Leasing a Plaza or Industrial Unit to a Place of Worship in Ontario: Zoning, Change of Use and Property Tax

The same congregation, the same rent and the same lease can be a workable deal in one building and a dead end in another. Where your unit sits decides which Ontario law does the deciding.

I’m Arthur Zhao, a real estate broker in Toronto. Picture one faith group, with one budget, looking at two vacant units a short drive apart. The first is an end unit in a neighbourhood retail plaza. The second is a clean, high-ceilinged bay in an industrial condo off a highway ramp. The group likes both. The landlords are offering similar rent and similar terms.

On paper these look like the same deal. Legally they are not. In the industrial building, a provincial definition that changed in 2024 may stop the use before the municipality ever looks at the lease. In the plaza, the answer lives in a local zoning by-law, and the bigger exposure is a permit rule whose wording reaches the person who allows a change of use, not just the one who makes it. And in both, the property-tax picture is the same, and it is not the one many people assume.

So rather than walk through the laws one at a time, I’ve organized this by the kind of building you own. Find the situation closest to yours and read that part first. One caution: I’m not a lawyer or a planner. This is general information drawn from the statutes themselves, and the city-specific answers have to come from your municipality and your own lawyer.

Situation 1: an end unit in a retail plaza

A plaza is usually zoned for commercial uses, and whether a place of worship is allowed in that zone is a question only your municipality’s zoning by-law can answer. By-laws differ from one municipality to the next, so I won’t guess at any particular city’s wording, and you shouldn’t rely on the prospective tenant’s word either: they want the space, and they may have been told something about a different property.

The rule that catches plaza landlords off guard is in the Building Code Act. Section 10(1) says that even though no construction is proposed, “no person shall change the use of a building or part of a building or permit the use to be changed” if the change would increase hazard, as determined under the building code, unless the chief building official has issued a permit. Read the middle phrase again. The prohibition is not limited to the person who moves the chairs in. An owner who lets the use change can be inside the wording too.

Whether turning a store into a gathering space counts as an “increase in hazard” is decided under the building code, not by the landlord or the tenant, so ask the local building department before the lease is signed. The building code text itself is not published on e-Laws, and I’m deliberately not quoting section numbers from the old regulation, which has been revoked. The fire-safety side of a change of use, such as exits and alarms, is a separate topic I’ve covered on its own; it’s in the related reading below.

Then there is tax. Section 3(1) of the Assessment Act begins by saying all real property in Ontario is liable to assessment and taxation, then lists exemptions. Paragraph 3 covers a place of worship, but only on land “owned by a church or religious organization or leased to it by another church or religious organization.” When the plaza is owned by an ordinary company or individual, that condition is not met just because the tenant is a congregation. The plaza stays taxable. How that tax is shared is a lease question: many commercial net leases pass realty taxes through to tenants as additional rent, but your lease is what governs, not the tenant’s status.

Situation 2: a bay in an industrial building or business park

Industrial units attract faith groups for good reasons: open floor plates, high ceilings, parking that sits empty on weekends. They are also where the provincial rules changed most recently.

The Planning Act defines an area of employment as land designated in an official plan for clusters of business and economic uses. The uses that qualify include manufacturing, research and development connected to manufacturing, warehousing and the movement of goods, retail and office uses associated with those, and ancillary facilities. The same definition then says the uses are not “Institutional uses” and not general commercial uses. That version of the definition came into force on October 20, 2024 (Helping Homebuyers, Protecting Tenants Act, 2023, Sched. 6, s.1).

Here I need to separate fact from inference. Fact: the Planning Act excludes institutional uses from an area of employment. Inference: the Act does not define “institutional use,” but places of worship are commonly treated as an institutional use in municipal official plans and zoning by-laws. If your municipality treats them that way, a congregation is exactly the kind of use the employment-area definition now leaves out.

Subsection 1(1.2) then closes the door for new arrivals. Official plan policies that allow an excluded use to continue “shall not authorize” that use on parcels where it was not lawfully established before that October 2024 date. In plain terms, if your parcel is in an area of employment and nobody was lawfully operating a place of worship on it before then, the provincial framework is working against a new lease, not for it.

So the first question for an industrial landlord is not about rent or parking. It is whether the official plan designates your land as an area of employment, and how your municipality classifies a place of worship. An industrial-looking building is not automatically inside a designated area of employment, which is why you check the plan rather than the look of the street.

Situation 3: a congregation is already in the building next door, or was in yours

This is the situation that produces the most confident wrong assumptions. A landlord sees a church operating two units over, or learns the previous tenant held services in the space, and concludes the use must be fine.

The Planning Act does allow for history, but narrowly. Subsection 1(1.1) says an area can still be an area of employment even if it contains parcels where official plan policies allow an excluded use to continue, provided the use was lawfully established on that parcel before the 2024 date. Two words do the work. “Lawfully” means operating with the permissions it needed, not simply operating. “Parcel” means that land, not the street or the business park. A neighbour’s continued use on its own parcel tells you nothing about yours.

If the earlier congregation was in your own space, ask for the paper trail before you rely on it: was the use permitted under zoning when it started, and was a change-of-use permit issued under the Building Code Act? A use that simply happened, without permission, is not the same as one that was lawfully established, and whether your municipality will treat a past use as continuing is its decision, not yours.

The neighbour’s tax bill can mislead you as well. If that congregation owns its building and uses it as a place of worship, paragraph 3 of the Assessment Act exemption may well apply to it, because the ownership condition is met. Your tenant would be renting, so the same exemption does not travel with it into your unit.

Before you sign a faith group as a tenant

Grouped by how much risk each step removes, highest first.