Please Put: Praise The Lord And Pass The Title: Church Transactions in the subject line of email! 6/19/2014 PRAISE THE LORD AND PASS THE TITLE! Presented by: Richard L. Black Stewart Title Guaranty Company Austin 805 Las Cimas Parkway, Bldg. 3, Suite 330 Austin, TX 78746 1-800-252-9229 Date: June 19, 2014 1 For Escrow Officer Credit please email one time only the password, attendees names, and TDI License numbers (if you have one) to CECertificate@stewart.com for certificates (please do this as soon as possible and make sure the correct spelling of the name(s) is included as to how it should appear on the certificate). For this webinar, please include Praise the Lord & Pass the Title in the subject line of your e-mail. Attorneys e-mail bar card number to the same e-mail for CLE credit. Send to your training administrator if applicable. 2 ADDITIONAL HOUSEKEEPING INFORMATION Because of recent opinions expressed by the Texas Insurance Department concerning rebates, legal credit is available only to attorneys who own title agencies which are Stewart Title Guaranty Agents, are employed by a title insurance agent licensed with Stewart Title Guaranty, or a Stewart entity. Fee attorneys who have an Escrow Officer license through a Stewart Title Agent or entity may also obtain CLE credit. We welcome any other lawyers to listen, but cannot provide continuing education credit to you. If you are claiming legal credit for this web conference, please provide in your email which category you are in. We regret any inconvenience but we must take reasonable steps to protect us and you from enforcement actions by the Texas Insurance Department. 3 1
PRAISE THE LORD AND PASS THE TITLE! Presented by: Richard L. Black Stewart Title Guaranty Company Austin 805 Las Cimas Parkway, Bldg. 3, Suite 330 Austin, TX 78746 1-800-252-9229 Date: June 19, 2014 4 2 WHAT IS THE EASIEST CHURCH TRANSACTION TO HANDLE? ROMAN CATHOLIC CHURCH - Basic geographical unit of the Church is the Diocese. - Each Diocese is presided over by a Bishop. - Bishop has complete and automatic authority over all Church property within his Diocese (no resolution needed!). - Authority passes from Bishop to Bishop. - Title is taken in and conveyed by the Bishop by name, e.g. The Most Reverend Gregory M. Aymond, Bishop of Austin, and his successors in office. 5 ROMAN CATHOLIC CHURCHES continued - Land titled in the name of a parish church is still controlled by the Bishop (Example: defunct church). - To be distinguished: Affiliated Catholic organizations, such as Knights of Columbus, are independent entities similar to fraternal organizations and can hold title to real estate in their own right. 6 2
PROTESTANT CHURCHES: DIFFERENT ENTITIES, DIFFERENT DENOMINATIONS, DIFFERENT RULES Beginning questions in any church transaction: 1. What kind of legal entity is your local church? 2. Does your church have any bylaws, constitution, or other governing document that affects its real estate transactions? 3. Is your local church affiliated with any denomination or larger church organization? 4. Does any superior authority in your denomination or organization have a role in local church real estate transactions? 7 FORMS OF ENTITY FOR CHURCHES (There are Two): - Not-for-profit (nonprofit) corporation OR - Unincorporated nonprofit association (If an unincorporated church incorporates, there is no automatic merger/conversion. The unincorporated association s title must still be transferred by deed from the old unincorporated association to the new non-profit corporation.) 8 TEXAS NONPROFIT CORPORATION: - Church holds a corporate charter issued by the Texas Secretary of State. - Church may be exempt from state taxes, not appearing in the Texas Comptroller of Public Accounts database. (Always ask the church for its charter number!) - Failure to timely file a Periodic Report required by the Secretary of State may result in involuntary dissolution of the corporation (no time limit on reinstatement, though). - Loss of its legal status as a nonprofit corporation changes a church to a nonprofit association. - Optional: Title taken directly in the name of the churchcorporation or in the name of trustees for the incorporated church. 9 3
UNINCORPORATED NONPROFIT ASSOCIATION: - Definition: an unincorporated organization consisting of three or more members joined by mutual consent for a common, nonprofit purpose. 252.001, TEXAS BUSINESS ORGANIZATIONS CODE. - Title for an unincorporated association should be taken by named trustees for the association, e.g. John Jones, Jim Smith, and Joe Brown, Trustees for Main Street Baptist Church, an unincorporated nonprofit association. - Capacity of Trustee is institutional/ex-officio and passes automatically to successor church trustees (no trust agreement required). 10 WHAT TO DO IF TITLE WAS TAKEN DIRECTLY IN THE NAME OF THE UNINCORPORATED CHURCH AND NOT IN TRUSTEES FOR THE CHURCH? - Fallback procedure is provided by Chapter 252, TEXAS BUSINESS ORGANIZATIONS CODE. - Chapter 252 was formerly known as the Texas Uniform Unincorporated Nonprofit Association Act (TUUNAA). 11 HOW DOES CHAPTER 252 WORK? - Unincorporated church s governing body meets to authorize the proposed transaction AND to elect one member as Authorized Member of the association. - Permanent or acting secretary of the governing body executes a statutory Statement of Authority identifying the Authorized Member. - Statement of Authority must be filed in real estate records PRIOR to a sale or loan closing and is conclusive evidence of the Authorized Member s authority - Statement of Authority remains in force for five years or until revocation is filed in the real estate records. 12 4
