Licence Guidance 3 - The Standard Licence Explained

The information in the Particulars (the first two pages of the Standard Licence) relates to the specific terms of the arrangement for use of Methodist premises by a third party (Licensee). It contains key details of the licence arrangement and can be seen as a summary of the terms agreed between the Managing Trustees and the Licensee. The guidance note Completing the Standard Licence explains how to complete the details that need to be inserted in the Particulars.

C1 Main terms of agreement

Part 2 of the Standard Licence (clauses 1 to 5) contains the main terms of agreement. This is the part of the Standard Licence that grants the Licensee permission to use the Premises and sets out the legal basis of that usage, the Licensee's obligations, safeguarding policy and the termination provisions.

C2 Licence to occupy

• Clause 1 is one of the main clauses in the Standard Licence. This clause grants the Licensee permission to use the Premises at the agreed times (Permitted Hours), for the agreed purposes (Permitted Use) subject to the Licensee's obligations set out in clause 3. The clause also grants the Licensee the right to use any common accessways that are required to access the Premises and to use any shared facilities or furniture and equipment (Rights).
• Clause 2 contains important statements at sub-clauses (a) to (d) to underline the fact that use is under a licence , as opposed to a lease  (Please see the Licence Page if you woud like guidance on the difference between these two types of arrangement). The clause states that the Licensee acknowledges the Managing Trustees retain control and possession of the Premises, that the right to use the Premises is personal to the Licensee and that there is no right to exclusive possession.
• Clause 2(e) confirms that the Licence Fee is inclusive of a contribution towards anticipated utility costs. If you want to charge for utility costs separately to the Licence Fee then please contact TMCP for an alternative form of Standard Licence.

C3 Licensee’s obligations

Clause 3 sets out the Licensee’s obligations at sub-clauses (a) to (q). Clause 3 is basically a list of all the things that the Licensee must and must not do. The obligations are intended to be self-explanatory and are grouped under headings (the type in bold) setting out their broad purposes. If you have any queries please feel free to contact TMCP  for further guidance.

C3.1 Payment of monies

• Sub-clause 3(a)(i) obliges the Licensee to pay the Licence Fee. The drafting reflects Methodist best practice by requiring payment in advance without any deductions. Allowing payment in arrears has led to Licensees building up sizeable arrears in the past that Managing Trustees have found difficult to recover. Payment in advance avoids this problem. The wording “without set-off or deduction” is intended to avoid Licensees subtracting sums they feel the Managing Trustees owe them, from the Licence Fee. This is not permitted. Licensees should pay the full Licence Fee in advance and if they fail to do so, the Managing Trustees can terminate the arrangement (see notes on clause 5).
• Sub-clause 3(a)(ii) obliges the Licensee to pay an additional amount (if required at any point) equal to the difference between licensee’s utility contribution (that is paid as part of the inclusive Licence Fee) and the Utility Costs (being the actual utilities used). This balances the practical attractions of an inclusive Licence Fee with the need to protect the charity’s best interests. The sub-clause allows Managing Trustees to recover any unexpected additional Utility Costs that may be incurred due to higher than anticipated usage by the Licensee or increases in charges by the utility companies. The aim is to prevent the charity being left out of pocket. Managing Trustees are obliged under statute to act prudently and in the best interests of the charity. It cannot be in the best interests of a charity to subsidise third parties’ use of charity premises.
• Sub-clause 3(a)(iii) obliges the Licensee to pay any business rates or other taxes that are imposed due to “the Licensee’s use” of the Premises. This clause is in accordance with Methodist best practice. It was originally introduced to address concerns raised by your District Property Secretaries that Managing Trustees could be faced with large bills for business rates if the usual business rate exemptions and reliefs for charities were lost due to a third party’s use of church premises.  TMCP cannot allow any exceptions to this provision. If a Licensee has concerns they are at liberty to obtain advice from their own accountant or tax adviser as to the risks of business rates becoming payable. This may be of more concern to a commercial Licensee that is neither charitable nor community based. As charity trustees, Managing Trustees are duty bound to act in the best interests of their charity and it is difficult to reconcile accepting liability to pay business rates imposed due to another party’s use (however unlikely that is perceived to be) with acting in the charity’s best interests. If use by a particular third party is likely to trigger loss of exemptions and reliefs the Managing Trustees may consider that it is not in the best interests of the charity to proceed in any event. The effect on the Local Authority’s treatment of the Premises for business rates may be difficult to reverse even after the Licensee (whose use changed the ratings position) has stopped using the Premises. Managing Trustees are strongly advised to take professional advice on this if they have any concerns that use by a particular third party will attract business rates.

C3.2 Repair, damage and leaving the Premises

Sub-clauses 3(b) to (e) oblige the Licensee to leave the areas that it uses tidy and free of the Licensee’s possessions. The Licensee is also obliged to remove any items that are left in any temporary storage areas, at the end of the Licence Period.

