Many fraternal organizations have rooms, space or facilities in their buildings that are not used on a daily basis. Making these spaces available to the public and other organizations to rent can be an effective way to earn additional income and further the organization’s mission.
However, whether renting your kitchen out to a local baker or your entire hall for a wedding or birthday party, there are risks that your organization should consider before making its event spaces available to rent. From lawsuits and property damage to member dissatisfaction and potential tax consequences, a single rental event can create risks that impact your organization’s finances, operations and reputation.
Before promoting your space as a rental venue, it’s important to understand potential challenges and the key risks fraternal organizations may face.
Top Risks of Renting Your Post Event Space
- Liquor Liability lawsuits
When an organization rents its hall or event space for weddings, parties, fundraisers or other gatherings where alcohol is served, it may assume more risk than many organizations realize. If an intoxicated guest causes injury to another attendee, damages property or leaves the event and causes a car accident, your organization could be drawn into a lawsuit, even if it did not directly serve the alcohol.
Many organizations mistakenly assume the renter’s actions are solely their responsibility. However, attorneys often pursue all parties connected to an event, including property owners and event hosts. If your organization sells alcohol, provides bartenders or fails to enforce alcohol-related policies, its exposure can increase significantly. Defense costs alone can be substantial, regardless of whether the organization is ultimately found liable.
- Property damage
Opening a facility to outside groups inevitably increases wear and tear on the property. While most renters are respectful, accidents happen. Broken furniture, stained flooring, damaged audiovisual equipment, vandalism and kitchen-related incidents are just a few examples of losses that can occur during private events.
The financial impact extends beyond repair costs. Damage may force the organization to temporarily close portions of the facility, cancel future rentals or disrupt member activities while repairs are completed.
Without proper rental agreements, security deposits and insurance requirements, organizations may find themselves paying for damages that are difficult or impossible to recover from renters.
- General Liability lawsuits
Any time members of the public enter a property, the risk of injury exists. Guests may slip and fall, trip over uneven flooring, suffer injuries from poorly maintained equipment or claim negligence after an accident during an event.
Even when an organization takes reasonable precautions, lawsuits can arise if an individual believes the organization failed to provide a safe environment. Medical expenses, legal defense costs, settlements and judgments can create significant financial challenges for organizations operating on a limited budget.
- Disruption to Post members
Renting space to the public can sometimes create unintended consequences for the members who rely on the facility. Frequent rentals may limit member access to meeting rooms, canteens, parking areas or other amenities that are central to the organization’s mission and culture.
Public events can also lead to noise, congestion, security concerns and scheduling conflicts. Members may become frustrated if they feel their organization is prioritizing rental income over their experience. In some cases, disruptive behavior by renters or guests can damage the welcoming atmosphere that members expect.
While rental revenue can be valuable, fraternal organizations should carefully balance income opportunities with their responsibility to serve members and advance their mission.
- Tax repercussions
Many leaders are surprised to learn that rental income can have tax implications. Depending on how the space is rented and whether significant services are provided, rental revenue may be considered unrelated business income and could be subject to Unrelated Business Income Tax (UBIT).
Fraternal organizations should work closely with qualified tax professionals to understand how rental activities may affect federal, state and local tax obligations. Careful planning can help organizations generate supplemental revenue without creating unintended compliance issues.
Protecting Your Post and its Members
Renting your organization’s space can be a great way to support your initiatives and keep your doors open for your members, veterans and the community.
By being aware of the risks renting your Post event space can cause, you’re taking the first step in protecting your organization. Strong rental agreements, adequate insurance coverage, clear policies and careful oversight can help fraternal organizations protect their assets, members and mission while benefiting from rental income.
By choosing the Post Insurance Program, administered by Lockton Affinity, you have access to insurance coverage that can help protect against the risks of renting your space, like Property, General Liability, Liquor Liability and more.
Protect against the risks of renting your Post. Contact one of our dedicated insurance representatives today at (800) 669-9944.
