This is not legal. The chair has no right to act except on governors' instructions, and I hope you will be brave enough to challenge him. I hope the decision is clearly minuted, so that when your clerk sends the minutes to the LEA the contradiction will be beyond dispute.
The clerk might ensure that the appropriate person in the LEA has the item pointed out and that the chair's letter goes to all governors. You might also wish to draw the attention of any specially interested governors to it.
In the end, it is for the governing body to ensure that the chair behaves correctly: it is their authority that he is usurping. If they actually voted on this matter it must be one they have a keen interest in so I don't think you need worry, as long as they get to know that it happened. It is a very serious matter and, as you know, there is now a procedure for voting the chair out at office in mid-term if the governors feel strongly enough about it.
Often heads, by working closely with the chair, come to feel rather in awe of him or her and reluctant to challenge. But an incident like this shows, in the end, how much more important the majority is to you. That's the side your bread is buttered.
Though not a church school, our village school is next door to the church and ever since I can remember, our hall has been used weekly for the Sunday school. They use our piano and sometimes our chalk boards. The heat is turned on in winter and the caretaker has to come out to unlock and lock, and clear up any mess.
No money has ever changed hands. Now our budget is under pressure and we wonder if we should raise the question of some token payment. Yet it is a community purpose and for children, most of them our own. The parish isn't rich.
The use of buildings outside school hours is your responsibility as governors and you are entitled to put community responsibilities above money if you think fit. Only you can decide whether your financial difficulties now make it essential to charge for the hire.
What you cannot do, however, (it is not legal) is to subsidise outside users from your LMS budget. You are doing so at present by making no charge for heat, light and caretaking, which come out of school money.
You must at once tell the church that you are legally obliged to recoup what it actually costs you to open the building on Sundays, whatever you do about rental.
Questions should be sent to Agenda, The TES, Admiral House, 66-68 East Smithfield, London E1 9XY.