Many charities and non-profit organizations have office, meeting, or program space that sits unused for portions of the week. Renting that space to another organization can seem like a practical way to offset operating costs and make better use of an existing property. It can also support collaboration between organizations serving the same community.

A nonprofit property rental in BC, however, involves more than agreeing on a monthly payment and handing over the keys. Once another organization begins using the property, questions can arise around insurance, liability, permitted uses, taxes, and responsibility for damage or repairs. Problems often develop because arrangements that started informally between friendly organizations were never properly documented.

A written agreement and careful planning at the outset can help charities protect their property, maintain good relationships with other organizations, and avoid unexpected legal or financial consequences.

Before Your Charity Rents Out Its Space

One of the first questions to consider is whether the charity is legally permitted to rent the space for the proposed use. If the organization leases rather than owns its premises, its existing commercial lease may restrict subleasing, licensing, or sharing space without the landlord’s consent. The charity should review its lease before making any commitments to another organization.

Zoning and municipal requirements also matter. A property approved for one type of activity may not be approved for another. Office space used occasionally by another administrative organization may raise different concerns than space rented for child care, public events, counselling, food preparation, or other activities. Before entering into a charity lease agreement in BC, it is important to confirm that the intended use is permitted.

Insurance should be addressed early as well. The charity’s existing policy may not automatically cover activities conducted by another organization. Both parties should determine what coverage is needed and whether proof of insurance should be required. The charity may also want to speak with its insurance broker about whether the rental changes its risk profile.

Liability provisions deserve particular attention. If someone is injured while attending the tenant organization’s program, who is responsible? What happens if the tenant damages the building or equipment? These questions are far easier to address before an incident occurs.

Indemnity clauses are commonly included in lease and licence agreements to allocate certain risks between the parties. These provisions can have significant consequences and should be understood rather than treated as standard boilerplate. A clause that appears routine may place considerably broader responsibility on one organization than its board intended.

Financial and Practical Issues That Can Be Overlooked

Generating rental income may be appealing, particularly when a charity is managing rising operating costs. Registered charities should consider, however, how rental activities fit within their charitable operations and their obligations under the Income Tax Act.

The Canada Revenue Agency distinguishes between charitable activities and business activities, and registered charities are subject to rules regarding related businesses. Whether a particular rental arrangement creates concerns will depend on the circumstances, including the nature and extent of the activity. A charity considering regular or significant rental operations should obtain appropriate accounting and legal advice rather than assuming all rental income can be treated the same way.

The charity’s designation matters here as well. Charitable organizations and public foundations are permitted to carry on a related business, but a registered charity that is designated as a private foundation may not carry on any business at all, whether related or unrelated, and risks losing its registered status if it does. A charity that is registered as a private foundation should confirm its designation and obtain legal advice before undertaking rental activity that could be characterized as a business.

Property tax exemptions deserve particular attention in British Columbia. Many charities and non-profit organizations hold their premises under a statutory or permissive municipal property tax exemption, and these exemptions generally depend on how the property is used. Renting space to another organization, especially a for-profit business or an organization whose own activities would not independently qualify for exemption, can cause the rented portion of the property to lose its exempt status and become taxable. A charity should confirm how a proposed rental may affect its property tax position, and may wish to consult the municipality or legal advisors before entering into an arrangement.

Practical issues can be just as consequential as tax considerations. Shared spaces can generate disagreements about parking, meeting rooms, storage, cleaning, security, utilities, signage, internet access, and after-hours use. If these details are not addressed at the beginning, relatively minor concerns can become ongoing sources of frustration.

Account ownership and access should also be considered carefully. Keys, security codes, alarm systems, confidential files, and computer networks should be managed thoughtfully when multiple organizations occupy the same property. This is particularly important for charities that maintain sensitive information about donors, employees, clients, or vulnerable individuals.

A commercial lease involving a charity in BC should clearly establish who is responsible for repairs and maintenance, what alterations are permitted, how rent and additional expenses are calculated, and how either party can end the arrangement. Even when the tenant is another charity with similar values and goals, putting these expectations in writing protects both organizations.