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Leasing Church Property

There are circumstances in which a church might consider leasing property to an outside group.  Perhaps a preschool is needing space.  Maybe a local non-profit hopes your church can host their services.  

Leasing can be good (brings in revenue, perhaps provides a wider introduction to the community than you currently have).  However, leasing also brings issues which need to be considered:

  • Will the renters be able to do structural changes to your property?  Will they ask before proceeding?
  • Could the renters obligate the church (unknowingly) to a long term utility contract?
  • If someone falls at an event sponsored by the renter, or their employee is injured at work, is the church liable?
  • Will the renter take political positions which could put the church at risk (or, at best, offend church members)?
  • Will the added income be considered commercial use, and thus imperil the tax-free status of the church property?
  • Will the church's insurance cover the new entity?
  • If the renter is also a church officer, could this be inurement, and thus jeopardize the church?
  • If the church closes, is the lease binding?  Will the property have to be maintained until the lease runs out?  At whose expense?
  • Will the revenue be sufficient to cover added wear and tear on the failcities, as well as increased utilities?

Each of the above has actually been an issue in a United Methodist Church.  For these and other reasons, we recommend the church consider the issue of leasing very carefully, and consult legal counsel.  

The legal staff at the General Council on Finance and Administration (GCFA) have provided a document to assist churches in reviewing prospective leasing arrangements.  You can download it here.

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