Sharing With Others: Benefits of Written Facility Usage Agreements

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How can nonprofit organizations best share their facilities with others on a long-term basis?  Many nonprofits allow other organizations to use their space in order to promote like-minded organizations, to help cover the financial expenses associated with building upkeep, and to achieve community outreach goals.  Such arrangements, however, can lead to conflict and expense without the proper foundation of a written facility-use agreement.  Consider the following scenario.

A church has grown sufficiently to purchase its own worship facility.  Just as others have been generous to the church, its leaders now seek to exercise generosity, as well as wise stewardship of the new facility.  One Sunday morning after a church service, amidst all the fellowship, mingling, and kids running around, a couple of visitors ask the pastor about using the sanctuary for their new church plant’s Sunday afternoon services, along with occasional use of the kitchen and fellowship hall. Knowing that church leaders would likely support such opportunity, the good-hearted pastor makes a verbal agreement with the visitors for a schedule, shakes their hands, and gives them keys to the building.  Isn’t that beautiful?  Who needs red tape or administrative hoops to jump through?

Hold on!  Although it might be possible for the shared space situation to work temporarily, the foundation to this working relationship was laid poorly.  Eventually, when common problems and misunderstandings arise, they will likely stress the relationship between the churches, expose the flaws in the agreement, and possibly bring things crashing down.  Misunderstandings and miscommunications may detract both churches from their purposes and may inflict personal wounds on all those involved.  A written agreement can help both parties avoid these common problems so that they can focus on fulfilling their missions.  Nonprofits can build a strong foundation for facility usage by considering the following guidelines.

1.  Preserve the organization’s mission and purpose.  State property tax exemption laws generally require that the organization’s property be used “exclusively” for tax-exempt purposes.  Beyond that, stewardship principles demand that the organization use all assets to further its mission.  If space sharing limits the ability to accomplish this mission, wisdom may guide leaders away from agreeing to share space.  Evolving expectations regarding legal rights of access to facilities (e.g., for same-sex weddings) also may be of concern if the owner makes its facilities widely available to some but not to others.  Be careful to ensure that the organization’s mission is served through sharing its space.

2.  Space sharing is not a “lease.”  The term “lease” connotes commercial activity, which is fundamentally inconsistent with most state property tax exemption requirements, particularly that no “view to profit” exist.  Thus, if an organization is exempt from property taxes, terms like “rent” and “tenant” should not apply.  Instead use “space-sharing” or “cost-sharing” terminology to identify the arrangement, including “contributions” instead of “rent” and “guest” instead of “tenant,” for both external and internal integrity. 

A.    Set forth the agreement’s noncommercial nature.  If the arrangement is a “space-sharing agreement” and not a “lease,” how is the written agreement different?  As an overarching matter, the agreement should reflect how the parties’ missions overlap (e.g., shared religious focus, shared educational aims, shared community improvement goals).  Such language can be included in preamble “Whereas” clauses.  Second, the agreement should not be couched in draconian commercial terms, such as late fees owed for overdue rent or punitive financial terms for occupancy holdovers. 

B.  Charge monetary contributions.  If the arrangement is less than “commercial,” does this mean that the nonprofit owner may not charge money?  Quite the contrary.  An appropriate total amount should be identified, along with a summary itemization of the guest’s shared facility-related costs, such as utilities, landscaping, cleaning, and security (to the extent not separately paid by the guest), as well as building maintenance, long-term systems, and exterior building costs.  In other words, the agreement should reflect that the guest is contributing a proportional amount for its usage, based on the owner’s due diligence and reasonable expectations.  The agreement should also identify when and where periodic contributions are to be paid.

3.  Clarify the “where” and “when” of property use.  The best space-sharing agreements typically contain an attached floor plan showing the specific space provided for exclusive use by the guest (include areas such as locked storage rooms or cabinets).  Additional areas for common usage (e.g., stairwells, bathrooms) may be identified.  Time considerations should be identified, as well.  Using the above example, the written agreement could identify the worship area as available during specified hours on Sunday for exclusive use by the guest, common areas available during such times, and other areas available at certain times during the week.  An owner-controlled facility calendar for special events or other one-time uses may be helpful too, to be coordinated with the guest (perhaps for an additional cost-sharing payment).

4.  State any responsibility for maintenance, repair, and changes.  Make expectations clear if groups are responsible for fixing things that break or if they may have their handyman do the work instead of hiring professionals.  In addition, identify what the owner will maintain and repair, such as major operational systems and exteriors.  State whether you anticipate minimal set-up changes from any standard set-up configuration and require the space to be “broom clean” with garbage removed after use.  Explain expectations about removing furnishings and equipment from the premises.  Also make it clear if you will allow material changes such as build-out, new fixtures, and sign postings. 

5.  Explain how the guest’s occupancy may end and how other problems will be addressed.  Specify a set term when your agreement expires.  In addition, provide for when things go wrong.  For example, what happens if the guest’s contributions are late?  Or if the guest does not repair damage caused by one of its program participants?  A strong written agreement anticipates such events and allows for resulting termination (and possibly a “cure” period beforehand).  In addition, a good agreement provides for addressing “roommate” issues through use of healthy communication channels and dispute resolution.

6.  Preserve security and safety.  Written agreements need to make clear who is allowed in the building, who is responsible for security, and who may have keys, as well as who will take care of the ice and snow and who will clean up slippery spills. Consider child-protection and adult-supervision requirements that otherwise may vary by culture.  Such measures help prevent theft, needless injuries, and other harm.  They also should be highly beneficial in the event of any later insurance claim. 

Any guest group should have its own liability insurance policy that names the owner organization as an additional insured.  The owner should have a copy of the insurance policy and a right to receive notices of any cancellation or coverage changes.  A security deposit may be desired as well.  The space-sharing agreement also should provide for indemnification by the guest in case of any liability or other monetary harm to the owner as a result of the guest’s use. 

7.  Have respectful relationships, not authoritarian ones. If you don’t plan and communicate well with guest users, you risk “pulling rank” when conflicts arise. Such response may send a message of condescension towards others and their missions, as well as otherwise adversely affect important relationships. 

8.  Never apologize for paper work.  Having only a verbal plan is not more laudable than having a written one.  Written space-sharing agreements really do help everyone involved to achieve more with excellence.  If someone is offended that you have written it down and expect his or her signature, a simple explanation may be “so we don’t forget.”  The longer explanation is “to protect property tax exemption, to provide clarity of understanding between the parties, to allocate rights and responsibilities, to promote healthy relationships, and to otherwise exercise wise stewardship.”  All that is certainly worth the paperwork effort!