Church Third Party Uses: What You Don’t Know Can Hurt You!
Renting or allowing use of church and ministry facilities has many new added risks: child abuse liability, unwanted use purposes (same sex marriages) or activities on premises (illegal or risky), liability that is not covered by insurance or renters’ indemnity, jeopardizing tax exempt status of property, entity or UBIT and getting dragged into court by renter/user for some unforeseen offense. The optimum “Church Facilities Use Policy” and “Rental or Use Agreement” should contain many key components. First, the policy and any subsequent agreement are designed to make the church less conducive to being perceived as a public accommodation. Second, the policy protects against general liabilities that could occur through public use of its facilities and grounds. Third, it protects against other specific liabilities like child abuse or unwanted activities. Fourth, it defines the Christian way to resolve disputes out of court and keep the process confidential and out of the media. Finally, it handles key nuts and bolts such as permitted uses, times and place of use, costs, indemnification, additional insurance, child care and safety policies, and other use safety measures.
1. Regulating a Church as a Private Entity
Through a third party Facilities Use Policy and Agreement with well-drafted clauses, a potential lawsuit will be framed as a church abiding by its own religious belief, consistent with Biblical principles, rather than an act of discrimination against homosexuals or same sex marriages. Before focusing upon the Facilities Use Policy and Agreement, however, it is necessary to establish a statement within church bylaws regarding a church’s doctrinal beliefs on marriage and sexuality. Presently, some churches and pastors are straying further from Biblical principles in support of legalization of same-sex marriages. Therefore, churches who adhere to strict Biblical marriage and sexuality must clearly demonstrate in their church bylaws their sincerely held beliefs regarding marriage.
While we can propose many different doctrinal statements to be tailored to the church and religious nonprofit’s beliefs and culture, any statement should contain key Biblical provisions that define marriage and sexual behavior outside of marriage that is sinful, such as the following:
We believe that Marriage unites one man and one woman in a lifetime commitment to each other (Genesis 2:23-24; Matthew 19:4-6). Marriage provides for intimate companionship, pure sexual expression (Genesis 2:25; Ephesians 5:31-33), procreation, and reflects the relationship of Christ and the church (Genesis 1:28; Proverbs 5:15-19; 1 Corinthians 7:1- 5).
We believe that God has commanded that no intimate sexual activity be engaged in outside< of a marriage between one man and one woman. We believe that any form of homosexuality, lesbianism, bisexuality, bestiality, incest, fornication, adultery, and pornography are sinful perversions of God’s gift of sex. We believe that God disapproves of and forbids any attempt to alter one’s gender by surgery or appearance (Genesis 2:24; Genesis 19:5, 13; Genesis 26:8-9; Lev. 18:1-30; Romans 1:26-29; 1 Cor. 5:1; 6:9; 1 Thess. 4:1-8; Hebrews 13:4). Such sinful pattern if not repented will be a barrier to membership, employment, and leadership in a body of believers.
2. Outside Liabilities Exposure
Often churches allow outside groups to use or lease their premises; however, such use of church property by third party groups exposes the church to potential liability for injuries that may occur, and this risk escalates if the property is being used for an activity that involves minors. Consider the following examples:
- ABC church leases a portion of its premises one evening per week to a local scout troop;
- ABC church leases several rooms to an outside group to operate a preschool or daycare;
- ABC church leases a room each week to an outside group for the operation of an exercise class, home schooling class or other single use event.
Churches respond to this risk in various ways. Before allowing outside groups to use or lease its property there are several points a church must be aware of and consider, including the following:
There is no way to create a “firewall” that insulates a church from all risk of liability under these circumstances.
However, churches should consider and implement at least one of several risk management options, including Facilities Use Policy and Agreements before allowing church property to be used by outside groups.
All general liability insurance policies have a “named insured,” typically the entity that procured the insurance. The named insured can add one or more other entities as additional insureds. Having the church’s name added as an “additional insured” to the general liability policy of an outside group that uses or leases church property for a specified purpose or activity is one way that a church can manage the risk of liability in the event of an injury. However, a recent case in New York suggests that this practice may be inadequate and can lull church leaders into a false sense of security.
In addition to liability concerns, a church also needs to be aware of the potential tax and legal implications of allowing outside groups to use or lease its facilities such as the application of the federal Unrelated Business Income Tax (See Simms Showers UBIT July 2014 article), the loss of the church’s exemption from real property tax, either fully or on a prorated basis, and the potential violation of local zoning laws.
The best first step for a church is to seek competent legal counsel who understand church and tax- exempt law before the church offers use of its property to one or more outside groups.
3. Creation of Child Abuse Liabilities
Does ‘outside use’ of a host organization’s facilities create child abuse liabilities? This question circulates among organizations with facilities used by outside groups bringing both children and adults onto the host organization’s campus. Specifically:
- What is the organization’s responsibility and risk for a child abuse allegation arising from an outside group?
- Can the organization be held responsible for not reporting an allegation arising from an outside group?
- Should the organization require child safety measures as a condition of facility use?
- What should the organization reasonably require of an outside group for child protection?
Every organization providing services to children should utilize an effective Child Protection Policy and Procedures aimed at reducing the risk of child sexual abuse at the hands of adult staff members or volunteers, or other children. An effective child safety system should contain the following elements:
- Child sexual abuse awareness training;
- Screening processes including appropriate criminal background check;
- Tailored Child Protection Policies and Procedures; and
- Monitoring and oversight for responding and reporting child abuse.
No single element listed above provides a stand-alone method for preventing or reducing sexual abuse in children’s programs. Rather, each element works within the system to create checks, balances, and accountability in an overarching plan of protection.
