The following is a guest post by my friend and operations guru, Greg Hubbard. He helps church planters through his ministry at the Orchard Group which focuses on planting churches in global cities.
The most significant contract a new church enters is a lease agreement for office space and/or a Sunday worship venue. Just like a personal contract for a home or new car, the church plant facility lease agreement may be lengthy and difficult to understand. How do new churches navigate complicated lease agreements?
To avoid nasty surprises, make sure you do these 5 things before you sign your church plant facility lease:
Avoid Providing a Personal Guarantee
In most circumstances church planters should avoid making their personal assets available to guarantee that the church will pay its obligations. Landlords often request a personal guarantee from the church planter, especially when the church is so new that it cannot demonstrate its financial viability. A church planter should only sign a lease agreement in his capacity as an official representative of the church entity, not on his own behalf.
Ensure You Have Adequate Insurance
Many commercial leases require liability and property insurance up to certain limits. Send a copy of the proposed lease agreement to your church insurance carrier for review before you sign it in order to ensure that your current policy complies with the lease terms, or to find out how much extra coverage you will need.
Be Aware of Penalties
Know what will happen if you have to get out early. Be sure you understand what happens if the church ends up not being able to pay its rent for the duration of the lease.
- Will you be allowed to sub-lease the property?
- Will you be able to break the lease by paying a penalty?
- Will you be released from the remainder of the lease once the landlord is able to find another suitable tenant?
Entering a lease always requires some risk, but be sure you know exactly what the risk is before signing.
Add Up the Hidden Costs
You need to understand all the different things you may have to pay for:
- Will you incur additional fees for maintenance of parking lots and other common areas?
- Will you pay any portion of property taxes or utilities?
- Can the base rent or additional rent increase during the term of the lease, and if so, how will the increases be determined?
Check the Hours of Use
Check the hours when you are allowed to use the leased space. Be sure the lease allows you to meet in the evenings and weekends if needed. Many standard commercial leases provide that the tenant will only use the facility during normal business hours Monday through Friday. Churches often need office space for evening meetings, and certainly need worship space on weekends.
… and Seek Expert Advice
When in doubt on any key language in a lease agreement, take the time and invest the money to have an expert review the lease and advise you. Retain the services of a real estate professional or an attorney for the review. The time spent and the expense incurred to obtain professional advice may end up being minor compared to problems you prevent.