against the restriction and in favor of the property's unrestricted use. The TN Court of Appeals discussed this in McKeehan v. Price.
Lastly, under federal constitutional principles, judicial enforcement of racially or religiously restrictive covenants by state courts constitutes state action that violates the Fourteenth Amendment of the United States Constitution. Consequently, even if such a restriction were written into a contract, courts are constitutionally barred from enforcing it or awarding damages for its breach. This was established in the 1950's when the Stratton v. Conway went all the way to the TN Supreme Court. This landmark case was what led to the overturn of covenants originally written to prevent persons of certain races from buying houses in certain neighborhoods. It also eliminated the need to redraft those covenants as the Supreme Court made clear that the language is stricken on its face.
Final Thoughts
In conclusion, a Tennessee church cannot legally include a restriction in a listing agreement or sales contract prohibiting future buyers from operating a religious institution on the property. Tennessee statutory law explicitly voids any direct or indirect restrictions on the use or occupancy of real property based on religion and makes the insertion of such clauses an unlawful discriminatory practice. Once the property is sold and no longer held by the religious organization, the church cannot restrict its future religious use, and any such covenant would be unenforceable under both state public policy and federal constitutional law.
Disclaimer: This guide is for informational purposes and is not legal or financial advice.
I hope that you found this informative. If you feel that this information may help you or a client, please reach out. It is my mission to help others.
Jeremiah L. McGuire
Attorney
Memphis, TN
901-494-1622
Your Past. Your Future. Our Priority.
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