When a host provides its facilities (with or without payment) to outside groups, questions arise concerning the host’s responsibility to take reasonable action to safeguard children enjoying use of its facilities through the outside group. In some states, these responsibilities are legislated; in others, civil cases are creating change in “best practices” and “standards of care” through litigation. Inevitably, “standards of care” and legislation are trending toward practices more protective of children, including specific training and screening requirements. Thus, a church should take an active role in reviewing what type of plan these outside groups have in place to reduce the potential for abuse and how it compares to the church’s own child abuse policy and plan before granting them permission to use its facilities.
4. Biblical Dispute Resolution
Biblical Dispute Resolution (or Christian Conciliation, as it is sometimes known) represents the formal means of resolving disputes between Christians without recourse to secular courts. Christian Conciliation encompasses both informal and formal mediation and arbitration of disputes. The use of Christian Conciliation stems from Biblical mandates in Matthew 18: 15–18 and in 1 Corinthians 6:1–8. These passages show us the Biblical process: (1) try to resolve the dispute simply by discussion between the parties (Matt. 18:15); (2) if this does not work, take others along in a mediation (Matt. 18:16); and (3) if this still does not work, appoint a judge from among the faithful in arbitration (1 Cor. 6:4) and/or the church discipline final step (Matt. 18:17).
Christian Conciliation is thus a multi-step process for resolving disputes between believers. The means and methods of this Biblical process ministry are described in the Christian Conciliation Handbook, originally published by the Institute for Christian Conciliation (1994, and updated periodically).
Below is a sample clause for Biblical Dispute Resolution that would most likely pass legal scrutiny (though each case should be evaluated separately to address its needs):
Any claim or dispute arising from or related to this agreement shall be settled by mediation and, if necessary, legally binding arbitration in accordance with the Rules of Procedure for Christian Conciliation of the Institute for Christian Conciliation. Judgment upon an arbitration decision may be entered in any court otherwise having jurisdiction. The parties understand that these methods shall be the sole remedy for any controversy or claim arising out of this agreement and expressly waive their right to file a lawsuit in any civil court against one another for such disputes, except to enforce an arbitration decision.
5. Nuts and Bolts of Any Third Party Use Agreement
Here are some factors to consider when building your policy and Agreement:
Know the tax implications. Consider federal and state tax laws when building your policy. The type of organization requesting use and the nature of the event both play into whether you can lease your facilities and whether you can charge fees without jeopardizing your tax-exempt status. Charging no fees does not really reduce liability exposure but renting it for below market rate with a good policy and Agreement will definitely minimize liability.
Establish a fee schedule. Determine under what conditions you will charge for building use. Create a fee schedule that clearly defines the fees for different rooms and different activities.
Avoid scheduling conflicts. Limit conflicts over scheduling priorities by defining your use policy and what areas can be used and when. Decide whether ministry events and congregant requests have preferential scheduling over outside party requests and community events.
Be detail oriented. Include details in your building use policy on what activities and decorations are allowed, whether furniture can be moved, and what to do with dirty dishes and trash. If you don’t address an item in your policy, you can’t hold people accountable for it.
Abide by conduct not in dispute of your faith statement. Make sure they know your statement of faith, especially on marriage and sexuality, and agree that the rental will do nothing that contravenes that faith statement and Biblical Code of Conduct to jeopardize your legal protections and reputation.
Who’s in charge? Appoint a facilities manager to track building scheduling and use. The manager should approve building request forms and maintain a centralized scheduling calendar.
Sign here. Require that a Facilities Use Agreement be executed for all use and/or rentals of facilities. The responsible party should sign the agreement. Consider a separate agreement with more specifics for large events like weddings.
Do damage control. Complete a thorough pre- and post-event inspection of the room(s) used. Look for damage and evidence of policy violations and provide the outside group written documentation of either. Determine if any facility use policies need to be revised for the future or if any damage claims should be filed.
6. Should we require the outside group to sign facilities use agreement?
Absolutely, since a church could be liable for injuries that occur during the use of its premises by an outside group because it is the owner of the premises. This risk can be reduced by adopting various precautions, including the following:
First, have the outside group sign a “facilities use agreement” that (1) provides the group with a mere license to use the property, (2) contains a hold harmless and indemnification clause, and (3) states that the church provides no supervision or control over the property when being used by the group. We can work with you to prepare a policy and agreement tailored to your uses and state law.
Second, have the church named as an additional insured under the group’s liability policy. Review the group’s liability policy to ensure that it provides adequate coverage and does not exclude sexual misconduct.
Third, consider charging below market rates as evidence of religious ministry for better legal protection and good will.
Fourth, if the group’s activities will involve minors, have a written acknowledgment from the group that all workers have been adequately screened and trained similar to your child abuse policy and training.
Finally, check with the church insurer to determine coverage issues in the event the church is sued as a result of an accident or injury occurring during the group’s use of the property.
Many churches and nonprofit ministries are choosing to maximize their existing facilities usage by either renting space to outside groups or by creating separate businesses, such as fitness centers or daycares. Your venture into the rental may help you reach people for Christ and fund your mission, but it also could have a big impact on your ministry’s assets, tax-exempt status, legal protections and reputation. Having a well-crafted facility use policy and agreement signed by the users of the facilities are essential to minimize impacts on these areas yet maximize protections (legal, safety and reputation).
Disclaimer: This memorandum is provided for general information purposes only and is not a substitute for legal advice particular to your situation. No recipients of this memo should act or refrain from acting solely on the basis of this memorandum without seeking professional legal counsel. Simms Showers LLP expressly disclaims all liability relating to actions taken or not taken based solely on the content of this memorandum. Please contact Robert Showers at firstname.lastname@example.org or Justin Coleman at email@example.com for specific legal advice on this issue for your needs.