FYI Chapter 252, TEXAS BUSINESS ORGANIZATIONS CODE, and its procedure using the Authorized Member and Statement of Authority is not limited to churches, but can also be applied to other unincorporated associations holding title in the organization name and not in the names of trustees for the association, such as: - unincorporated cemetery association - unincorporated civic association - unincorporated social club. 13 SPECIFIC CHURCHES: ASSEMBLY OF GOD - Generally unincorporated with title to an individual church s property held in the name of local Trustees who act when specifically authorized by the congregation. - Business meeting of the congregation must be the subject of notice given at two prior regular meetings of the church. - Pastor s affidavit certifies the congregation s meeting and the specific authorization given to the Trustees. - Deed to Trustees of a local church must recite that, if the congregation disbands or severs its affiliation with the national organization, title completely reverts to the appropriate District Council of the Assemblies of God, Inc. 14 SPECIFIC CHURCHES: BAPTIST - May be either incorporated or unincorporated (no rule), but with title to real estate held by Trustees in all cases. - Actions of the Trustees must be approved by a majority vote of the congregation at a called meeting with a quorum present. - Meeting notice must be announced at a prior meeting of the congregation. - Affidavit by an acting/permanent church secretary certifies to proper notice, presence of quorum, majority vote of approval, and identity of incumbent trustees who will act for the church. 15 5
SPECIFIC CHURCHES: CHURCHES OF CHRIST (UNITED) - Denomination is a federation of Congregational Christian Church and the Evangelical and Reformed Church. - General Synod provides overall governance. - Incorporated versus unincorporated: No general practice among local churches. - Individual churches are autonomous and operate under local customs/practices that each congregation is free to modify. 16 SPECIFIC CHURCHES: CHURCH OF CHRIST (RESTORATIONIST) - No organized denomination as such. - Local churches are entirely independent and autonomous, loosely affiliated with each other through common doctrine. - Local churches are typically unincorporated associations; title should be found in the names of Trustees for the church. - Local governance is usually by a plurality of church elders elected by the congregation, and the elders function as the trustees holding title. 17 SPECIFIC CHURCHES: EPISCOPAL CHURCH - Local churches are usually incorporated; geographically organized into dioceses presided over by bishops. - Parish church congregation meets to give general approval to the Church Vestry; Vestry approves specifics and authorizes the Senior and Junior Wardens to execute transaction documents. - Required: Resolution of the Vestry Chairman and Clerk certifying actions of the congregation and Vestry. - Also: Deeds of Trust given by parish church require joinder by the President and Secretary of the Protestant Episcopal Church Council of the Diocese. 18 6
SPECIFIC CHURCHES: CHURCH OF JESUS CHRIST OF LATTER-DAY SAINTS (MORMON) - Denomination is one large unincorporated religious society; local churches are unincorporated associations that do not hold title to real estate. - Title to church real estate is held by the Corporation of Presiding Bishop of the of the Church of Jesus Christ of Latter-day Saints, chartered in the State of Utah. - Corporation (Presiding Bishop) has authority to dispose of church real estate without approval of local members. - Corporation delegates its authority to agent(s) within Texas through one or more certificates filed with the Texas Secretary of State. 19 SPECIFIC CHURCHES: JEHOVAH S WITNESSES - Church facilities are known as Kingdom Halls. - Title to newer Halls is vested in Watchtower Bible and Tract Society of New York, Inc. - Acquisition of land and construction of new Halls by local congregations are funded through loans from the Society Kingdom Hall Fund administered by the Watchtower Society. - Title to older Kingdom Halls within the U.S. may be held in a nonprofit corporation chartered by the local congregation and governed by trustees. If the congregation disbands, title reverts to the Watchtower Society. 20 SPECIFIC CHURCHES: LUTHERAN CHURCH (ELCA & MISSOURI SYNOD) - Geographically organized into synods under Bishops (ELCA) or into districts under District Presidents (Missouri Synod). - Governance is local in incorporated churches. - Meeting of the congregation to approve a transaction requires that notice be given in a prior meeting or service. - Congregational resolution identifies the incumbent officers and authorizes the President and Secretary, the Pastor, and the church s Board of Trustees all to conclude the transaction. - Board of Trustees resolution then directs the President to execute documents on behalf of the church-corporation with attestation by the church Secretary. 21 7
SPECIFIC CHURCHES: METHODIST CHURCH - Organized geographically into Conferences under Bishops; further divided into Districts under District Superintendents. - Methodist Discipline (book of rules and practices): Local churches should be incorporated wherever possible. - Under the Methodist Discipline, governance is divided between the local congregation and the District Superintendent of the District in which the church is located. - Regular or called Charge Conference or Quarterly Conference is a business meeting of the congregation presided over by the District Superintendent or his delegate. (continued) 22 SPECIFIC CHURCHES: METHODIST CHURCH continued - Notice of a Charge Conference must be given from the pulpit or in the weekly church bulletin not less than 10 days prior to the meeting. - Majority of the Charge Conference (members attending) must approve action to be taken and must authorize any two officers of its Board of Trustees to execute necessary documents. - Resolution of the Charge Conference is certified by the Conference Secretary. - Written consent of both Pastor and District Superintendent must on or affixed to any deed or Deed of Trust from the local church. 23 SPECIFIC CHURCHES: METHODIST CHURCH continued - Title to abandoned church property reverts to the Trustees of the Methodist Church Conference in which the property is located and may be disposed of by them. 24 8
