Replacement Project Status to a project can be beneficial to Managing Trustees who wish to use the proceeds from the disposition of Methodist property to fund another project (“Replacement Project”). A common example of a Replacement Project is when one manse is to be sold to fund the purchase of another manse elsewhere in the Circuit. In this situation, the sale is the disposition, and (subject to a number of requirements) the purchase would be considered to be the Replacement Project. The criteria for Replacement Projects can be found on the Methodist Church website here.
Under Methodist Standing Order 970, the Connexional Priority Fund (“CPF”) levy is charged on the proceeds from the disposition of virtually all Methodist Model Trust Property. If Replacement Project Status is granted however, a proportion of the CPF levy can be reclaimed and used to fund the Replacement Project. The amount which can be reclaimed is proportionate to the cost of the Replacement Project (e.g., the purchase price of a new manse). Please refer to the Replacement Project Focus Note for more in-depth guidance on how this amount would be calculated.
How to request Replacement Project Status
In order for a project to be treated as a Replacement Project, the Managing Trustees should fill out the relevant section when creating a new project on the Methodist Property Consents (“Consents”) website. The Replacement Project heading can be found under the “Project Summary” tab for the proposed Replacement Project (i.e., buying a replacement manse). This section can be updated at a later date if anything changes, or otherwise if a project for the associated disposition has not yet been created.
Managing Trustees should be aware that the consent of the Connexional team is required under Methodist Standing Order 973 in order for a project to be treated as a Replacement Project. To ensure that Replacement Project status is granted in good time, please notify the Property Support team that an application for Replacement Project status has been submitted.
Replacement Project status will be confirmed via the project on the Consents website. The Property Support team may require further information if the request is not on a “like-for-like” basis. It is therefore helpful that the team is notified as soon as possible, to ensure that any queries are dealt with well before the Managing Trustees are looking to progress their transaction.
It is helpful if you keep TMCP in the loop by notifying us of any requests for Replacement Project status. Managing Trustees should be assured, however, that we have access to the Consents website. TMCP Finance will, as a matter of course, check whether there is a Replacement Project upon receipt of the proceeds from a disposition, and will factor this in when calculating the CPF levy.
Other important points to note
Managing Trustees should be assured that Replacement Project status is not affected by whether the transaction completes before or after the associated disposition. If the Replacement Project is completed first, TMCP Finance will deduct the cost of the Replacement Project from the proceeds of the disposition when calculating the CPF levy.
If the disposition completes before the Replacement Project, the CPF levy will be taken in full, and a CPF levy refund can be arranged once the Replacement Project is approaching completion. In order to arrange for this, the Managing Trustees should select “CPF levy refund” when filling out the “Project Funding” for the project on the Consents website and enter the refund amount. If the refund amount is not known, Managing Trustees can contact TMCP Finance who should be able to assist.
Managing Trustees should also be aware that Replacement Project Status is only valid if the Replacement Project and its associated disposition complete within five years of each other. The order of which the projects complete does not impact this “five year rule”, i.e. it does not matter whether the Replacement completes before or after the associated disposition. If there is more than five years between completion of the two projects, the Replacement Project status will no longer be valid and the CPF levy exemption under Standing Order 973 will not apply.
If you have any queries in relation to the guidance in this document please contact TMCP Legal for further assistance.