Keypoint:  Due diligence when purchasing assets is paramount. It is never safe to assume that you can put a church in a particular location.  Make sure that zoning and planning gives you their "Ok" in writing before you make any financial commitment.

Today I want to share with you how having the right infrastructure in your church can save your dream.  The life of ministry can take turns on a dime.  Walk with me for a moment right now and allow me to show you how one church in Arizona bought a dream building for their congregation, but lost it because of a zoning law.  There are times in your ministry that you perceive God to be doing a particular thing, only to realize He really has other plans, which you only discover once you are in way too deep to retract.  He does that on purpose to get you to move into areas that are much bigger than you.  Readiness is just as much a part of receiving a blessing as believing.   In other words, I am so convinced that God is going to bless me that I am making plans today by building the biggest net I can to receive it all.  The disciples' net began to break when it only had 153 fish.  Its structure was too small and weak.  How big and strong is yours?  I am going to show you how this Arizona church's foundational structure could have saved the building and also propelled the church into a bright new future.

When you think your dream has arrived

In 2007, a pastor and a 250-member congregation in Yuma, Arizona purchased a 17,466 square-foot building on Main Street for $415,000.00.  Their dream was to offer worship services and activities on a daily basis.  They wanted a church that would also teach music and dance lessons, counseling, summer Bible camps, GED classes, English classes, and computer classes.  They looked for a very long time to find the perfect place for their church, and after years of searching, they found just the right spot: a former department store building that had been vacant for several years!  It looked like the perfect building.

Due diligence must be thorough

After signing the purchase contract, the church attended a pre-development meeting with the city as a matter of due diligence.  They wanted to be sure they could operate a church at that location.  They asked if "there were any potential problems with operating a church at the property."  The city staff informed them that the church would have to apply for a conditional use permit before they could operate a church on Main Street because it was located in the Old Town district.  Feeling satisfied with the city's answer, they closed on the building and began preparations to fulfill the church's dream. 

Request Denied

Once the building was fully purchased, they prepared their conditional use permit application and submitted it to the city.  Now the only thing left to do was to have a community meeting for public comments and then a hearing before the Commission, who would vote.  At the hearing, the City's Community Planning staff presented a report recommending denial of the church's application.   They stated that the application was inconsistent with the city's historic downtown plan and zoning ordinances.  Though the city staff had told the church that they would have to submit a conditional use permit application, the church never contemplated that their application might get denied.  What should they have done?

Going to court

Feeling out of options, the pastor and the church believed they had no other alternatives but to take their case to court.  They filed a suit in the District Court of Arizona.  They argued that the city's denial of their application violated the Religious Land Use and Institutionalized Persons Act.  In essence, Sub Section 2000cc(a) states, "No government shall impose or implement a land use regulation in a manner that imposes a substantial burden on the religious exercise of a person, including a religious assembly or institution . . ." The problem with the law is that it never defines what is a substantial burden.  Therefore, the district court relied on the U.S. Supreme Court ruling on previous cases that defined substantial burden as "more than an inconvenience," "oppressive to a significant great extent," or a "significant great restriction upon the exercise of religion."  In the 32-page ruling, the court ruled that because the church bought the property before applying for the conditional use permit, the city did not place a substantial burden upon the church.

Looking ahead to the future

The more I have studied this case, the more I realize that our plans do not always turn out as we expect they will.  It is imperative that we learn to recognize as opportunities what might otherwise appear as setbacks.  However, I am not speaking of the Arizona church's unexpected "denial" as being an opportunity, as much as I am referencing the overall church infrastructure they could and should have had in place, long before the building purchase was even a consideration, which would have let them come into the transaction with a far greater number of opportunities.  I have had the privilege of walking many pastors and church leaders through forming their ministries and the infrastructure that makes them succeed.  By creating solid legal structures, churches have the ability to fully engage a community on many fronts while minimizing liability.  I will explain later in this article.

