The power of a city to regulate (and severely limit) new land use through historic preservation policies does not extend to noncommercial properties owned by religious nonprofit organizations. This is the recent holding of the California Court of Appeal in a case that shields a local church group from the effects of a local landmark ordinance. The Court relied on a state law exemption that makes it very clear that local government cannot block a religious nonprofit organization from demolishing a noncommercial historic building for the purpose of disposing of the land for economic benefit. This could have major implications in San Francisco, where many religious groups struggle with declining membership, surplus properties (many historic), and no money to maintain or retrofit their crumbling buildings. The court made it clear that the City may not use preservation laws to stop these groups from demolishing and developing these sites.
On May 20, 2009, the California Court of Appeal issued an important decision that could impact the use of many of San Francisco’s historic old church properties. The Court’s decision provides guidance on what has been a controversial issue in San Francisco, pitting preservationists against religious organizations dealing with dilapidated old buildings and declining memberships.
The First St. John’s United Methodist Church, located on Larkin Street in San Francisco, was built in 1911, and used for religious purposes for over 90 years. However, by 2004 the dilapidated unreinforced masonry building required major seismic upgrades and structural repairs to be safe for human occupancy. Due to the hazardous condition of the property, as well as declining membership in the congregation, the building was vacated in 2005. The church concluded that the only rational decision was to demolish the building and sell the property in order to gain important revenue that would further the mission of the church by supporting its 14 other congregations located in San Francisco. Therefore, the church planned to sell the property to a developer that would construct residential housing. However, in an effort to block the demolition of the building and proposed development of the site, the San Francisco Board of Supervisors adopted Resolution No. 308-07 to designate the building as an official historic landmark, which would effectively prohibit demolition of the building and development of the site. The church filed suit in Superior Court to invalidate the Board’s action.
After the trial court ruled in favor of the church, the City appealed. In The California-Nevada Annual Conference of the United Methodist Church v. City and County of San Francisco (May 20, 2009, A122578), the California Court of Appeal ruled in a strongly-worded opinion that the San Francisco Board of Supervisors had no jurisdiction to adopt a resolution designating The First St. John’s United Methodist Church as a historic landmark under Article 10 of the San Francisco Planning Code.
The Court’s decision focused on California Government Code Section 25373. While Section 25373(b) provides the general rule that the Board of Supervisors may adopt regulations for the protection or use of buildings having a special historical interest or value, there is an exemption to this general rule (the “Religious Exemption”). Section 25373(d) provides that the general rule shall not apply to noncommercial property owned by a religious nonprofit organization, if the organization objects to the application of the general rule, and if the religious organization determines that it will suffer substantial hardship, which is likely to deprive the association of economic return on its property, or the appropriate use of its property in the furtherance of its religious mission.
The City maintained that the Religious Exemption only applies if the church had been currently using the property for a religious purpose at the time of sale. The City also argued that the church property is not noncommercial because the church had agreed to sell the building for demolition and the development of housing. However, the Court determined that both of the City’s arguments were without merit. Following the California Supreme Court in East Bay Asian Local Development Corp. v. State of California, 24 Cal.4th 693 (2000), the Court determined that the whole point of the Religious Exemption is to allow religious institutions to sell their dilapidated churches for a profit. Noting that the only reason The First St. John’s property stopped being a working church was because the property was too unsafe to be used for any purpose, commercial or noncommercial, the Court stated that a non-functional church structure, owned by a nonprofit, does not become commercial by virtue of it inactivity. Thus, the Court held that the Board of Supervisor’s adoption of Resolution No. 308-07 was improper and the landmark designation of The First St. John’s Church was invalid.
Reuben & Junius, LLP is a full service real estate law firm. We specialize in land use, development and entitlement law. We also provide a wide range of transactional services, including leases, purchase and sale agreements, formation of limited liability companies and other entities, lending/workout assistance, subdivision and condominium work.
