Buying and Selling a Church Building

According to Statistics Canada, more than one-third of Canada’s population reported having no religious affiliation or having a secular perspective (atheist, agnostic, humanist, etc.) about spirituality. The proportion of this population has more than doubled in 20 years, rising from 16.5 per cent in 2001 to 34.6 per cent in 2021. The decline in religious affiliation is backed up by other findings, which show that fewer people reported the importance of religious or spiritual beliefs in their lives, down from 71.0 per cent in 2003 to 54.1 per cent in 2019. In 2009, there were just over 27,000 churches in Canada. As of 2019, due to the increase in secular attitudes, a decrease in congregants and rising building maintenance costs, one-third of churches, or 9,000, were likely to be closed, sold or repurposed by 2029. While a gut-wrenching loss for many communities across Canada, by repurposing these buildings or even just the land they sit upon, every church building sale becomes an opportunity for commercial real estate investors to create a new legacy for them.

Benefits of Being a Part of a Church Building Sale

• Portfolio Diversification with a Truly Unique Asset
  Whether in the stock market or commercial real estate, a diverse portfolio better protects investors from market volatility. By adding church properties to their portfolios, investors acquire assets with a timeless appeal and, often, irreplaceable architectural features executed with unmatched craftsmanship.Although not usually as regally appointed, convents have their own rich history, and because they were originally designed to house many lifetime residents and also allow nursing, teaching and social work to take place under their roofs, convents can often be converted to artist studios, multi-family residential properties or senior-care facilities much easier than a church building sale.
• Centralized Locations with Easy Access
  Because they were designed to service large congregations, a church building sale usually involves a property located on prime real estate in the heart of a community. Many churches have large parking areas and are situated on significant parcels of land, which may even include extensive gardens or wooded areas designed for quiet contemplation. Retail shops and amenities will likely have sprung up nearby, as well as links to public transportation.
• Versatile Usage Options
  Because the possibilities for redesign and repurposing are practically endless, a church building sale will appeal to many stakeholders. Commercial real estate investors have previously converted former churches into community arts, education or recreation centres, event spaces, office buildings, residential properties, and more.
• Investments With a Significant Opportunity for Value Appreciation
  Because churches are often found in strategic hub-like locations on large parcels of land that are becoming increasingly scarce in both urban and rural areas, church properties have the potential for significant appreciation.
• An Opportunity to Preserve the Past While Reinventing for the Future
  By participating in a church building sale, investors can preserve a piece of the past while reinventing it for a long-lasting future. If the property is still structurally sound, the purchase ultimately contributes to maintaining the cultural history of an area. Because communities are heavily invested in a positive outcome for these projects, provided buyers, sellers, and developers are respectful, the project can benefit from favourable community relations and goodwill from its inception.
• Community Impact
  Few buildings have the potential for the sort of cradle-to-grave impact on a community that a church has. From celebrating the birth of a child and giving singers and musicians their start in church choirs to gathering the neighbourhood together for religious holidays and weddings – and then, finally, for funerals – churches are where milestones are marked.Beyond potential financial gains, investing in a church building sale lets stakeholders keep a church’s community-building traditions alive while facilitating new, meaningful memories.

Due Diligence For a Church Building Sale

Investors considering a church building sale still need to do careful due diligence before they sign on the dotted line.

Areas to investigate include:

• Zoning, Permitting and Land Use Regulations
  Reviewing zoning bylaws and land use regulations that govern property in a church building sale is crucial, as zoning designations can affect their potential conversion and future uses. By examining all applicable regulations, investors can determine if they’ll need special permits or variances for a desired end product.
• Heritage Designations and Conservation Restrictions
  In Canada, churches may be eligible for a heritage designation from any level of government, including municipal, provincial or federal. Put in place to safeguard a building’s historical integrity, character and cultural significance, heritage designations and conservation restrictions can add substantial costs to planned renovations if they’re allowed at all.
• Structural Integrity, Building Code and Compliance Issues
  As in any commercial real estate deal, inspectors must investigate the structural integrity of the foundation, roof, plumbing and electrical systems in any church building sale. Because many churches and convents were constructed long ago, although the stained-glass windows and brickwork will reveal genuine artistry, many other areas will not comply with today’s building codes.
• Cost of Renovations
  Old churches and convents will almost always require extensive renovations to get up to code and to convert into community or commercial spaces. It’s essential to determine the total cost of upgrades and renovations so that these can be factored into financing.
• Environmental Liabilities
  Hazardous materials like asbestos, lead-based paint, urea formaldehyde and other contaminants may hide deep within church and convent buildings.Most lenders require investors to conduct an Environmental Site Assessment (ESA) on properties before they approve financing, and a church building sale is no different. Real estate lawyers can help investors by including allowances in offers to purchase that set aside the proper amount of time to complete both Phase 1 and Phase 2 studies. Offers should also include the right to terminate the transaction at any stage of the ESA or if the ESA reveals any contamination.
• Tax Implications and Charitable Status
  Because many churches in Canada are considered registered charities, many are exempt from various taxes and financial obligations.Investors interested in a church building sale should confirm the property’s current tax status and identify exemptions that could affect property taxes for future owners. If another religious organization purchases the property, sellers need to ensure any tax-exempt status is appropriately transferred. In the case of a sale to an individual or company looking to use the property for non-religious purposes, it will need to be revoked.

The Role of Real Estate Agents in a Church Building Sale

Not all real estate agents have experience facilitating a church building sale, so finding one with knowledge in this particular commercial real estate niche could be challenging.

Once you’ve found one, the expertise they’ll bring to the table includes:

• Market analysis and property valuation
• Familiarity with zoning and permitting
• Familiarity with heritage status and conservation restrictions
• Deal structure and negotiations

Every church building sale in Canada requires buyers and sellers to pay careful attention to a long list of due diligence tasks while being mindful of churches’ unique historical, cultural and emotional legacy within the heart of a community. Commercial real estate agents can help buyers and sellers navigate the complexities of a church building sale, so all parties feel respected and valued as they prepare to embrace a new future.