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Property and Risk Management

Canons and Rules Governing Parish Property

Managing a Renovation

Canons and Rules Governing Parish Property (top)

Under the Maryland Vestry Act (and the subsequent extension of that Act to the District of Columbia) the rector is given the right to use parish properties, but the vestry is granted a fee simple interest in church property, meaning that the vestry has the power to manage and direct the use of church property. This includes the power to purchase or take land by gift, bequest, or otherwise. As the senior warden, you serve as the legal representative of the vestry in property matters.

While in many respects a church is not a business, in the eyes of the law parishes and separate congregations are religious corporations. The vestry, which is the governing body of parishes and separate congregations, performs functions similar to those performed by a board of directors of business corporations. This is a critical distinction since as a corporate entity, the vestry may sue and be sued in a court of law for its official actions - thus the importance of maintaining liability insurance for both the parish and its officers.

Recognizing the constitutional separation of church and state, courts do not interfere in church matters other than the management of property issues. Recent constitutional case law has further developed the principle that courts will avoid becoming entangled in litigation involving the doctrine, discipline and worship of churches. However, the basis for property-related suits against a parish is not that esoteric -- for example, a liability claim on behalf of someone who slips and falls on the ice in the parish parking lot -- and, if the situation is truly contentious you and/or the members of the vestry may be sued individually as well. Maintaining the upkeep of parish property is not only good stewardship, it is good business.

Property Management (top)

The care and upkeep of parish property is the responsibility of the vestry. A committee should be established to maintain the property in safe and adequate condition.

Buildings should be inspected for hazardous materials (faulty wiring, lead paint, asbestos) and these should be removed;
Outdoor areas should be maintained; ice and snow on walkways should be removed and trees should be pruned;
Fire inspections should be performed, and the church should have an appropriate sprinkler system and fire extinguishers;
Preventive maintenance such as roof repair and heating/air conditioning system checks should take place;
Handicapped access to buildings, including rest rooms, should be provided;
An alarm system should be installed to protect the church building, and electronic equipment should be protected against damage from power surges.

Renovation and upkeep of church property is expensive, but proper maintenance may save the church money by preventing litigation against the vestry.

Insurance (top)

Adequate insurance coverage is essential to the protection of the church and its property. Insurance coverage is mandated by the national canons (I, 7, sec. 1).

The church property and its contents should be appraised by a certified appraiser, and the appraisal should be updated as property values change.
A parish should have adequate insurance to cover its buildings and grounds in case of fire, loss, or destruction.
A parish should have adequate insurance to cover building contents. An updated inventory of building contents should be kept in a firesafe location.
Vestry members should be aware of and understand policy coverage and terminology, including what will be covered, and to what extent, in the case of a disaster.
Insurance policies should be kept current and their value increased when necessary. The vestry should determine whether one policy is sufficient for all claims or multiple policie are needed.

Liability Insurance (top)

Parishes must be adequately protected from the possibility of lawsuits and other potential risks.The vestry, as the governing body of the church, is solely responsible for assuring adequate protection of the church as well as management of potential risk.

Property insurance should be adequate to cover potential liability claims for injury or negligence.
The vestry, as the governing board of the church, is subject to liability, as are the clergy. The parish should carry directors' and officers' insurance as protection.
A church may obtain fidelty bonds as protection from loss by theft or embezzlement by its own members or employees. The diocese automatically provides a $10,000 bond for each parish through the Church Insurance Corporation. Parishes may increase the bond amount at their own expense.

Sexual Misconduct (top)

Training workshops on prevention of sexual misconduct have been suspended temporarily for purposes of review. The workshops, which have been a part of diocesan offerings since 1994, have been required for all persons, ordained and lay, who work for the diocese. To support its ongoing commitment to misconduct prevention, the diocese intends to redesign the training program to reflect experience to date, incorporate a clearer theological perspective, and make the training more accessible and available. An important part of the redesign will be the use of an expanded cadre of trained trainers.

The diocese's overarching objective in providing sexual misconduct prevention training is to ensure that our churches are safe places. The program review will involve gathering information from other dioceses, the national church network of people working in prevention, and the people of this diocese. For more information or to provide input, contact Cheryl Wilburn.

