Every so often a nonprofit gets a call that sounds like a windfall: a longtime supporter has died and left the organization a house, a farm, a rental duplex, or a downtown building. It feels like a blessing, and sometimes it is. But real estate is not the same as cash. It comes with taxes, maintenance, liability, and occasionally environmental problems that can cost more than the property is worth.
The board's job is to slow down long enough to figure out which kind of gift this really is. Here is how to do that responsibly.
Understand What You've Actually Been Given
Before anyone celebrates or panics, get the basic facts. A bequest of property is not final until the estate is settled, and the terms matter enormously.
Ask your executive director or attorney to confirm:
- How title will transfer. Is the property left outright, or held in a trust with conditions? Is your organization the sole beneficiary or one of several?
- Whether there are strings. Did the donor require you to keep the building, use it for a specific purpose, or name it after them? Restricted real estate gifts can lock you into obligations for years.
- What debts follow the property. An inherited building may carry a mortgage, unpaid property taxes, or liens. In many states those obligations pass with the asset.
- The condition and occupancy. Is anyone living there? Are there tenants, and if so, what leases are in place?
You cannot make a sound decision until these questions are answered in writing.
Run the Real Numbers, Not the Hopeful Ones
Property has a headline value (what a realtor thinks it might sell for) and a carrying cost (what it takes to hold it). Boards get into trouble when they look only at the first number.
Before accepting, the board should see a realistic estimate of:
- Property taxes. Nonprofit tax exemption usually applies only to property used for exempt purposes. A rental house or vacant lot you plan to sell is often fully taxable.
- Insurance. Vacant buildings are expensive and sometimes hard to insure.
- Maintenance and utilities. Even an empty building needs heat, security, and upkeep.
- Deferred repairs. Roofs, foundations, plumbing, and HVAC systems that were neglected in the donor's final years can run into six figures.
- Sale costs. Realtor commissions, closing costs, and capital improvements needed to make it marketable.
A property worth $300,000 on paper can easily cost $40,000 a year to hold and $60,000 to prepare for sale. If it sits for two years, the math changes fast.
Insist on a Professional Property Assessment
This is not the place for a friendly walkthrough by a board member who "knows houses." Before accepting, commission or require the following, ideally paid from the estate where possible:
- An independent appraisal to establish fair market value.
- A Phase I environmental assessment if the property is commercial, industrial, agricultural, or older. Underground fuel tanks, asbestos, lead paint, and contaminated soil can create cleanup liabilities that far exceed the property's value. In some cases a nonprofit that takes title becomes legally responsible for that cleanup.
- A title search to surface liens, easements, and boundary issues.
- A building inspection for condition and code compliance.
Environmental risk is the single biggest reason to be cautious. It is entirely reasonable, and sometimes wise, to decline a gift rather than inherit an environmental cleanup obligation.
Decide: Use It, Sell It, or Decline It
Once the board has the facts, there are really three paths.
Use it. If the property genuinely serves your mission (office space you need, a site for programs, housing for the people you serve), then holding it can make sense. Just budget honestly for ongoing costs and make sure your board is prepared to be a landlord or facility manager, which is real work.
Sell it. For most nonprofits, the best outcome is to accept the gift and convert it to cash that supports the mission. Plan for the holding period, the sale process, and any tax on the interim. If the donor placed no restriction on keeping the property, this is usually the cleanest route.
Decline it. Yes, a board can and sometimes should refuse a gift. If the environmental risk is serious, the carrying costs exceed the value, or restrictions make the property a burden, declining protects the organization. A clear gift acceptance policy makes this decision defensible rather than awkward.
Put a Gift Acceptance Policy to Work
This is exactly the situation a gift acceptance policy is built for. A good policy says, in advance, that real estate gifts are subject to board approval and require an appraisal, an environmental review where appropriate, and an analysis of carrying costs before acceptance. That way no one is improvising under pressure, and no single staff member or board member can commit the organization to a liability.
If your organization does not have such a policy, an inherited building is a strong signal that you need one.
Mind the Compliance Details
Real estate gifts carry a few technical obligations the board should be aware of:
- Form 8283 and Form 8282. For noncash gifts, the donor (or their estate) may need a qualified appraisal, and if you sell the property within three years of receiving it, your organization generally must file Form 8282 reporting the sale.
- Unrelated business income. Rental income from debt-financed property, or active management of real estate, can create unrelated business taxable income. Check with your accountant.
- Restricted use and property tax exemption. Confirm with local authorities whether and when the property qualifies for exemption. Assume it does not until you have written confirmation.
None of this is a reason to fear real estate gifts. It is a reason to involve your attorney and accountant early.
Handle the Donor Relationship With Care
If the gift comes from a living donor's estate plan, or from a family carrying out a loved one's wishes, treat the conversation with warmth. Families often have emotional ties to a house. Explain your process honestly: you are stewarding their gift responsibly, which means understanding its true value and costs. Most families understand that selling a property to fund the mission honors the intent better than letting it deteriorate.
If you must decline, do so graciously and, when possible, suggest alternatives, such as the estate selling the property and gifting the proceeds.
The Practical Takeaway
Inherited real estate is a gift that has to earn its welcome. Before the board says yes, get the facts in writing, run the full carrying and cleanup costs, order an appraisal and an environmental review, and check the gift against your acceptance policy. Then choose deliberately: use it, sell it, or decline it. A property that funds your mission is a blessing. One that quietly drains your reserves is not, and a careful board knows the difference before it takes the keys.