Real Property Donation Sample Policy

Preamble

Whereas it is the desire and responsibility of the Board of Directors (the “Board”) of “XYZ Ministry” (the “Ministry”) to administer its charge with respect to the business and financial aspects of the Ministry with all due diligence and prudence, so as to protect the financial well-being of the Ministry on behalf of its donor constituents, and;

Whereas the Ministry has received real property donations in the past and may again in the future, and;

Whereas the ownership and operation of real property carries with it certain financial and legal risks, which must be carefully assessed before the Ministry accepts prospective real property donations;

Now therefore the Board desires to adopt the following policy:

Policy

It shall be the policy of the Board of the Ministry that before accepting and taking title to a real property donation, the Board must conduct, or appoint an individual or sub-committee to conduct, an assessment and evaluation of the property. Such a review includes, but is not limited to, the following areas and in accordance with the following standards. The following is intended as a guideline and may not include every aspect that requires review and assessment. It is incumbent upon and through the Board, and to any individual or subcommittee it may appoint for this purpose, to include in its reasonable business judgment other evaluations and assessments of the real property deemed necessary on a case-by-case basis. It will be left to the discretion of the Board and any individual or subcommittee it may appoint, to engage outside experts to conduct inspections and/or reviews of any or all of the following provided. However, it will remain the responsibility of the Board to make the final determination as to the acceptability of the property to receive as a donation.

  1. Condition of Title. Review all matters of record, including property tax bills, easements and encroachments, covenants, conditions, and restrictions, recorded leases, trust deed liens, deed restrictions, mechanics liens, etc. Are there any matters of record that might affect marketability of the property (for sale or for lease), or which might cause exposure to legal risks not covered by a standard policy of title insurance?

  2. Physical Aspects. Review condition of all aspects of the physical plant, including but not limited to foundations and footings, walls and wall structure, roof and roof structure, mechanical and electrical systems, fixtures and finishes, site improvements and landscaping, code compliance, hazardous or life-safety issues, etc. Are there maintenance or deferred maintenance items, or capital improvements that would require immediate attention and expense and/or would affect the marketability of the property? Are there physical issues that might cause exposure to liability risks?

  3. Environmental. Review environmental conditions, including site condition, building materials, property use history, adjacent and local property uses, etc. To the extent that there is any evidence of environmental contamination, empirical or by disclosure, the Board may call for a Phase I Preliminary Site Assessment.

  4. Property Documentation. Review all property documentation, including leases, surveys, disclosures, FEMA maps, operating covenants, or restrictions not already reviewed as matters of record, as well as warranties, construction documentation, etc. Are there conditions not of record and not apparent by physical inspection that would nevertheless affect the marketability of the property for rent or for sale?

  5. Market Assessment. Review market and property marketability at property level, neighborhood level, and regional level. Consider functional and physical characteristics relative to comparable for-rent properties, such as neighborhood physical condition and trends, growth/demand-inducing factors (such as growth of a major employer), vacancy rates, rental and sale price trends, schools, crime, etc. Are there property, neighborhood, or regional conditions or trends that would adversely affect the marketability of the property for rent of for sale?

  6. Property Economics. Review current, historical, and proforma market valuation (appraisal) income and expenses, considering income/expense trends, cost saving, and/or income enhancing opportunities, etc. Evaluate cash flow during the holding period. Are there significant one-time expenses that will come up during that holding period? If so, what are the available cash sources to cover such expenses? If financing is to be assumed, evaluate what level of vacancy would result in negative cash flow. Are there assumption fees/qualification procedures? Is there yield maintenance? Project net sale proceeds, cash sources, and uses over the holding period.

It shall be the policy of the Board of the Ministry that the above aspects shall be considered with all prudence and due diligence, with an eye towards minimizing financial and legal risks to the Ministry, and even to the point that a potential reward is foregone if such risks are anything other than nominal or cannot be reasonably ascertained. The Board shall carry out its responsibilities in connection herewith as a fiduciary, entrusted with the financial well-being of the Ministry; the Board shall carry out its responsibilities in connection herewith according to biblical principles.

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This text is provided with the understanding that ECFA is not rendering legal, accounting, or other professional advice or service. Professional advice on specific issues should be sought from an accountant, lawyer, or other professional.

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