1. Methodist Leasing Best Practice Heads of Terms
Please use these heads of terms (Heads of Terms) when negotiating leases of Methodist Model Trust Property. Using these Heads of Terms will ensure that the lease complies with Standing Orders and Methodist leasing policy and will facilitate approval of the lease by TMCP.
The table below sets out the Heads of Terms, that is, key commercial lease terms that should be included in all leases of Model Trust property. Terms marked “A” are non-negotiable terms that must be included to ensure that the lease accords with the Constitutional Practice and Discipline of the Methodist Church (CPD) and the accompanying Methodist policy. Terms marked “B” are recommended and follow Methodist leasing best practice. The Connexion feels that such provisions are in the best interests of the Church protecting both Managing Trustees and charity assets. Terms marked “AB” should be treated as “A” terms if the premises to be demised by the lease lie within the curtilage of a Church site and “B” terms if the premises lie outside of the curtilage of a Church site.
Please show this guidance note to your surveyor, agents and/or solicitor before the property is advertised for letting and before negotiations with a potential tenant start. This guidance note aims to assist you as Managing Trustees to ensure that everybody is clear on what terms the property can be let and avoid terms being agreed that later turn out to be contrary to CPD and/or Methodist leasing policy.
Policy and/or Best Practice Requirement
|A||1. Term||The lease will exclude the security of tenure provisions of Part II of the Landlord and Tenant Act 1954.|
|A||2. Rent||The rent will be no less than best market rent and there are no exceptions to this policy of the Methodist Council.|
|B||3. Service Charge||If the lease is of part only the tenant will pay a service charge. The amount will be a fair proportion of the total service expenditure being all expenses incurred by the landlord in respect of the building and any common parts.|
|B||4. Other sums payable as rent||In addition to the agreed rent and any service charge, the tenant must also pay VAT (including any VAT on the rent), rates, insurance premiums and all other outgoings.|
|B||4A. Business rates relief||The tenant will indemnify the landlord against any loss of business rates relief for the property.|
|B||5. Rent Review||If recommended by the surveyor, the rent will be reviewed and will be reviewed at intervals determined by the surveyor. Rent review will be upwards only and on an open market basis.|
|B||6. Rights reserved to the landlord|| |
The landlord (and those authorised by the landlord) will be permitted entry onto the property for all the usual purposes and must have the right, specifically reserved if necessary, to carry out any quinquennial inspections* that fall due during the term of the lease.
* CPD dictates that all local and circuit property must be inspected at least once every five years by professionally qualified persons (Standing Order 952) - “quinquennial inspections.” The person who carries out the inspection will report back to the Managing Trustees and recommend any works that are deemed to be required. Such works should be carried out by the tenant as part of the tenant’s repairing obligations under the lease.
|A||7. Insurance||The Managing Trustees will insure the property and the tenant will refund the premiums on demand. If the property let is part of larger premises insured by the Managing Trustees, the tenant will refund a fair proportion of the total premium|
|AB||7A. Insurance - Reinstatement obligations||If the property is within the curtilage of a church the landlord will be under no obligation to reinstate the property in the event of damage or destruction by an insured risk if the Managing Trustees determine that it would not be in the best interests of the charity to reinstate. The landlord will have the right to terminate the lease on notice.|
|B||7B. Insurance – termination and rent abatement||Subject to the usual exclusions the landlord and tenant will be able to terminate the lease if the property is damaged or destroyed by an insured or uninsurable risk so that the tenant cannot occupy the property and the standard commercial lease rent abatement provisions will apply.|
|A||8. Use||The tenant may not use the property for religious purposes, betting or gambling in any form, the sale, supply or consumption of alcoholic beverages, public dances, the sale of adult products or for any other purpose contrary to the Standing Orders of the Methodist Conference in force at the date of the lease.|
|AB||8A. Use - Sunday trading||The tenant may not use the property for Sunday trading.|
|B||9. Assignments, underleases and other dealings with the lease||(i) The tenant can assign the lease and underlet the whole of the property with the landlord's prior written consent. The tenant will always be required to give an authorised guarantee agreement in respect of any assignee of the lease and obtain a Charity Commission order if the assignee is deemed to be a connected person under s.118 of the Charities Act 2011. The landlord will be able to impose any other conditions recommended by the Managing Trustees’ solicitor. |
(ii) The tenant cannot assign part of the lease or underlet any part of the property.
|B||9A. Charging||The tenant cannot charge the whole or any part of the property.|
|B||10. Repair|| |
10(i) The lease will be a full repairing lease with the tenant responsible for all repairs OR, if a lease of part, with the tenant directly responsible for all internal repairs and responsible under the service charge for the cost of all other repairs.
* See paragraph 6(*) for information on the five yearly inspections that must be carried out under CPD.
|B||11. Alterations||11(i) The tenant cannot make any structural or external alterations to the property. |
11(ii) Provided that the property is not listed, the tenant can make internal alterations to the property with the Managing Trustees’ prior written consent.
11(iii) Provided that the property is not listed or in a conservation area, the tenant can put up signs on the outside of the property or that would be visible from the outside of the property with the Managing Trustees’ prior written consent.
|B||12. Costs||The tenant will be responsible for the Managing Trustees’ reasonable legal costs in connection with this transaction.|
|A||13. Surveyor's recommendations||The lease will include all provisions recommended by the surveyor in the Qualified Surveyor's Report (QSR) (or competent advice if the lease term is 7 years or less) provided that such recommendations are not contrary to Methodist law or policy.|
|A||14. Safeguarding||If the lease is of part of the church premises and these are used by the Managing Trustees and other user groups, the standard safeguarding clause is required: |
The tenant will confirm that they have received a copy of the safeguarding policy of the relevant church or circuit, have an understanding of it, and undertake to follow it or comparable equivalent guidelines and procedures (such as Scouting and Guiding national safeguarding policy) for the safeguarding of children, young people and vulnerable adults at the building of which the property forms part.
NB. When you first instruct solicitors to act for the Managing Trustees in relation to a lease of Model Trust Property, please provide them with the QSR (or competent advice if the lease term is 7 years or less) a copy of the Non-Residential Lease (Landlord) Template Clauses and these Heads of Terms. Please ask your solicitors to send the draft lease to TMCP for approval before sending it to the tenant’s solicitors.
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.