There are a number of Methodist Church properties which are subject to restrictive covenants. These covenants can cause difficulties for Managing Trustees when planning for the management of property.
A restrictive covenant is a negative obligation which affects property, in other words it means something which cannot be done on or with a property. These covenants can be enforced by the person or body which is said to have the benefit of the covenant (in legal terms the “Covenantee”). Restrictive covenants often affect the use of the property, for example:
“not to use the land hereby conveyed other than as a Chapel for religious worship”
This type of covenant was often imposed when the land was originally conveyed to the Methodist Church. These covenants can cause problems when a church building has closed and the Managing Trustees are endeavouring to sell the property to release funds to further mission elsewhere within the Connexion.
In these situations Managing Trustees should consult their solicitors before taking any steps and ask for advice as to the exact effect of the covenants.
Managing Trustees should ask their solicitors to advise them on the alternative ways in which the covenants can be dealt with. Restrictive covenants can be released in different ways and sometimes may not need to be released at all if the covenant has become unenforceable. The most common method of release is a formal Deed of Release. However, there are 2 main problems with this approach:
1. Before entering into a Deed of Release the Managing Trustees' solicitors should ensure that they are satisfied that the person or body purporting to give the release is actually the party with the benefit of the covenant. This is not always a simple question, for example if the landowner who transferred land to the Methodist Church then also transferred other plots of land to third parties at the same time then the current owners of these other plots of land may also be entitled to the benefit of the covenant. This means that even if a Deed of Release is entered into it may not effectively release the property from the restrictive covenant as the covenant could continue to be enforced by the owners of these other plots.
Therefore instructing solicitors to advise at an early stage may prevent the Managing Trustees from negotiating with the wrong party.
2. When entering into a Deed of Release the party who claims to have the benefit of the covenant may often require a substantial payment before releasing the covenant. Often the starting point for negotiating the sum that will be paid is a principle from a court case dated 1961 known as the Stokes v Cambridge Principle. The principle decided in this case was that the person with the benefit of the covenant could claim one third of the value of the property once the restrictive covenant has been released.
The most important thing Managing Trustees can do is to avoid contacting any person they believe may have the benefit of the restrictive covenant. The reason for this is that if contact is made then it may make following an alternative approach more difficult.
What can Managing Trustees do?
Once Managing Trustees have taken legal advice and obtained a Qualified Surveyors Report they should contact TMCP Legal and provide copies of the advice obtained and the title deeds to the property. TMCP Legal will then be able to provide guidance to the Managing Trustees.
If further guidance on this issue is required please contact TMCP Legal.
From an article produced by TMCP legal for Property Matters issue 12 - September 2015.