SPECIFIC CHURCHES: PENTECOSTAL CHURCH OF GOD IN AMERICA - Denomination is incorporated nationally, presided over by the Bishop General (f/k/a the Overseer), and divided into Districts under District Bishops. - Individual congregations function as chapters of the national corporation. - All District transactions are approved and conducted by the District Board of Trustees (Executive Committee) composed of the Bishop, Secretary-Treasurer, and Presbyter of the District. - Certificate of resolution and documents are signed by the same individuals in those capacities. 25 SPECIFIC CHURCHES: PRESBYTERIAN CHURCH - Book of Church Order of the Presbyterian Church in America governs church operations. - Board of Deacons controls church property under direction of the Church Session composed of the minister and Ruling Elders. - Incorporated church: Chairman and Secretary of the Board of Deacons are the chairman and secretary of the corporation, and Board of Deacons is the board of directors. - Unincorporated church: Board of Deacons functions as trustees of the unincorporated association. 26 SPECIFIC CHURCHES: SEVENTH-DAY ADVENTIST - Local congregations are governed by Local Conferences that affiliate as Union Conferences under the 13 Divisions making up the world-wide General Conference of the denomination. - On the Conference Division level, title to all properties (churches, camps, office buildings, parsonages, etc.) is held in the Conference Corporation of Seventh-day Adventists. - Conference Corporation s Board of Directors must authorize any legal action pertaining to the purchase, trade, or sale of denominational property under its jurisdiction, and the Conference Corporation Treasurer is the initial contact person. 27 9
UNAFFILIATED INCORPORATED CHURCHES When There is No Organizational Documentation - Require voted action/approval by both the congregation and its governing board, if any (begin with congregation s approval and end with board s resolution or vice versa). - Notice of the congregation s meeting to authorize the transaction should be sufficient to promote attendance, e.g. announcements at two prior meetings/services or one announcement and notice in church bulletin/newsletter. - Action taken by congregation and board must be reduced to certificates of resolution signed by the permanent/acting secretary of each body. (continued) 28 INCORPORATED UNAFFILIATED CHURCHES continued - Congregation and board resolutions must authorize the church president (or the minister) to act for the church in execution of documents, with attestation of his/her signature by the church secretary. 29 AD VALOREM TAX ISSUES - All sales to or by a church: Talk to your Appraisal District BEFORE closing! - Not all church-owned property is tax exempt, only what is involved in the operation of the church and its ministries. - Sale from a non-exempt seller TO a church for its exempt use: Appraisal District may compute and accept payment of seller s tax obligation for the current year before taxes have been assessed. - ROLLBACK ALERT! When a church sells its tax-exempt property to a NON-exempt buyer, TEX. TAX CODE 11.20 authorizes Appraisal District to assess 5 years of rollback taxes plus 7% interest. A statutory tax lien securing payment of these taxes attaches immediately on transfer of title by the church. 30 10
SHARIA-COMPLIANT MORTGAGES - Program is designed to comply with Muslim law and its prohibition against payment of interest. - Program example: - Program Financier provides funds for purchase/refinance. - Consumer is the individual borrower. - Single-purpose LLC is created to be a co-owner with the Consumer (takes title with Consumer in a purchase or is deeded undivided interest by Consumer in a refinance). - Undivided interest of LLC declines as Consumer makes payments to Financier. (continued) 31 SHARIA-COMPLIANT MORTGAGES continued - For more detailed information, see Stewart Bulletin No. SLS2009002 dated 2/12/2008. 32 THANK YOU! For Escrow Officer Credit, please email the password, attendees names, and TDI License number (if you have one) to CECertificate@stewart.com for the certificate (please do this as soon as possible and make sure the e-mail includes the name(s) as it should appear on the certificate). Please be aware that due to TDI's strict policies on issuing credit, you must pay close attention to the password given at the end of the webinar as we are unable to give it out once the presentation has been terminated off of Webex. For this webinar, please include Praise the Lord & Pass the Title in the subject line of your e-mail. Please make sure your request is submitted one time only. Submitting the same request multiple times and to multiple e-mail addresses will only delay the processing of your certificate. Attorneys email bar card number to CECertificate@stewart.com for CLE credit. Next Texas TIPS Online July 17, 2014, Side Programs for Agents by Brandon Linscomb. Questions/Comments? Email john.rothermel@stewart.com Certificates will be e-mailed out within 5 business days of your request. Should you not receive your certificate by the end of the 5 th business day, feel free to contact us at that time. The presentation materials will be available at www.stewarttexas.com within 5 business days of the webinar. 33 11