When Managing Trustees are looking for a new Manse property which meets the requirements set out in Part 2 of Section A of Book VII of the Constitutional Practice and Discipline of the Methodist Church, they are increasingly looking at new build properties.
Purchasing a new build property can present additional challenges which Managing Trustees need to be aware of. However being aware of these challenges and how to overcome them will help Managing Trustees to complete such purchases successfully.
Before paying the reservation fee
As a first step, before paying any non-refundable “reservation fee”, Managing Trustees will want to ensure that they can show that charitable money is being used appropriately and that they have negotiated a good deal for the charity. Instructing a surveyor to value the property will help achieve this. This valuation should refer to similar properties in the vicinity (if not agreed sales on the same development) and the plans and specifications of the property being built. In terms of the agreed price, Managing Trustees will want to ensure they are benefitting from the same incentives etc. as other buyers. If Managing Trustees are paying more than market value they should consider the guidance in Section B2.2 of the Purchase Guidance for Managing Trustees which sets out the steps which Managing Trustees should take to ensure that they have complied with their duties as charity trustees.
If having obtained a purchase survey the Managing Trustees decide that they do wish to purchase the property, the next step would be to pay the reservation fee. At this point developers/ housebuilders often impose a strict deadline for exchange of contracts. Managing Trustees should not be deterred by this. TMCP are aware of these time constraints and will work with Managing Trustees to meet them. It is of great assistance to TMCP if the Managing Trustees can contact us before the reservation fee is paid, we can then ensure that the project is dealt with as quickly as possible.
Once the offer has been accepted and the reservation fee is paid, the legal process will start and the developer/ housebuilder’s solicitors will contact the Managing Trustees’ solicitors. When you first instruct your solicitors please refer them to the Purchase of a New Build Focus Note. This gives solicitors the information they need to conduct the transaction as smoothly as possible:
- Developers often state that all the plots on the estate must have identical documents and that amendments cannot be agreed. Your solicitors will need to make it clear to them that as the property is being purchased by a charity the documentation must include the same template clauses as any other purchase. If the developer/ housebuilder wants to sell to the charity they will have to accommodate this requirement.
- The “standard documentation” will impose covenants and obligations on the owners of the plots and usually create Management Companies. There is often a clause requiring the owner of the property to become a shareholder in the company and (in some situations) an officer of the company. Although TMCP cannot do this, alternative options are available as explained in the Purchase of a New Build Focus Note.
- New build properties are often subject to a requirement that the property is only to be used as a “residential dwelling” or “for occupation by one single family unit”. It will therefore be necessary to ensure that a specific clause is incorporated to make it clear that use as a Manse does not breach any such provision. Guidance to help Managing Trustees’ solicitors to do this is in the Purchase of a New Build Focus Note.
Exchange and completion
Once TMCP have confirmed that all the requirements in the Purchase of a New Build Focus Note and the standard purchase requirements have been dealt with then authority to exchange is given in the usual way.
At this point, Managing Trustee should bear in mind that it can take up to 10 working days for TMCP to seal documents as Board Members are not based in the office. Usually TMCP Legal can obtain the signatures of Board Members in a shorter period but if the contract provides that the completion date is not fixed and is instead triggered by service of completion notices or otherwise, the notice periods will need to accommodate the practicalities of dealing with execution of documents by Managing Trustees and the custodian trustee body. Again, accommodating this should not prove problematic provided that Managing Trustees’ solicitors are aware of the position and follow the guidance provided.
From an article produced by TMCP legal for Property Matters issue 18 - June 2017