Losing the building

Having lost the case, the building sat unused for several years.  Then in July of 2009, the building was foreclosed.  The joyful purchase of a 17,000 square foot building ended in the church having to walk away.  They lost their down payment and all other monies they put into the building.  Another corporation purchased it for $120,000.00.  It was a severe blow to the church.  I deeply felt their loss.  In fact, I paused in my research and writing to pray that God would use that season as a way to draw them ever closer to Him and that He would restore what they lost.

True due diligence before you buy or sign a lease

The pitfalls of purchasing real estate or signing a lease for the church can bring you a lot of grief.  I believe that 2015 will be a year during which an unprecedented number of churches will take the bold step of acquiring buildings and leases as their permanent places for the platform God has given them.  Though many cities in America have passed ordinances that make it difficult for churches, we must continue to remember that our hearts must remain unoffended.  God is ravished with love for your city.  He still wants to use your church to reveal His love for the city.  With that in mind, let me give some practical due diligence steps that will help your church avoid grief.

1.     Always begin with a letter of intent:  This is a letter that is written outlining the general principals of what an official agreement would contain.  The main reason for the letter of intent is to let the seller or landlord know you are interested in their building and that you would like to clarify the terms. 

2.     Make the deal contingent on zoning:  The letter of intent must state that you need to get written approval from zoning that your church/ministry can use the property as proposed. 

3.     Make any official contract contingent:  If the seller or landlord agrees to the terms of the letter of intent, move forward with an official contract, but make sure the contract has a contingency clause that requires official approval from zoning.

4.     Look for a planning and zoning manual:  Most cities have some sort of written manual that details the plans the city has for a particular area.  It is necessary to get familiar with it and make your proposal consistent with the manual.  I say this with trepidation; many churches try to reach a city without actually investing themselves in the city.  Why not come up with a proposal that actually propels a city's long-term plans forward?  By doing so, you earn the city's respect and your voice will be heard when you speak.  One thing I did not mention earlier was that Arizona has a law, which restricts most liquor licensing within 300 feet of schools and churches (A.R.S. § 4-207).  Granting the church the CUP (conditional use permit) would have foreclosed alcohol licenses for restaurants, wine clubs, and hotels.  The church would not have been well received as ministers of the gospel if their presence forced disruptions to these businesses.

How structure could have saved their dream

Looking to the future is always a necessary component of growing a church.  Often times, devastating news can cause one to give up.  That does not have to be you. Sometimes, when a church experiences a setback, it may not actually be a setback.  It may be an opportunity to reinvent and grow.  Here is a list of six things I believe the church in Yuma, AZ could have done with their building once they exhausted all of their legal possibilities of establishing their church at the Main Street location.    

1.     Start a for profit business. We also call it a for profit arm. In Section 502, the IRS calls it a "Feeder Corporation. It describes this as a business operated for the primary purpose of carrying on a trade or business for profit even if the profits are distributed to your church. 

2.   With the church holding ownership of a for-profit entity, It has the option to create Single Member LLC subsidiaries for the purpose of launching a range of businesses. This entire process can be executed while maintaining the church's tax exempt status.

3.     Use the for profit arm to start a coffee shop or restaurant or other business consistent with the city's zoning laws. The profits are then distributed to the church as dividends. Section 512(b)(1) exempts dividend income from taxes when such dividends are issued to the church.

4.     Have the for profit arm subdivide the rest of the space and sublease them to other potential merchants.  

5.     Enjoy the fact that the church not only created jobs, but also contributed to the city's plans, earning a seat at the table and influence in the future.

6. Lastly; enjoy the positive cash flow and expand their dreams.

Dream on

Having worked with 1,000's of pastors over the years, I can say that one thing every one of them has had in common is the fact that they are dreamers.  They are men and women whose hearts dream of what could be and should be in their city.  Sometimes, we hear stories like the church in Yuma, AZ and we can become timid in our dreaming.  But this is not the hour for small dreams!  This is the hour to dream big dreams. I believe the outcome for the church in Yuma, AZ could have been different if they would have been better coached through this difficult time.