Sub-Clause 3(c) obliges the Licensee not to cause damage to the Premises, the land and church buildings of which the Premises form part (Building) or neighbouring premises or property on such premises including the fixtures and fittings. These provisions reflect best practice by safeguarding charity assets.

C3.3 Use of Premises

The obligations in sub-clauses 3(f) to (h) oblige the Licensee to only use the Premises for the Permitted Use and not to do anything contrary to the Standing Orders or anything that would cause a nuisance or disturbance to the Managing Trustees or any other occupiers or neighbours. Any use contrary to Section 92 of Standing Orders  would be in breach of Methodist Law and constitute breach of the Model Trusts. Whilst there are exceptions to Standing Order 924 (permitted gambling), the rules surrounding these exceptions are complex. The blanket prohibition under sub-clause 3(g) is drafted to avoid unintended breach. If there is a particular requirement for a one-off raffle for example then please contact TMCP for further guidance.

• Sub-clause 3(g) - Note that use for religious purposes is not permitted in the Standard Licence. If a third party wants to use the Premises for Christian worship please contact TMCP so that we can provide additional guidance on the requirements surrounding use under Model Trust 14(2A) including obtaining the required consent of the Connexional Ecumenical Officer. TMCP Legal will also suggest amendments that can be made to the Standard Licence so that it can be approved for use under Model Trust 14(2A).

C3.4 Alterations

Sub-clauses 3(i) to (k) state that the Licensee should not carry out any works to the Premises, apply for Planning Permission or display signboards and advertisements without the Managing Trustees' approval. District Property Secretaries have raised concerns about Licensees displaying notices as they so choose some of which may have no regard for the Building’s primary purpose. Under sub-clause 3(j) the Licensee must obtain the Managing Trustees' consent to any such signboards, nameplates, banners etc. You may want to consider such applications carefully and ensure that the Building’s main purpose is not obscured.

C3.5 Compliance with rules and regulations

It is important that third parties comply with any consents, planning permissions, legislation and rules that apply to the Premises. These include those of a public or private nature including rules made by utility suppliers and the Managing Trustees themselves (sub-clauses 3(l) to (m)). This reinforces the obligation not to injure the reputation of the Church (sub-clause 3(h)) and ensures that the Managing Trustees are not liable for any breach of rules or regulations by third parties.

C3.6 Indemnity and insurance

It is important to ensure that correct insurance is in place to protect Managing Trustees against claims by third parties relating to the Building. Sub-clauses 3(o) to (q) oblige the Licensee not to void the Managing Trustees' insurance cover, to provide an indemnity against any claims for third party liability and to put in place suitable insurance to support this indemnity. This is just a starting point. It is important that Managing Trustees ask to see Licensees policies to ensure that adequate cover is in place. Please speak to your insurer or broker if you have any queries.

Please bear in mind that Managing Trustees' own third party liability cover is very unlikely to extend to third parties who come onto church premises to attend sessions, meetings, classes or clubs etc. run by a Licensee. It is unrealistic for Licensees to expect to be able to use the Premises without having their own adequate third party liability insurance in place and Managing Trustees should find that most users are happy to show evidence that they are covered.

C4 - Safeguarding

Clause 4 has been agreed with the Connexional Safeguarding Team and refers to the Safeguarding Policy defined in the Particulars. This is the safeguarding policy applicable to the particular Building. In short the clause is intended to ensure that all users of the Premises act in accordance with the local safeguarding policy to protect children, young people and vulnerable adults who may be on the Building while the Licensee is using the Premises.

The clause confirms that the Managing Trustees have supplied the Licensee with a copy of the Safeguarding Policy. This can be provided via email or as a hardcopy. The clause also confirms that the Licensee understands the Safeguarding Policy and will follow it or an equivalent policy. If the Licensee is an established group they may have their own safeguarding policy that they can follow instead but only if that policy is “comparable equivalent guidelines or procedures” i.e. the Licensee’s policy sets a standard no less than the Safeguarding Policy (of the Methodist Church).

Please note that if you will be providing the Licensee with a key, the Licensee will also need to sign Safeguarding Form D (Key Holder Declaration).

C5 - Termination

Termination Clause 5 sets out the circumstances in which the licence will end.

Note that the licence will end on the earlier of the date that the parties intend the licence to end (the End Date defined in the Particulars) or the occurrence of any of the events listed under clauses 5.1(b) to (c).

• The Managing Trustees can end the licence early if the Licensee is in breach of its obligations under the Standard Licence (clause 5.1(b)).
• Either party can terminate the licence on giving the other party four weeks’ notice (clause 5.1(c)).
• Clause 5.1 obliges the Managing Trustees to reimburse any part of the Licence Fee that has been paid in advance for any period of time following termination of the licence unless the arrangement is terminated due to the Licensee being at fault under clause 5.1(b).
• Clause 5.3 sets out what will happen if the Licensee has left items on the Premises following termination of the licence. In short the Managing Trustees can dispose of any such items and are not obliged to account to the Licensee for the proceeds arising from any such sale.

