Trusteeship

Prop Corp was incorporated under an Act of Victorian Parliament in 1941 established by the will of the Conference of Churches of Christ in Victoria.

Prior to the incorporation of a body corporate in 1941, local church members acted as trustees of church titles. Over time the Church Extension Committee, followed by the Church Extension Properties Trust and Bequests Committee and later the Church Building Debts Committee were formed to facilitate trusteeship and financing of church property for Conference churches. These committees were under the control and supervision of the Conference of Churches. (Preamble, Churches of Christ in Victoria Property Act 1941 Act No. 4818/1941)

The history of progression from individual trusteeship to a trustee body corporate came about because of the inherent difficulties of churches holding titles and raising finance to secure and develop property. Many of these issues are still present today despite the introduction of the Victorian Associations Incorporation Act in 1981 and the rationalisation of financial markets in the 1980s which overcame a number of the previous hurdles to churches holding titles and accessing development finance.

Notwithstanding these advancements, many of the same historical issues are still inherent in the nature of church trusteeship today and include the following:

• Conflict of leadership jeopardising local church trusteeship even under an incorporated association
• Difficulties with church financing, as banks and other financial institutions are reluctant to provide finance to churches for a number of reasons including:
  • Negative community perceptions impacting the financier where the mortgage has to be foreclosed
  • Uncertain cash flow and margins to sustain loan serviceability
  • Overcapitalisation of the special purpose nature of church buildings complicating the loan to asset ratio
• The potential exposure of local church members acting as guarantors to banks or making personal loans directly to the church to assist in seeking outside financing
• Limitations of incorporated associations compared to a statutory church trust. For example, incorporated associations can be far m0re easily wound up or forced into liquidation
• Increase cost of administration due to regulatory requirements of the Associations Act
• Increased exposure of local churches and boards to litigation
• Rise of the regulatory tide swamping smaller churches that lack the time, funding and expertise to comply e.g. Building Regulations, OHS, employment conditions and tax legislation both State and Federal
• Lifting the “corporate veil” on directors of corporate churches

The early history of trusteeship highlights a number of key points:

• Corporate trusteeship was initiated by the Conference of the churches known as the Churches of Christ
• The Conference initiative toward corporate trusteeship demonstrated the “brotherhood” and goodwill of churches for the benefit of all of Conference
• Trusteeship of titles was by voluntary participation by churches
• Corporate trusteeship was intended to reduce interest rates and financial strain on trustees, guarantors and churches

The move to corporate trusteeship prior to 1941 was not embraced by all churches but was supported by the majority of churches so that by the late 1960s most titles were held under Churches of Christ trusteeshipThe 1941 Act contemplates an association of which each individual church and its congregation are members. This is not to deny the individual character of each church but it does emphasise the historical position that each church is a member of a larger association called The Churches of Christ in Victoria now known as the Conference of the Churches of Christ in Victoria and Tasmania. It must be remembered that each state has its own Act. Tasmania is cited as the Churches of Christ Tasmania Act 1978.

Prop Corp is the incorporated trustee under the Act on the basis that church titles are held for the Churches of Christ in Victoria under terms of trust contained in the Act, which is different to holding assets as a fixed beneficial trust directly for respective churches.

The nature of this trust comes from the historical position of each church being a member of a larger association, the Churches of Christ. Church trustee parliamentary Acts are typically drafted to enable a broader trusteeship in the interest of the churches corporately at the state level i.e. denomination or in our case movement.

It is for these reasons that the mainline churches have guarded their church trusts jealously. From a corporate church governance perspective, the benefits of trusteeship under parliamentary legislation include:

• Perpetual existence
• Certainty where gifts and bequests are ambiguous
• Obtaining fresh objectives for relocation of purposes where a church, department or agency, for example, no longer exists
• Protecting denominational (in our case Conference) property
• Facilitating financing and funding of church development and protecting church assets from bank mortgage foreclosure
• More sustainable charitable and religious exemptions

The Act is clear that the transfer of property titles, amendments to the trusts by which church titles are held under the First Schedule of the Act, and any rules made by the Trustees, are subject to the will of the Conference (sections 10, 13(3), 17(1) of the Act).

This means the Conference ultimately has the power to decide on whether or not to approve a transfer of titles, retain capital sale proceeds or decide on any other matter impinging on trusteeship of church assets, whether by way of an isolated or specific motion or more generally by way of policy, rule or amendment to trusts in the First Schedule of the Act.

Most titles are either listed in the Second Schedule of the Act, which is under the trusts of the First Schedule, or have been directly assigned, at purchase, to Prop Corp as Trustee, and therefore under the First Schedule (sections 6 and 4 of the Act).

In Victoria the Act’s First Schedule allows broad powers for the church to enjoy and use the property without the need to incorporate or seek external finance. This includes building, alterations, mortgage, sale and purchase, lease, repair, insure and use proceeds to meet liabilities and responsibilities.

The First Schedule of the Act defines the terms of the trust held for the church by Prop Corp which among other things allows for the congregation of any Church of Christ to manage its own affairs so no loss of autonomy in this respect is suffered by individual churches.

In Victoria, churches may request titles to be transferred from Prop Corp to the church on satisfaction of Section 10 of the Act which requires the direction and consent of the Churches of Christ in Victoria and Tasmania under a resolution of a Conference general meeting.

In Victoria policies impacting on Prop Corp’s trusteeship of church titles are subject to the will of the Conference general meeting according to sections 10, 13(3), 17(1) of the Act which govern the transfer of property titles, amendments to the trusts by which church titles are held under the First Schedule of the Act, and any rules made by the Trustees.

Prop Corp is the Churches of Christ in Victoria and Tasmania appointed Trustee of property titles for and on behalf of its affiliated churches according to the respective state Acts in Victoria and Tasmania.

A church is expected to use trustee property to fulfil the church’s purposes, in accordance with the purposes, values and policies of Churches of Christ, and any legal compliance. (Affirmation, Affirmation by Churches item 18)

Churches may use property sale proceeds for the purposes of the church. The only proposed caveat to this is when a church falls below 25 or 10, and then Churches of Christ in Victoria and Tasmania becomes more directly involved in the management of the church and the stewardship of any property involved. Currently Churches of Christ in Victoria and Tasmania enter into conversations through the Partner Departments when a church is considering closing, merging or disaffiliating. (Affirmation FAQs Q10 p2)

Churches are encouraged to practice wise stewardship of assets entrusted to the church including proceeds of property sales by consulting with Prop Corp and making use of Prop Corp’s services.

Prop Corp will endeavor to meet a church’s financing requirements, as this is a core purpose of its mission. Where Prop Corp is unable to provide financial services to a church, at the church’s request, and as Trustee of a church’s title(s), it will facilitate security arrangements as required with an external financial institution.