After being elected pope in 1181, Lucius lived at Rome from November 1181 to March 1182, but dissensions in the city compelled him to pass the remainder of his pontificate in exile, mainly at Velletri, Anagni and Verona. Lucius was in dispute with the Holy Roman Emperor Frederick I over the disposal of the territories of the late Countess Matilda of Tuscany. The controversy over the succession to the inheritance of the Countess had been left unsettled by an agreement of 1177, and the Emperor proposed in 1182 that the Curia should renounce its claim, receiving in exchange two-tenths of the imperial income from Italy, one-tenth for the Pope and the other tenth for the cardinals. Lucius consented neither to this proposition nor to another compromise suggested by Frederick I the next year, nor did a personal discussion between the two potentates at Verona in October 1184 lead to any definite result. During the conflict between Frederick I and the papacy, the problem of heresy required a political solution. In 1184, Lucius decreed Ad abolendam that all "counts, barons, rectors, consuls of cities and other places" who did not join in the struggle against heresy when called upon to do so would be excommunicated and their territories placed under interdict – and declared that these provisions joined the apostolic authority of the church with the sanction of imperial power. In the meantime other causes of disagreement appeared when the Pope refused to comply with Frederick I's wishes as to the Imperial regulation of German episcopal elections which had taken place under the authority of the German-sponsored antipopes, both during and after the recent schism, especially as regards an election to the See of Trier in 1183 contested between the papal candidate Folmar of Karden and the imperial candidate Rudolf of Wied. In pursuance of his anti-imperial policy, Lucius declined in 1185 to crown Henry of Hohenstaufen as Frederick I's destined successor, and the breach between the Empire and the Curia became wider on questions of Italian politics. In November 1184 Lucius held a synod at Verona which condemned the Cathars and Paterines, Waldensians, Josephines, Pasagians and Arnoldists, and anathematized all those declared as heretics and their abettors. Contrary to what is often said, he did not institute the Inquisition, which was not created until the reign of Pope Gregory IX in 1234. Despite the fulminations of the first three Lateran Councils against married clergy, Lucius wrote in 1184 to the abbot of St. Augustine Canterbury suggesting that the parson of Willesborough should retire and pass the benefice to his promising son, who could then pursue his studies, showing continued papal tolerance of married clergy at this late date.
Death
In 1185 preparations began for the Third Crusade in answer to the appeals of King Baldwin IV of Jerusalem. Before they were completed, Lucius III died in Verona.