Managing a Renovation (top)

The Committee on Church Architecture has assembled guidelines for capital improvements. These serve as an introduction to the design, construction and building process for diocesan parishes and missions. The diocesan property manager, Robert Tomlinson, can help you find contractors who have handled similar projects and can consult with you on building projects.

Suzanne Welch, senior warden at St. John's Norwood, oversaw major renovations at that parish. She passes along her learnings in the article below.

Managing Renovation or New Construction

By Suzanne Welch

Undertaking a major renovation or new construction at your church is no easy task. Many professionals, trades and talents are required to have a successful capital fundraising campaign, to conduct and complete the building construction or renovation, and to accomplish the project on schedule, within budget and with as few problems as possible. Almost every project will encounter problems and it is best to anticipate them in advance. The following or some general areas to take into consideration:

1. Planning What You Can Afford. Probably the first steps to be undertaken are two-fold: preparation of a conceptual plan of what your parish wants and obtaining preliminary costs for that plan, and evaluating what your parish can afford. After the space utilization needs of the parish have been assessed, you can retain an architect to prepare a conceptual plan.

The church should inventory its equipment and facility to evaluate what would probably need to be replaced in the next five years and determine which of these items should be included in the construction work. The church then needs to provide the architect with the wish list to factor the work into the plans.

While architects generally would like to contract for services through construction, contracting initially only for conceptual design services allows the church, as owner, to decide if they like the architect's ideas and if they work well with the architect. See the next section about selection of an architect.

In the conceptual design phase, the architect should meet with various members of the parish in a series of meetings to get comments and input as to what is desired. The more the parish participates and buys into the master plan, the more the individual parishioners will feel a part of the final design and will be willing to contribute to the capital campaign.

Ask the architect to estimate the cost of completing the master plan, both the cost of design and construction. In general add a contingency of 10% for new construction (20% for rehabilitation) and 10% for what people may not have thought of yet since the design is in the preliminary phases.

Talk to the lay leadership of the parish to determine what you think the parish can afford to raise in a capital campaign. Engage a consultant if necessary to advise you. After the master plan has been presented to the parish, have preliminary meetings with key lay leaders to see what they would be willing to commit to the plan. You need to determine what you think your parish can afford. Consider a multi-year pay in plan for capital campaign commitments. You should talk to banks about financing. Not all contributions will come in by the start of construction and you will need to be paying the bills. Include interest costs and typical loan fees in the budget.

You may need to scale back or phase construction of the master plan to fit into what the parish can afford. You should have your rector check with the Finance Committee of the Diocese to determine what approvals the Diocese will require. Typically approval is required for substantial expenditure of funds for renovation or new construction.

2. Architectural Services. The American Institute of Architects (AIA) has developed documents for use in design and construction. One thing to keep in mind is that, while the documents contain some rights in favor of the Owner, in this case the church, the terms of the documents tend to favor the architect and contractor. Churches should seek legal advice before signing design or construction contracts and negotiate necessary changes to protect the church's rights as owner. Many architects try to set their basic design fee as a percentage the construction costs rather than on a fixed fee. Construction costs in the DC area are very high and continue to increase so a fee based upon construction costs is not to the church's advantage. You should expect to pay a fee for additional changes to the plans as additional services.

3. Zoning Code, Fire Code and Other Local Regulations. Project costs can increase dramatically when complying with local zoning, fire, building codes and neighborhood covenants, and the requirements of the American Disabilities Act (ADA). Have the architect conduct preliminary meetings with the local permitting agency to review the plans and uncover problems or issues before the plans are put out to bid. Fire code issues are very complicated for older churches. If the architect is not experienced in those issues for churches, consider retaining a fire code consultant. Find out if any special exceptions or variances from codes are required.

4. Budget for everything you can think of and the things you can't. Work with a budget beginning at the conceptual design phase and refine it as the project progresses. It is advisable for the Vestry to approve a preliminary budget and then the final budget, usually developed when construction bids are in and the contractor is selected.

Budgets should include all design and engineering fees and other consultant fees, like fire code consultants if the architect is not providing that service (and be sure to ask the architect). Budgets may include the costs of permits and surveys. You may need to retain an attorney to review contracts. Development budgets usually contain interest and loan fees, insurance costs, inspection fees, costs for furniture or sign or other item outside the construction contract to be performed by others. Again, as a general rule, add a contingency of 10% for new construction (20% for rehabilitation) and 10% for what people may not have thought of yet since the design is in the preliminary phases.

