Commercial Real Estate News / Investing / Property Law Considerations for Religious Facility Investors

Property Law Considerations for Religious Facility Investors

Published: 09-06-23 Category: Investing

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Religious facilities can present unique investment opportunities for those looking to purchase commercial property. You probably wouldn't consider it, but buying churches and other religious facilities for sale can yield long-term rewards with the right investment strategy.

Here, we'll cover everything you need to know about the relevant property law for religious facilities for sale. We'll talk about the definition of religious facilities, religious facility ownership structure, religious property land use clauses, and more.

Let's get started.

What Is a Religious Facility?

Property Law Considerations for Religious Facility Investors

In legal terms, a religious facility is any kind of building or structure in which people perform religious worship and ceremony rituals. Common examples of religious facilities include:

Churches;
Synagogues;
Mosques;
Temples; and
Monasteries.

A religious facility may not refer to a single building but may rather include multiple buildings on a single campus. The term "religious facility" encompasses the main structures on the land as well as any associated improvements.

From the perspective of real estate investors, religious facilities are a type of special-purpose real estate that can generate passive income. Facility owners can lease buildings to congregations that want to expand or renovate the church. You can even establish a ground lease that you can use to open up some of the land to develop other facilities.

What Are the Differences Between Public & Private Non-Profit Organizations?

The main difference between public and private non-profit organizations is the constraints on board management and ownership. Public non-profits must have a sufficiently diverse board of directors that accurately represents the public's interest. This means that any board members can't be employees of the organization.

A private non-profit, in contrast, can be controlled by a small group of people or families that also includes employees. In other words, the owners of private non-profits have much more control over the organization.

Most churches and other religious facilities in the US are classified as 501(c)(3) charitable non-profit organizations. This special status gives religious facilities in the US access to tax-free donations and exemptions from income taxes. Additionally, the 501(c)(3) status means that church owners don't have to pay capital gains taxes on any property appreciation.

Are Churches Private Property?

Yes, churches and other types of religious facilities are generally considered private property in the US. Due to the First Amendment, churches are exempt from many regulations and tax laws that cover other types of private property.

Churches are exempt from state and federal income taxes and owners don't have to register them with the government. However, churches do still have to follow federal health & safety regulations and employment discrimination laws.

Who Usually Owns Churches & Other Religious Facility Property?

The answer to this question generally depends heavily on the specific religious institution and the structure of the denomination. For example, smaller, independent churches can be held in trust by a separate holding company. Other independent churches might have a single owner that leases the building to a congregation.

Denominational churches, in contrast, are usually owned by the local diocese. For instance, Catholic churches are considered the property of the legal corporation that is the local church diocese.

Where Can I Buy Religious Facilities for Sale?

The simplest place to start looking for religious facilities for sale is the Internet. Aside from major listing sites for buying commercial real estate, you can find specialty sites specifically for buying and selling religious facilities.

Religious facilities can vary in size from small, single-room facilities to large church complexes with multiple buildings. As such, the price of buying religious facilities for sale varies heavily depending on the state and city, as well as the type of building and its amenities. According to data, the average management and upkeep costs for a church facility are between $5.25 and $7.50 per square foot per year.

One of the best ways to find churches for sale is to work with a church real estate broker. A church broker has the specialized skills for buying and selling religious facilities. A church broker can not only help you find properties but also explore options for commercial real estate financing, analyze real estate financials, and negotiate sales contracts.

What Is the Religious Land Use Clause?

The Religious Land Use and Institutionalized Persons Act (RLUIPA) of 2000 prohibits zoning discrimination against religious congregations, individuals, and houses of worship. In other words, this law means that zoning laws cannot exclude religious facilities when they allow similar structures, like theaters and other secular meeting places.

The point of the RLUIPA is to protect religious individuals and congregations from discrimination and promote their First-Amendment freedom of assembly. It prohibits instituting zoning laws that place an ‘undue burden' on religious congregations.

What Are Some Land-Use Regulations of Religious Uses?

Here is an example of a hypothetical land use case where RLUIPA would apply. A county that has no zoning areas that allow for religious facilities would count as a violation of RLUIPA.

Below are some examples of real-world RLUIPA cases:

In 2007, the Albanian Associated Fund sued the township of Wayne, NJ under RLUIPA after the city took property meant for a mosque under eminent domain laws.
In a 2006 case, the Department of Justice (DOJ) sued the township of Hollywood, FL for not issuing permits for a Jewish synagogue in an area that already had other religious facilities.

Since RLUIPA's inception in 2000, the federal government has prosecuted about 485 RLUIPA land use investigations. If you're planning on buying a church or religious facilities for sale, it's important to familiarize yourself with these types of religious land use laws and regulations to understand your rights as the owner of religious property.

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