Source: http://woodrobbins.com/real-property-how-to-turn-an-old-church-into-new-condos/
Timestamp: 2019-04-19 11:17:58+00:00

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A little known secret about California law allows religious organiazations to tear down and sell their real estate without much of the process incumbent on other property owners.
By invoking a statutory exemption, churches – in conjunction with developers, if desired – can develop their property and ultimately sell their property following its development for profit and avoid the application of landmark preservation restrictions that can make the expensive land use entitlement process drag on for many years. However, certain requirements regarding prior, noncommercial use of the property and objections to the application of landmark preservation restrictions must first be met.
In that case, the developer filed applications for conditional use and building permits in 2004. The Board of Supervisors deemed the dilapidated and abandoned church on the site a historic landmark thereby prohibiting its demolition and ultimate development. Wood Robbins was hired to fight the landmarking decision.
We beat the City at the San Francisco Superior Court, arguing the landmarking decision violated California state law prohibiting local land use restrictions on religious organization owned property. The City appealed, but the Court of Appeal agreed with the Superior Court and affirmed in a unanimous vote. The decision was of sufficient import to warrant publication in the Court of Appeal reporter at 173 Cal. App. 4th 1559.
But that was not the end of the story. Reacting poorly to the ruling, the Planning Commission brought the 2004 environmental and CUP permit applications up for hearing and summarily denied both. The firm then filed action in federal court alleging violations of the Religious Land Use and Institutionalized Persons Act aka RLUIPA. That Act requires City undertake to consider and weigh the right of religious organizations when debating land use actions. Faced with another loss, the City settled with the developer and the site is now under construction. The case was featured on the front page of the leading San Francisco legal newspaper, The Recorder.
State law prohibits local governments from applying landmark preservation restrictions to noncommercial property owned by religiously affiliated organizations.
Two California statutes – California Government Code §§ 25373 and 37361 allow religiously affiliated organizations to exempt their noncommercial property from landmarking restrictions that otherwise might be imposed by local entities like cities. The California Supreme Court has upheld the constitutionality of these exemptions.
However, a property will not qualify for an exemption for noncommercial property unless it was used for the religious institution’s mission and not for profit before the religious institution seeks to invoke the exemption. The exemption cannot be invoked for property that was never used for noncommercial or nonprofit purposes and never related to the religious entity’s mission until after the landmark designation process commenced.
Therefore, if your religious organization’s property is not presently being used as a church or for any other religious purpose, but has been used previously for religious purposes, the statutory exemption may still apply as long as the procedural requirements discussed below are met.
The Religious Land Use and Institutionalized Persons Act of 2000 (“RLUIPA”), 42 U.S.C. § 2000cc et seq., is a federal law that prohibits the government from substantially burdening a person’s exerercise of religion guaranteed by the First Amendment.
The Ninth Circuit has recognized that the “right to build, buy, or rent [a place of worship] is an indispensable adjunct of the core First Amendment right to assemble for religious purposes.” RLUIPA has been held to apply to cases where the government takes into account the particular details of an applicant’s proposed use of land when deciding to permit or deny that use. In such cases, the religious entity has the burden of persuasion on whether zoning laws, or the application of those zoning laws to a particular party, “substantially burdens” its “exercise of religion.
However, a religious organization’s commercial endeavors, such as a sale of property for a secular use, do not constitute “religious exercise” protected by RLUIPA, even if undertaken in order to fund the organization’s religious mission.
As such, RLUIPA may be applicable to your church’s plans to develop its noncommercial property. However, if the proposed use of the development is not for the purpose of religious exercise, the federal protections will not be available.
We hope this summary of California law regarding exemptions for noncommercial property owned by religiously affiliated, nonprofit organizations and federal law prohibiting the government from imposing “substantial burdens” on “religious exercise” through land use regulations is helpful to your consideration of whether church property can acquire the protections of the exemption and then developed and sold for profit. Our firm has previously successfully represented a developer against the City of San Francisco’s efforts to apply historic landmark designation of church property that had been sold to a developer. (Note, past experience is no guarantee of future success).
 California-Nevada Annual Conference of United Methodist Church v. City and County of San Francisco, 173 Cal. App. 4th 1559, 1563 (2009); Cal. Gov’t Code §§ 25373, 37361.
 East Bay Asian Local Dev. Corp. v. State of California, 24 Cal. 4th 693, 721 (2000).
 California-Nevada Annual Conference, 173 Cal. App. 4th at 1565; Cal. Gov’t Code §§ 25373, 37361.
 California-Nevada Annual Conference, 173 Cal. App. 4th at 1565; East Bay, 24 Cal. 4th at 713.
 East Bay, 24 Cal. 4th at 714.
 California-Nevada Annual Conference, 173 Cal. App. 4th at 1565. This viewpoint of the Court of Appeal does vary from the earlier California Supreme Court opinion in East Bay, in which the majority construed “noncommercial” property as referring to “property whose use is related to the religious entity’s fulfillment of the owner’s religious mission but is not used for profit making purposes.” See, e.g., East Bay, 24 Cal. 4th at 715 (emphasis added); Or Khaim Hashalom v. City of Santa Monica, 190 Cal. App. 4th 375, 382 (2010).
 Or Khaim, 190 Cal. App. 4th at 384 (property at issue did not qualify for exemption because it had always been a commercial enterprise, at the time the religious organization purchased it and at the time the religious organization sought the exemption) (emphasis added).
 Id. at 385 (emphasis added).
 California-Nevada Annual Conference, 173 Cal. App. 4th at 1567.
 Guru Nank Sikh Soc’y v. Cnty. of Sutter, 456 F.3d 978, 985 (9th Cir. 2006).
 California-Nevada Annual Conference of the Methodist Church v. City and Cnty. of San Francisco, 74 F. Supp. 3d 1144, 1151 (N.D. Cal. 2014).
 Int’l Church of Foursquare Church v. City of San Leandro, 673 F. 3d 1059, 1069 (9th Cir. 2011).
 Guru Nank Sikh Soc’y, 456 F.3d at 986.
 California-Nevada Annual Conference, 74 F. Supp. 3d at 1153.
 Int’l Church of Foursquare Church, 673 F. 3d at 1067.
 California-Nevada Annual Conference, 74 F. Supp. 3d at 1151, 1154.

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