Guidelines for Construction Projects and Construction Financing (Parish Faith Communities) What Steps Need to be Taken to Undertake Construction or Alteration of Real Property? Where to begin: Any construction or alteration of the church or other real property owned or leased by a faith community begins with a review of civil and canon law and a gathering of relevant documents. There is help available for this work. Should you have any questions, please contact your Missioner for Missional Management, the Rev. Michael Pipkin, for assistance or clarification. Church Canon Requirements When a parish faith community desires to undertake construction or alteration of any building or other improvements, our canons require certain approvals. The complete process for receiving approval for such project could take up to 90 days, including appropriate notification time for faith community meetings, and depending on the complexity of the project. A. Any construction contract for the building, improvement or significant alteration to the fabric of real property owned or leased by a faith community must be approved by the Bishop and Trustees. Significant alteration of the fabric of a building includes the building s structure, roof, floor slabs, walls, windows, window openings, and exterior doors and door openings. No consent is required for minor or urgent repairs or replacements to the fabric or furniture of the church or other building. Canon 803.2c. B. If the Faith Community intends to finance its construction project by any borrowing secured by a mortgage or other encumbrance on the property, the approval of the Bishop and Standing Committee is required. The Faith Community must also seek the advice of the Chancellor. Canon 803.2b.
C. If the Faith Community intends to finance its construction project by any borrowing under a line of credit, pledge of investments, or unsecured loan, the approval of the Bishop and Standing Committee is required when the amount borrowed exceeds 50% of the normal operating income of the Faith Community for the previous calendar year or the repayment schedule calls for payment over a term exceeding 12 months. The Faith Community must also seek the advice of the Trustees and the Chancellor. Canon 803.2d. D. If the Faith Community is acquiring the property on which the construction or alteration will occur, the approval of the Bishop and Trustees is required. The Faith Community must also seek the advice of the Standing Committee and Chancellor. See the separate Guidelines for Acquisition of Real Property by Gift, Purchase or Lease (Parish Faith Communities) for more information. E. All real and personal property held by or for the benefit of Faith Communities is held in trust for The Episcopal Church and the Episcopal Church in Minnesota. Canon 801.1 Such trust must be recited in all deeds or by other legal instruments relating to the property of the Faith Community. Canon 801.2. F. All design and construction contracts, loan documents, and other agreements relating to the project must be submitted to a Chancellor for examination and approval as to form. Such approval is required before the Faith Community executes any contracts or other binding commitments or closes on any loans. Canon 805.3. G. A copy of all design and construction contracts, loan documents, and other agreements must be kept in a safe, fire-proof place. Send a copy to the Missioner for Missional Management at the Episcopal Center for recordkeeping. Canon 805.1. Also send a copy to the Vice-Chancellor for his or her records. Civil Law Requirements In addition to church canon requirements, a parish faith community must comply with certain requirements of civil law when it undertakes construction or alteration of property. A. The Vestry must approve the design and construction contracts, loan documents and other agreements and record its action in the Vestry minutes. Normally, this action should take place before the project is submitted to ECMN for review or approval. B. The Faith Community must abide by the requirements of its Articles of Incorporation and Bylaws to undertake any construction project or borrow any funds to finance such project. The mortgages or other documents need to use the name of the Faith Community set out in the Articles of Incorporation, which may be different from the common name of the Faith Community. C. Faith Communities are normally organized as religious corporations under Minnesota Statutes chapter 315. If the Faith Community is organized under Minnesota Statutes 2
chapter 315, the congregation must approve any mortgage of its church or church site made to secure any construction loans or other encumbrances in a meeting called for that purpose. Minnesota Statutes section 315.17. D. In some instances, Faith Communities have been organized as nonprofit corporations under Minnesota Statutes chapter 317A. Congregational approval of mortgages is not required for Faith Communities organized under Minnesota Statutes chapter 317A, unless otherwise required in its Articles of Incorporation or Bylaws. Minnesota Statutes section 317A.661. E. The Faith Community is encouraged to appoint its own attorney to provide legal advice and representation to the Faith Community. The Faith Community will be responsible for the fees and expenses of its attorney. The Faith Community s attorney should work cooperatively with the Vice-Chancellor in connection with