How to Lower Your Rent

By Raul Rivera

When Pastor Francine in Kansas City, MO, called me to help her understand a lease contract for 24,000 square feet of space, she was glad to hear that she could lower her rent by $2,000.00 per month through simply taking advantage of an exemption.  However, I did explain to her that with the way the contract was currently written, it would not work.  So she made a counter offer, like I suggested to her during our conversation on the phone, and was able to get a contract that would save her $24,000.00 per year.  I will explain later what we did to get her rent down.

Every church has to rent

Let’s face it, sooner or later nearly every church has to rent space for its facilities.  Very few churches ever start with a facility they own.  This means that one-day if not already, your church will have to negotiate a lease.  Getting a good deal is all about your ability to negotiate the annual price per square foot.  If you want to rent a building that is 4,000 square feet, the landlord will probably tell you that the price is $12.00 a square foot, plus CAMs (Common Area Maintenance).  So when you hear that the rent is $12.00 a square foot, you do the math as follows: 

4000 x 12 = $48,000.00. 

Now that you know the annual rent is $48,000.00 a year, you then divide it by 12 to figure out your monthly rent, which in this case is $4,000.00.  After making those calculations you proceed to figure out the CAMs.  The CAMs usually cover the property landscaping of the common areas, plus the insurance and property tax.  You may be surprised, but in many cases the CAMs are another $3.00 to $6.00 per square foot.  Let’s say that the CAMs in this case end up a $4.00 per square foot.  You figure that out as follows:

4000 x 4 = $16,000.00

After figuring both the lease portion and the CAMs, you will notice that the annual cost of the lease is $48,000.00 plus $16,000.00, for a total of $64,000.00 per year, which amounts to $5,333.33 per month.  One thing many churches do not know is that numerous states allow churches to apply for property tax exemption on the building they are renting so long as they can show that it is being used exclusively for church purposes. 

Two things that will lower your rent

Here is what I consulted Pastor Francine to do.  She went back to the landlord and requested an amendment to the lease offer so that it would state that if the church applied for property tax exemption of the property then the landlord would lower the CAM’s and/or rent by an amount equal to the exemption.  Naturally, the landlord agreed because property tax was something from which he never benefited.  When the proper time came, Pastor Francine applied for property tax exemption based on the fact that the space was being used exclusively for religious purposes.  The county granted the tax exemption on the space and she took a copy of the exemption approval to her landlord.  The next month’s rent was lower by $2,000.00.  What a great savings for her church.

Not all states do and not all assessors know

Though many states grant a property tax exemption for the property leased by a church and used exclusively for church purposes, not all do.  Therefore, the best way to find out is to check with your local assessor’s office and ask for a property tax exemption application for the church.  After getting the application, ask the assessor if he/she believes your church would qualify.  It is a good idea to verify it.  For example, when Pastor Blakely went to the assessor’s office to verify if his church could apply for the property tax exemption of the leased space, they told him “No.”  Yet California Tax Code Section 207.1 makes provisions for property leased to a church to qualify for property tax exemption.  Moreover, California’s publication 48 states that “If the lease or rental agreement does not state that the rent has already been reduced to reflect the property tax exemption, the church must receive a future rent reduction in proportion to the tax reduction that results from the exemption.”  After a little bit of a delay, it was that the person he spoke to that day did not know that such exemption existed.  Therefore, remember it is best to get a second opinion. 

We can help

Keeping churches compliant is our passion.  We believe that compliance is not just doing the things that will keep your church out of trouble (though that is important), but also doing the things that cause your church to prosper and grow.  As church pastors and leaders, we need to understand the laws that govern churches and ministries and leverage them to our favor.  At all of our conferences we teach pastors that it is not just preaching that brings growth to a church; it is also good stewardship.  If you want a copy of your state’s law concerning property tax exemption, give us a call and we will send it to you so that you can read it for yourself and take the proper action.