Creating a Contract that Protects Everyone

Steve Petty
Written by Steve Petty

The steps so far have brought us to our final action – signing a reasonable contract.  We now understand clearly who can rent our facility.  We understand the types of long-term and short-term rentals and the costs of renting each space.  We have established policies that honor our buildings and our staff and are easily understood.  We have easily understood and reasonable fee schedules.  Now we are ready to sign a contract.

The prospective tenant will want to look at the space and consider the various costs of using the space.  The church contact person will be responsible for being the first layer of evaluation for the request.  Is the space in question available at the time being suggested?  Are there potential conflicts with other groups using the facility at or near the same time?  If there are any questions about conflicts, the pastor should be consulted immediately.

When the tenant is satisfied that renting is a good idea and the church contact person is satisfied that the building use is consistent with our policies and procedures and easily accommodated in the church calendar, only then should the church present the tenant with a Facilities Use Request form.   The tenant will fill out the form and return it to the church contact person.

At this point you may ask, why not just give them a contract?  Why this two-stage process?

As we discussed in article 4, Creating Policies and Procedures, at this point I think it’s a good idea to run all requests by the staff (and any other potential staff conflicts), just to see if there are any unforeseen objections.  It is better to discover those conflicts prior to signing a contract.  It is clear to all that this is simply a request, it is not cast in stone.

More than once I have experienced the conflict caused by a well-meaning facility coordinator renting space that some church group planned on using at the same time, but had not yet booked the space with the coordinator.  When the church group finally gets around to informing the coordinator that they have a program planned, the coordinator has the unenviable task of informing them that we have rented the space to some outside group, often eating up church parking in the deal.  Now, we have violated one of our key understandings of renting space, not to hamper the Church Mission, and we have angered some hard-working volunteers who are not easily mollified.  I feel strongly that the few days it takes to get everyone who might be affected to sign off on a request, is worth it in the appreciation from staff and volunteers who prefer being consulted over being disappointed.

If there are no potential conflicts and everyone signs off on the possible use, then the church contact person would issue the tenant a contract.

Sample Building Use Contract

It’s not enough to enter a handshake agreement anymore.  Neither the courts, nor your insurance company will be happy.  The potential tenant must enter a formal agreement, in writing, to use the building.  The agreement must spell out, in as much detail as possible, exactly what rooms are being used and what the costs are to secure the use of that space.

It is a good idea to have an attorney – preferably one in the church or on the Trustees – review this agreement every few years.  Legal decisions being what they are, some things may need to be changed periodically.  Keep it simple.  Attorneys are used to being paid by the word and enjoy writing long obtuse phrases that common people have no clue about the meaning.  Don’t do that, it is just as legal to keep it simple and direct.

The key ingredients are the most important:

What rooms are being rented on what days and at what times?

What are the policies for conduct that must be obeyed?

What are the monetary considerations for the space?

What additional documents are required?

What are the deadlines for payment?

What are the consequences of not fulfilling the contract?

When these considerations are completed, then everyone clearly understands what will happen and what will not be allowed to happen.

We discussed who may rent in article 1 Who can you rent to?  Therefore, we need to have proof that the tenant is in fact who they say they are.  I have had several groups tell me that they were non-profit corporations, take up lots of time, agree to space and costs and yet, when it came time to sign contracts, we got a lot of excuses about why they couldn’t produce the documents. It turned out that they were not legit, had no corporate papers, no legal protections from possible law suits, and did not have insurance to cover themselves.  They were also really mad when we would not rent to them.  They failed to understand that they were placing the church at risk, and using our corporate status and insurance to cover them was not something we were willing to do.

You would be wise to create a file folder when you rent to each group, and in this folder you should place the following items:

Notes from the initial contact with the tenants

The facility use request form

The signed and dated contract

A copy of their articles of Incorporation

A copy of their insurance binder showing the church as co-insured

Any other pertinent details related to their use

Extra equipment used – was it found in a condition to be readily usable again?

Special room set-up requested – with notes from actual use

Notes following the building use – recommendations to rent again or not

The last item is critical for your corporate memory if you have a high turnover in staff.  If the facilities coordinator is new, they have a file to turn to which will help them make decisions as groups return to use the space again.  It is also worth keeping the room set-up maps.  Often return groups say, “Set up just like last time.”  Having the room map available allows everyone to see what was requested and actually used.  Again, clarity is the goal for all.

CONCLUSION

The church buildings are dedicated to the Glory of God, the ministry of Jesus Christ, and the service of humankind.  It can be a tremendous benefit to both the church and the community at large that the church buildings are available to be used by the people who live in that community.  However, the church cannot be expected to provide buildings free of charge when that use actually incurs certain costs that then must be borne by the church.

Certainly, there are times when the church will allow its buildings to be used by the community free of charge, especially when such use is consistent with the ministry the church maintains in that community.

However, there are also times when the church should ask for financial remuneration for the use of its buildings by outside groups.  To do this wisely requires that we know what it costs us to operate the space in both the immediate and the long-term.  It also requires that we are careful with whom we will allow to use our facilities, coordinate well with our own people, and meet all the legal requirements for use.

When we follow some simple procedures, we avoid the various perils and pitfalls, and enjoy broadening our building’s usefulness to more than just the church people.

The positive result is that more people in your town will know where your church is, have good feelings about the times they were present therein, and are more likely to return when the church is doing something they might like to be a part of in the future.

It is a win-win!

All articles in this series:

  1. Who can you rent to?
  2. Understanding the types of rentals
  3. Understanding the actual costs of renting.
  4. Creating a policy for community groups and events.
  5. Creating a policy for sacred events.
  6. Creating a contract that protects everyone.