5. It almost always takes longer than you think it will. Design and construction can be very time consuming. You and your architect and contractor should factor in expected delays, like obtaining governmental approvals or church design approvals, and unexpected delays, like encountering a hidden condition that required a certain mount of redesigning and construction. You may need to factor in academic schedules of a school located in your church and not start construction until the beginning of summer. It may be better to schedule work to begin after Christmas or Easter. The construction schedule proposed by the architect, construction manager, or contractor needs to be negotiated and modified to fit the particular needs of your church's operations, recognizing that there will be disruptions.

6. Contracting for the Work. Again AIA forms are generally used for the construction contract and many on the terms in the contracts favor the contractor and architect rather than the owner. You should seek legal advice before signing these contracts and negotiate necessary provisions to protect the church's rights as owner. There will be issues like whether or not the church wants the contractor to obtain payment and performance bonds in favor of the owner, whether the project should be a cost plus contract or a guaranteed maximum costs contract. Should disputes be resolved by litigation or arbitration? The saying of "what can go wrong, will go wrong" often applies to construction. Once the contract is signed, the church will have to live with its terms so it is best to take the time to negotiate one that protects the church.

When bidding architectural, construction or other services, try to obtain at least three bids in all cases. Request references and call the references for both the architect and the contractor. Experience has proven that something will go wrong on projects. Make sure that you feel good about the team of people assigned by the prospective company and that you are comfortable with the references.

If your church uses a particular electrician or plumber or other service provider and you want them to bid on the work, give that list to your architect in advance of the bidding process in case contractors would wish to use their services.

The contract should provide that at the end of the job, the general contractor will provide the owner with as-built plans and specifications and manuals. Plan to meet with the contractor before final payment to review these materials. The AIA forms generally provide for a one-year warranty from the date of the issuance of the certificate of substantial completion. You should plan to walk though your facility on the 11th month, inspecting it carefully, make a written list and submit it to the general contractor before the one year deadline.

7. Insurance Coverage. You will need to check with your insurance carrier on increased coverage due to the construction on the project. Either the contractor's insurance company or the church's insurance company should cover the property and liability coverage while work is underway. Get copies of insurance certificates from architects, contractors and others who will be on site. They should have adequate liability coverage naming the church as an additional insured and they should be able to provide insurance certificates. Professionals such as architect, construction managers and engineers should have errors and omissions overage as well.

8. A Word about Construction Management Services. Someone within the church or retained by the church needs to oversee the design and construction as the owner's representative. Sometimes that talent lies within the congregation and an experienced parishioner will agree to volunteer to do the oversight work. Often churches have to look outside for a construction manager. In the later case, someone or some group of people within the parish with experience still needs to monitor the work. That person or group should be approved by the Vestry and provided the necessary advice and support to undertake the task.

You may want to appoint a capital improvements committee to meet periodically to review plans and bids and discuss issues. This committee could be made up of representative of the staff, finance committee or treasurer, capital campaign leadership, legal counsel, and other lay leaders with expertise in the area or whose space in the building will be directly affected. You should establish the roll and relationship between the Vestry, the designated oversight person in the parish and the design and construction team and at which points the Vestry review and approval is required along the process.

9. Plan for Disruption and Manage Inconvenience. Invariably the construction will disrupt church operations in one way or another. Dumpsters may need to be located in parking lots, entrances relocated, bathrooms shut down temporarily just to name a few inconveniences. You may need an agreement from the contractor that no work will be performed immediately before and during funerals and during other church services. Communicate often with your parish staff and congregation. After all, they will be the ones that are inconvenienced, and they are ultimately paying the bills.

10. Celebrate. At the completion of the work, you will probably want to plan a dedication or celebration. The Book of Common Prayer as several forms of blessings for new structures. You may choose to erect a plaque recognizing signification donors to the capital campaign and/or dedicate parts of the space in someone's memory. You may want to invite the contractor or architect to the celebration, keeping in mind that you may need to call them back about problems discovered during the one-year warranty period.

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