C5.1 Termination points in practice

If Managing Trustees decide to terminate the licence early under clause 5.1(b) they will need to serve notice of termination on the Licensee giving the Licensee a reasonable period of time in which to remedy the breach. The licence would terminate if the Licensee failed to remedy the breach. Managing Trustees may want to instruct an independent legal adviser to advise them on their legal position and assist in drafting the termination notice. If you would like TMCP to review any drafts from a Methodist point of view please feel free to send them in. TMCP can however only ever provide guidance and not legal advice.

If the Managing Trustees decide to terminate the licence early under clause 5.1(c) they will also need to serve written notice of termination on the Licensee. The notice could simply specify that notice of termination was being served under clause 5.1(c) of the licence dated [the date of the particular licence agreement].

If litigation is ever considered please obtain guidance from TMCP as soon as possible. There are procedures that must be followed under Methodist Standing Orders to issue or defend any proceedings. TMCP will provide more detailed guidance if required but in short; a resolution must be passed locally authorising the Managing Trustees to proceed to litigation, the Connexional Team must give permission and the Managing Trustees must be able to show that they have obtained legal advice on the issue and be able to provide a letter from their solicitor setting out the merits, risks and costs involved in taking any such action. Managing Trustees often find that the costs and risks outweigh the likely gain but your legal adviser would be able to confirm the position given your particular circumstances.

D1 General legal terms

General legal terms, often called “boiler plate” clauses, are generic contractual provisions that are generally found in commercial contracts whatever the nature of those contracts. Clauses 6 to 12 of the Standard Licence may appear to be superfluous and full of legalese but they do have important practical uses. This is a summary of the role of each of the "general legal terms":

D2 Notices - Clause 6

Clause 6 sets out how the parties can validly serve notice on each other and ensure notices come to the attention of that party. If the Managing Trustees want to serve notice on the Licensee to terminate the licence under clause 5.1(c) for example they just need to follow the process set out in clause 6.

D3 Warranties – Clause 7

Clause 7 establishes that the Managing Trustees have not given any legally binding assurances that the Premises can be used for the Permitted Use or are reasonably suitable for the Licensee’s intended purposes. This avoids any such term being implied into the licence and tries to prevent claims against the Managing Trustees should the Licensee be unable to use the Premises as desired. If asked, Managing Trustees should confirm that if the Licensee has any concerns about the suitability of the Premises, they should make and rely on their own enquiries. The onus is on the Licensee to ensure that it has any required consents and that the Premises are suitable.

D4 Limitation of Managing Trustees' liability – Clause 8

Clause 8 is an attempt to limit the Managing Trustees' potential liability under the Occupier’s Liability Act 1957. However there are statutory restrictions on the extent to which liability can be limited. Whilst there is a general exclusion of liability under clause 8.1, clause 8.2 limits this general exclusion to reduce the risk of the clause being struck out, if challenged, for being an unfair contractual term. Clause 8.2 confirms that the Managing Trustees would be liable for death or injury caused due to their negligence or where exclusion is otherwise unlawful. In terms of negligence, it is important that the Managing Trustees, as prudent charity trustees, fulfil their responsibilities with regard to health and safety and generally looking after the Building. Managing Trustees should discuss this clause and its effect with their legal advisers if they have any concerns or queries as to their liability, especially if the Licensee intends to use the Premises for something they feel is particularly risky. Your insurer may also be able to advise you of your position should an accident happen.

D5 Third parties - Clause 9

Clause 9 tries to prevent somebody who is not a party to the agreement from enforcing a term of the Standard Licence in their favour which may otherwise be possible under the Contracts (Rights of Third Parties) Act 1999.

D6 Governing law and Jurisdiction - Clauses 10 & 11

Clauses 10 & 11 clarify the system of law that will apply to the interpretation of the Standard Licence if a dispute arises and the country whose courts would have jurisdiction over disputes.

D7 Interpretation – Clause 12

Clause 12 confirms what is meant by various terms in the Standard Licence including a “Rights” and sets out rules of interpretation. It states, for example, that where a Licensee comprises more than one individual, the obligations on the Licensee can be enforced against all the individual members of a group comprising the Licensee together or separately. This could assist if you needed to recover unpaid Licence Fees as you could seek payment from just one of the individuals in a group.

 

Please note that this document is to provide guidance and assistance to Managing Trustees and their professional advisers. This guidance note is general in nature, may not reflect all recent legal developments and may not apply to the specific facts and circumstances of any particular matter.   Also note that nothing within the documents and guidance notes provided by TMCP nor any receipt or use of such information, should be construed or relied on as advertising or soliciting to provide any legal services. Nor does it create any solicitor-client relationship or provide any legal representation, advice or opinion whatsoever on behalf of TMCP or its employees.   Accordingly, neither TMCP nor its employees accept any responsibility for use of this document or action taken as a result of information provided in it.   Please remember that Managing Trustees need to take advice that is specific to the situation at hand. This document is not legal advice and is no substitute for such advice from Managing Trustees' own legal advisers.