The acquisition, disposition and mortgaging of land owned by churches and other religious institution non-profit organizations have become increasingly common in recent years. In Ontario, such transactions have specific requirements, which are too often overlooked internally by religious organization themselves, as well as the lawyers completing the transactions.

In general, the holding and disposition of land by religious organizations is governed by the Religious Organizations' Lands Act, RSO 1990, c R23 (the "ROLA"). It's important to note, however, that ROLA does not apply to incorporated religious bodies, because incorporated bodies are not "religious organization" within the meaning of the ROLA. This article focuses solely on unincorporated religious organizations.

In addition to the ROLA, there are several specific acts enacted for particular religious entities. For example, the United Church of Canada Act (the "UCCA") also covers the acquisition, disposition and mortgaging of land owned by United Church organizations. In the event of a conflict between the ROLA and a specific legislation applicable to that entity, the applicable specific legislation governs.

In Ontario's ROLA, a "religious organization" means an association of persons,

  1. That is charitable according to the law of Ontario
  2. That is organized for the advancement of religion and for the conduct of religious worship, services or rites, and
  3. That is permanently established both as to the continuity of its existence and as to its religious beliefs, rituals and practices

and that is organized for the advancement of and for the conduct of worship, services or rites of the Buddhist, Christian, Hindu, Islamic, Jewish, Baha'i, Longhouse Indian, Sikh, Unitarian or Zoroastrian faith, or a subdivision or denomination thereof.

Under section 2 of the ROLA, religious organizations are authorized to acquire land for certain specific purposes and the land is to be held in the name of trustees appointed by the organization. The land automatically vests in each trustee's successors without a conveyance.

In some cases, a religious organization's constitutions fail to permit the appointment of trustees to own land and, as such, there is no authority for the trustees to hold the acquired property. Section 3(6) contains a remedial provision permitting the passing of a resolution appointing trustees to hold land on its behalf would automatically vest property in the names of the newly appointed trustees. A resolution respecting any purpose of the ROLA is adopted by a majority vote and a copy of the resolution is signed by the chair and secretary at the meeting. In lending to a religious institution, it is essential to obtain certified copies of the resolutions to determine the authority of the trustees.

The power to mortgage land is found in section 9 of the ROLA. The provision reads:

"The trustees of a religious organization may secure any debt contracted for the acquisition or improvement of land under this Act, or for the building, repairing, extending or improving of any buildings thereon, by a mortgage or charge on all or any part of the land of the organization."

As noted, there is a significant limitation on the power to mortgage land and debt must be contracted for one of the various purposes listed in section 9. Further, section 20 provides that:

20 "Any instrument affecting land made by or to trustees under this Act shall be expressed to be made under this Act, but failure to do so does not render the instrument void."

As such, when registering a mortgage against a religious entity, it is important to obtain a statement that the trustees are following the requirements of the Act in order to comply with Section 20. The party dealing with the registry office should understand with any provisions of church constitutional rules that may affect the transaction. It is recommended that an officer and a lawyer for the church provide a certificate and an opinion regarding compliance with ROLA and the church constitution, if any.

As with any real estate transaction, it is important that the lender or buyer understand the content of instruments registered against the property, including any trust or registered restrictions on dealing with the land. Finally, the lawyer acting for the lender or buyer should confirm if property tax or HST payable and not assume that the entity is exempt.

As mentioned above, in addition to the ROLA, the religious organization must also comply with any specific act related to their specific religious organization and there may be additional or different requirements that need to be considered, including consent of hierarchal bodies within the organizations. For example, the UCCA requires consent in writing of the Regional Council within the bounds of which the lands are situated.

As always, it is important to consult with a lawyer to confirm the exact requirements with respect to each transaction related to the acquisition, disposition or the mortgaging of land owned or to be owned by religious organizations.

Take-away

  1. The purchase, disposition and mortgages related to land owned by unincorporated non-profit organizations requires special considerations and lawyers completing those transactions.
  2. Holding and disposition of land by unincorporated religious organizations is generally governed by the Religious Organizations' Lands Act, RSO 1990, c R23.
  3. There are several specific acts enacted for particular religious entities that set out specific requirements with respect to that organization regarding the acquisition, disposition and mortgaging of land.
  4. The power of Trustees to mortgage land and debt must be contracted for one of the various purposes listed in section 9 of Religious Organizations' Lands Act, RSO 1990, c R23.

Should you have any specific questions about this article or would like to discuss it further, you can contact the authors or a member of our Real Estate Group.