Use Documentation When Leasing Facilities

Written agreements can help smooth leasing process

If your church rents property or is approached about lending your facility, it’s a good idea to spell out the arrangement in a written document. A lease agreement can help clarify what’s expected during the lease, and assist in settling any disputes that emerge.

A well-written lease agreement will address:

  • The lease term. How long will the agreement last? What renewal options will be available when the term is up?
  • Payment terms. How much will be charged for rent and security deposit? When are payments due? What fees will be required for late payments? Who is responsible for paying utility bills?
  • Use of premises stipulations. How will the facility be used? Are there any activities that will not be allowed? As landlord, a ministry generally is allowed to limit on-premises activities to only ones that are consistent with its Biblically based beliefs.
  • Repair and maintenance obligations. What is expected of the owner and renter? Who is responsible for making major repairs? What types of alterations can the tenant make?
  • Liability. Who is responsible if certain property is damaged or destroyed? Generally, each side is responsible for its own property, and the renter takes responsibility for all of its activities that take place on the premises. The owner may want to include an indemnification clause that requires the renter to assume responsibility for injuries that result from their use of the premises.
  • Insurance. Who will purchase property insurance to cover the rented facility? The owner generally carries property insurance for the facility, but this is not always the case. How much liability insurance is each side required to purchase? It’s best for both the owner and the renter to carry at least $1 million of liability insurance, but in some cases greater limits should be considered. Both sides should exchange proof of insurance before the lease takes effect.
  • Termination, defaults, and remedies. What events can allow each side to end the agreement early? If there is a termination or default, will either side owe damages?
  • Dispute resolution. If the owner and renter have a dispute about the lease, how will the dispute be resolved?

Brotherhood Mutual provides a sample Real Estate Agreement that can serve as a starting point as you create your own document. For one-time events or short-term agreements, a Facility Use Agreement may be a better fit. Your ministry attorney should review and approve any agreement before signing.