Property Leases at a Glance in the Episcopal Diocese of Newark

The requirement for approval of leases of church property by the Bishop and Standing Committee is required by the Episcopal Church Canons, the Diocesan Canons and New Jersey Statutory Law.

Title 1, Canon 1.7.3 of the Canons of the Episcopal Church states:

No Vestry, Trustee, or other Body, authorized by Civil or Canon law to hold, manage, or administer real property for the Parish, Mission, Congregation, or Institution, shall encumber or alienate the same or any part thereof without the written consent of the Bishop and Standing Committee of the Diocese of which the Parish, Mission, Congregation, or Institution is a part, except under such regulations as may be prescribed by Canon of the Diocese

Diocesan Canon 10 states:

A Parish may enter into a lease or leases of Parish-owned property, other than for residential use, without the prior consent of the Bishop and Standing Committee, provided the term of such lease does not exceed one (1) year in duration, and the lease does not obligate the Parish to extend or renew the tenancy beyond one year.
(emphasis added)

Parish-owned property used or leased for residential purposes must obtain the prior consent of the Bishop and Standing Committee, in writing, regardless of the extent of such use and the duration of such lease, except that no such consent shall be required for the occupancy of Parish-owned property by clergy or lay employee of such Parish.

Leases for longer than one year require approval from the Bishop and Standing Committee. The Standing Committee will consider a lease for up to 5 years; if the lease is to be renewed, it must be resubmitted to the Standing Committee for approval.

N.J.S.A. 12-4 provides:

No sale, conveyance or mortgage of any real estate other than burial lots of churchyards or cemeteries, and no lease for a longer term than one year shall be made by such corporation without the previous written consent of the Bishop and a majority of the Standing Committee of the Diocese within which the corporation is located or in the case of a vacancy in the office of the Bishop, or of the Bishop’s absence from the Diocese, then a majority of the Standing Committee. Such consent shall be acknowledged or provided and recorded with the deed, lease, mortgage or instrument of conveyance. Without such consent, the sale, conveyance mortgage or lease shall be void.

Absent approval by the Bishop and Standing Committee, your lease is deemed void as a matter of law.

Remember:

1. You are the landlord.
2. Leasing of a rectory or other property may enter that property onto the property tax rolls of your town. While our proposed leases recommend language to shift any tax burden to the tenant you may want to consider adding the potential cost of the property tax to your calculation of rent. Consulting with a tax attorney before entering into a lease would provide clarification.
3. It is recommended that you consult with your insurance provider to determine how leasing property may affect your coverage and premium.
4. Leasing property to a child care provider, pre-school, or school may require special safety upgrades to the property. In addition, the lease must stipulate that the Tenant shall provide the Landlord with written documentation of training of the Tenant’s employees in the prevention of sexual harassment and child abuse. Suggested language for this provision may be found in Provision A, attached below.
5. In light of the experience of many of our churches during the recent COVID pandemic, we also recommend that you consider a provision stipulating the rights and provisions of landlord and tenant during a public health emergency or other force majeure event is recommended. Suggested provisions are currently being considered as amendments to the Property Management Guide, but can be viewed in Provision B, attached below.
6. It is recommended that you retain the services a real estate attorney before you move to secure any approval of a lease of your property as leases can have significant legal consequences.

Checklist for Leasing Property

If you require approval from the Bishop and Standing Committee for a lease, here are the steps to follow:

1. Contact the president of the Standing Committee to discuss your intentions. A liaison from the Standing Committee will be assigned to accompany you through the process.

2. Obtain the leasing value per square foot of comparable properties (“comps”) in your area for a comparison. A local realtor should be able to assist you with this information. A letter from a realtor with this information will generally suffice. A template for such a letter is attached below.

3. Submit a Petition to the Bishop and Standing Committee that contains or is accompanied by the following:

a. A Vestry resolution indicating their consent to lease the property

b. A description of the property (and/or a copy of the deed)

c. Information as to whether the property has been consecrated

d. A document known as the Ministry Plan, which outlines how leasing the property will assist your parish in carrying out its mission

e. The full name, address, and relationship (if any) of the lessee to the parish

f. A copy of a local realtor or appraiser’s comparable property lease values

g. Proof of liability insurance coverage carried by the leasing body or organization

i) Such coverage should be in the amount of not less than two (2) million dollars, and should specifically stipulate the parish, the leasing body or organization, and the Episcopal Diocese of Newark as additional insured

h. A copy of the proposed lease

4. Be aware that if any of the above documentation is missing, the Standing Committee will not be able to vote on your petition and a decision could be delayed into the next monthly meeting of the Standing Committee.

5. Please consider hiring a real estate attorney to assist you in the process.

Procedure for Submitting the Required Materials

The foregoing documents in proper form should be received in the Bishop's Office, 31 Mulberry Street, Newark, New Jersey, 07102, THREE (3) WEEKS PRIOR TO CONSIDERATION BY THE STANDING COMMITTEE, following which the petitioning congregation, or other petitioner, will be advised of the manner in which the petition will be entertained. NOTE: Electronic documents (pdf’s preferred) may also be submitted to the President of the Standing Committee via e-mail.

Please note that timely submission allows for a review of the petition for missing information and an opportunity to provide it prior to the Standing Committee meeting. Normally, correct petitions, fully prepared and duly submitted to the Bishop's Office, will be sufficient for the Standing Committee to take action. A member of the Standing Committee shall notify the petitioner if it is necessary for a representative of the congregation to appear to present the petition in person.

NOTE: REGULAR STANDING COMMITTEE MEETINGS ARE HELD THE FIRST WEDNESDAY OF EACH MONTH, EXCEPT IN JULY AND AUGUST.

Church Vestries, and all others required to petition for consent of the Standing Committee, are cautioned to establish a date for closing the transaction which will allow ample time for preparation of the petition and its accompanying schedules and the presentation thereof to the Bishop and Standing Committee. It is suggested that counsel for the petitioning body review the petition and its accompanying schedules before filing the petition with the Standing Committee.

Sample Documents

You may find additional information and sample leases in the 2019 Property Management Guide. The samples begin on page 51 of the pdf. Please keep in mind that the updated Standing Committee guidelines are requiring additions to the lease for child-care/school situations, and are advising COVID/pandemic provisions be added, as noted in the document links above.

1. Sample of a school lease
2. Sample of a child-care facility lease
3. Sample of a one-time facility use lease
4. Sample of an annual lease
5. Sample of a rectory lease
6. Sample of a church sharing lease