When a party gifts real property to a charity, it is not unusual for them to put a condition on the gift in order to ensure the property will be used for a particular purpose. Such conditions will be encompassed in the language of the deed transferring the property. It does not matter how much time has passed since the donation, the conditions specified in the deed still apply as demonstrated in a recent decision of the New York Supreme Court, Appellate Division, Third Department. The case illustrates how important it is to carefully draft any conditions on a gift or transfer of property as well as ensure compliance with the terms, so the gift does not revert to the donor.

Paul Smith’s Coll. of Arts & Sciences v. Roman Catholic Diocese of Ogdensburg involved a deed which had transferred property located in upstate New York to the Bishop of Ogdensburg in 1896. The language in the deed required that the property was to be used by the grantee “as and for Church purposes only, … and in case the said premises shall be devoted to any other use than for Church purposes, … this conveyance shall be void and the parties of the first part shall have the right to reenter and take possession of said premises and every part thereof.” (emphasis supplied).

The defendant had, since the time of the transfer in 1896 until 2015, used the property as required and had built a Roman Catholic church and related structures on the property. However, in 2015 the Bishop of Ogdensburg relegated the property to “profane” use (use for purposes other than Roman Catholic worship). The plaintiff thereafter commenced an action seeking a determination that it now owned the subject property. The Church opposed the action claiming that the plaintiff had lost its rights based on a 1963 deed between the estate of the last heir of the grantor (i.e., the donor of the property) and the plaintiff. In 1963, the estate issued a deed to the plaintiff transferring “rights of way, easements, reversionary rights and rights of reentry” to the property. The Church argued that by trying to transfer these rights by the 1963 deed, the reversionary rights were extinguished as a matter of law.

The appellate court disagreed with the Church’s argument finding that the grantor had conveyed the property to the Church subject to a “possibility of reverter” if the Church failed to use the property for church purposes. The court relied on the language of the 1896 deed which expressly stated that the transfer to the Church would be “void” and the grantor “shall have the right to reenter and take possession” of the premises if the Church no longer used the property for church purposes. Furthermore, the court found that the grantor had the right to transfer the possibility of reverter to the plaintiff or another party and this right was not extinguished by the 1963 deed. The court determined that plaintiff was the rightful owner of the entire property as well as the church buildings located on the property, in that both the property and any fixtures thereon reverted to plaintiff.

While this situation seems extremely rare, the lesson here is that the language in a document, no matter how old, controls the legal relationship between the parties thereto and their successors in interest. As such, proper drafting is essential in protecting a party’s rights.

If you have any questions regarding an agreement you have signed or are about to enter into, please contact one of our business or real estate attorneys.