the transaction. Approval Process The Faith Community should not enter into any design or construction contract or other binding construction obligations or borrow any funds to finance such project until it has obtained the necessary approvals by the Bishop, Trustees, Standing Committee and Chancellor. The process for obtaining such approvals normally follows the following sequence: A. As the Faith Community is preparing to move forward with the project it should gather the documents that will need to be reviewed by the Bishop, Trustees, Standing Committee and Chancellor. A list of the documents required for legal review is included in Appendix A. B. In addition to gathering documents, the Faith Community should also be thinking about why it desires to undertake such construction project, what impact such project will have on the mission, ministry, and sustainability of the faith community, and any other information the faith community would like to share with the larger church. These matters are included in the Construction Questionnaire that will guide the Faith Community, Bishop, Trustees, and Standing Committee in their approval of the project. The Construction Questionnaire is included in Appendix B. C. The Faith Community is encouraged to work with the Missioner for Missional Management in gathering the documents and thinking through the Construction Questionnaire as soon as they begin considering the construction project. This will help expedite the approval process. D. Once the Vestry has approved the construction project, the Rector or Senior Warden sends one letter addressed to the Missioner for Missional Management with a copy to the Bishop advising ECMN of the proposed construction and means of financing. The letter 3
should include the documents that are available to the faith community at that time and a completed Construction Questionnaire. This letter can be sent via email, along with scans of the appropriate documentation and the Construction Questionnaire. E. Normally, within a day or two of receiving information from the Faith Community, the Rector or Senior Warden will receive a phone call from the Missioner for Missional Management who will discuss the action of the vestry, the next steps in the approval process, and the timelines for any required approvals. The Missioner for Missional Management will then verify all of the documents and the Construction Questionnaire, and forward them to the Bishop, Trustees, Standing Committee and Chancellor for review and recommendations. F. Upon receipt of the information from the Missioner for Missional Management, a member of the Real Estate Committee of the Trustees will contact the Rector or Senior Warden to discuss the project, ask questions, and possibly arrange a time for a personal visit. Following this conversation or visit, the Trustee will write a brief report on the project, making appropriate recommendations, and will forward that report to the Rector, Senior Warden, Bishop, Trustees, Standing Committee and Chancellor. G. Meanwhile, the Chancellor will review the legal documents and make recommendations as to form and content of legal documents relating to the project, and will forward those recommendations to the Missioner for Missional Management for distribution to the Faith Community, Trustees, Standing Committee and Bishop, as appropriate. H. The Trustees, upon receiving the report from the Real Estate Committee, will place the construction project on their agenda for the next appropriate meeting. Representatives of the Faith Community may be asked to meet with the Trustees to discuss the project. In some circumstances the Trustees will consider the proposal by email or conference call. The Trustees will discuss the project and hold a vote to consent. If approved, a written approval will be forwarded to the Missioner for Missional Management for distribution to the Faith Community, Trustees, Standing Committee and Bishop, as appropriate. I. If the Standing Committee s advice or approval is required, the Standing Committee, upon receiving the report from the Trustees, will place the construction project on their agenda for the next appropriate meeting. Representatives of the Faith Community may be asked to meet with the Standing Committee to discuss the project. In some circumstances the Standing Committee will consider the proposal by email or conference call. The Standing Committee will discuss the project and hold a vote to consent. If approved, a written approval will be forwarded to the Missioner for Missional Management for distribution to the Faith Community, Trustees, Standing Committee and Bishop, as appropriate. 4
J. The Bishop, upon receiving the required consent of the Trustees and Standing Committee, will consider the project and, if he or she approves, will issue his or her consent to the construction project. Contacts Do not hesitate to ask any of the following persons for assistance: Missioner for Missional Management: Vice-Chancellor: The Rev. Michael Pipkin Episcopal Church in Minnesota 1730 Clifton Place, Suite 201 Minneapolis, MN 55403 Tel: 612-870-3315 or 800-596-3839, ext. 315 Fax: 612-871-0552 E-mail: michael.p@episcopalmn.org Robert O. Straughn McGrann Shea Carnival Straughn & Lamb, Cht d 800 Nicollet Mall, Suite 2600 Minneapolis, MN 55402 Tel: 612-752-1906 Fax: 612-339-2386 E-mail: ros@mcgrannshea.com 5
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