What You Need to Know Before Renting a Church Building

Is your startup church bursting at the seams? Or has the size of your congregation steadily increased as the years have gone on? As churches outgrow a size that can comfortably meet in their current space, they may reach a point where they need a larger option. It’s a great “problem” to have! If you’re not quite ready to build or buy your own property, renting could be a solution.

A church lease agreement is legally binding, so it should be approached with great care. Here are five tips to consider before renting a church building.

Five Commercial Lease Tips for Churches

1. Understand Your Lease Terms

Review the terms of your lease carefully, and don’t be afraid to ask for changes. Understanding your terms will help you carry out church functions and budget for expenses. Be sure that the following terms are addressed:

• Who pays for damages not caused by the church (e.g., vandalism)?
• Who pays for utilities?
• Who provides and pays for maintenance?
• What are the approved hours of operation (e.g., include weekends and evenings outside of standard business hours)
• How often can the rent increase?
• Is a use clause included? Because of the religious nature of churches, ask for a clause stating that religious gatherings can take place.¹
• What are the terms for terminating the lease?

2. Avoid a Personal Guarantee

Use the church’s name in the contract — not the pastor or another individual of the church. Your church must have a Federal Employer Identification Number (FEIN) to be named on the lease.

A landlord may ask for a personal guarantee, but a pastor should only sign a lease agreement as an official representative of the church entity — not personally — to avoid personal liability.²

3. Get Permission to Make Improvements

If you plan to modify the rented space to accommodate your church’s needs, specify the terms in the church rental contract. You also need leaseholder/tenant improvements coverage to recoup your improvement costs in case of a loss.

4. Protect Your Ministry While Renting

What happens to your music equipment or sound system if your leased space gets damaged by fire? Protect your ministry from financial losses with renter’s insurance when renting a church building. Also, consider coverage for items kept at a rented facility or maintained elsewhere and transported during the week. Liability insurance is also essential to help protect your ministry as you grow.

5. Consider Alternate Leasing Possibilities

In addition to looking at commercial properties in your area, consider some alternative options that may be less expensive. Whether you choose a traditional or nontraditional space, it’s critical to always have a written contract.

• Community centers
• Larger churches
• Movie theaters
• Public libraries
• Schools

Find Support in All Seasons of Ministry

Church growth is exciting but can also involve legally binding decisions, such as renting a church building. Before signing a lease, seek counsel from a real estate attorney. And look to GuideStone^® for your property and casualty needs — we’re here to help guide you as your needs change over the years. For more information, contact us at PCSalesSupport@GuideStone.org or (214) 720-2868, Monday through Thursday, from 7 a.m. to 4:30 p.m. CT and Friday, from 7 a.m. to 4 p.m. CT.

This article is for informational purposes only. It is not intended to be construed as legal advice. Readers should use this article as a tool, along with best judgment and any terms or conditions that apply, to determine appropriate policies and procedures for your church’s risk management program.

GuideStone Property and Casualty^® is part of GuideStone Agency Services^®, an agency licensed to sell Property and Casualty products in various states and is an affiliate of GuideStone Financial Resources^®.

¹TeliosLaw.com/blog/commercial-lease-issues-churches-or-spiritual-organizations
²LinkedIn.com/pulse/church-start-ups-entering-lease-agreements-gregory-hubbard