These frequently asked questions are to be read in conjunction with the Purchase Guidance for Managing Trustees and cover issues that are often raised on purchases.
In these Frequently Asked Questions;
“the 2011 Act” means the Charities Act 2011.
“the Consents Website” means the Property Consents Management System.
B Frequently Asked Questions
Q1 After trying to find a suitable manse for months, the Circuit has finally found a property that meets the requirements of Standing Order 803. The seller is refusing to accept anything less than the asking price. Can we make an asking price offer?
A1 As charity trustees, the Managing Trustees must ensure that the “deal” is in the best interests of the charity. Whilst ideally Managing Trustees should pay no more than market value for a property, in some cases suitable properties are very hard to come by.
Please see Section B2 of the Purchase Guidance for Managing Trustees for guidance relating to purchase surveys. Any decision must be supported by the Managing Trustees' surveyor and as with offers generally, should be made subject to contract and survey. The surveyor should recommend how much to pay as part of the purchase survey and explain why this is in the best interests of the charity to proceed, particularly if the recommended offer is more than the valuation. Does the surveyor feel that it is in the best interests of the charity to pay the asking price given the dearth of alternatives or other factors? They must explain the position fully to the surveyor so that he/ she can help the Managing Trustees to reach an informed decision about whether this property is the best option available and whether a purchase at the asking price would be in the best interests of the charity.
If the Managing Trustees decide to pay more than market value, they should confirm why they have decided that it is in the best interests of the charity to proceed and forward a copy of the professional advice supporting this decision to TMCP. The Circuit Meeting, in this case, should record the reason for the decision in the Minutes of the Circuit’s meeting. If questions were raised in the future as to why the property was acquired at such a price (this would arise if the property is later disposed of at a loss for example), the Managing Trustees would then be able to show why they reached the decision they did. There would be evidence in place to show that the Managing Trustees acted as prudent charity trustees.
Q2 We have finally found a property to buy for our new Minister that meets all the requirements under Standing Orders. The Minister will need to move in in just over 5 weeks’ time. Does TMCP need to be involved in the purchase process or do we just have to make sure the property is registered in the name of TMCP?
A2 TMCP must approve the substance of the transaction before exchange of contracts. Proceeding without the concurrence of TMCP would mean that the Managing Trustees were in clear breach of trust. TMCP does not concur in a transaction unless it is satisfied that all the charity law and Methodist law, policy and best practice requirements have been fulfilled.
Please review the Purchase Guidance for Managing Trustees carefully and follow the steps set out in the guidance notes to ensure that the charity law and Methodist law, policy and best practice requirements regarding a purchase are fulfilled sooner rather than later. The Managing Trustees may find the Purchase Checklist helpful to highlight any outstanding issues that must be complied with.
Whilst five weeks is a very tight timescale, it is not impossible if the Managing Trustees and their solicitors ensure that evidence is provided to TMCP from the outset that all the requirements in the Purchase Checklist have been complied with and they follow all the steps set out in Section B and C of the Purchase Guidance for Managing Trustees. Please ensure that the solicitors have a copy of the Purchase Guidance for Solicitors, Purchase Template Clauses and contact TMCP with draft documents including the required template clauses without delay.
However, please be aware that transactions usually take longer than five weeks as TMCP Legal is rarely provided with evidence that all the requirements have been fulfilled from the outset. Chasing outstanding requirements and reviewing multiple draft documents takes time. The timescale can be reduced by the actions of Managing Trustees and their solicitors.
TMCP will not concur with a transaction unless all the requirements have been met notwithstanding the timescales being worked towards. The onus is on Managing Trustees to ensure that arrangements are made in sufficient time for incoming Ministers.
Q3 We have struggled to find a suitable property for our new Minister and have had to stretch our budget to make an offer of £243,000 on a semi-detached property that is about 20 years old. The property looks ok. We want to keep costs as low as possible and have decided not to bother with a purchase survey, is this ok?
A3 As explained in Section B2 of the Purchase Guidance for Managing Trustees, TMCP will not approve exchange of contracts unless a copy of the purchase survey has been sent in for TMCP’s approval. Therefore, please comply with this requirement to ensure that TMCP’s approval with be forthcoming. Section B2 of the Purchase Guidance for Managing Trustees explains why TMCP requires sight of the purchase survey and sets out what information it must contain to ensure that the Managing Trustees can demonstrate that they are acting prudently and only in the best interests of the charity.
The age and look of the property may influence the Managing Trustees' decision as to what type of purchase survey to obtain rather than whether or not to obtain a purchase survey at all. As explained in Section B2.1 of the Purchase Guidance for Managing Trustees, it is highly recommended that Managing Trustees obtain a full structural survey even if this is not a requirement of their District (please check).
It is difficult to see how it could be in the best interests of the charity to save a few hundred pounds by not obtaining a full structural survey when it is intended to spend hundreds of thousands of pounds of charity money on acquiring a new property that the charity will be responsible for maintaining going forwards. The Managing Trustees, as prudent charity trustees, will want to avoid saddling the charity with a property that requires unanticipated repair and maintenance going forwards or could prove difficult to sell in the future if a more prudent buyer’s full structural survey identified problems such as underlying damp or subsidence for example.
In short, TMCP requires sight of a purchase survey addressing the points set out in Section B2.1 of the Purchase Guidance for Managing Trustees before approving exchange. This purchase survey should help the Managing Trustees to demonstrate that it is in the best interests of the charity to acquire this particular property and allow the Managing Trustees to budget for any required works.
A4 This is possible but it is not a decision that is made by or involves TMCP. It is the Conference Office who actually decide whether a project can be designated as a “replacement” under Standing Order 931(1)(ix) and this is dealt with via the Consents Website.
You mention that you sold a Manse “a few years ago”. Please note that a replacement project must complete within 5 years of the original project. As a first step, please check that the intended purchase is likely to be within 5 years of the sale.
Please refer to the Replacement Project Focus Note for details of the process to be followed and the guidance produced by the Connexional Grants Committee for details of the criteria that is taken into consideration by the Conference Office when deciding whether or not to classify one project as a “replacement” for another.
Q5 We are in the process of selling an old Manse that is no longer suitable and we are in the process of buying a new manse which will be perfect for our incoming Minister and her family. Will the purchase of this new Manse be classified as a replacement project?
A5 This is possible but it is not a decision that is made by or involves TMCP. Please refer to the answer to FAQ 4.
If the property being replaced hasn’t yet been sold, the Managing Trustees will need to find interim funding. The Managing Trustees may want to contact Methodist Chapel Aid for advice on obtaining finance in the short time pending completion of the sale or could ask local churches or other Circuits for help.
In this scenario, the process for requesting that one project be considered as a replacement for another is slightly different. When the Managing Trustees log the purchase project on the Consents Website they will be asked; “Is this project a replacement project?” and must tick the box to indicate that they do. This will trigger an alert to the Conference Office who will consider the position. If consent is forthcoming the two projects (the sale and the purchase) will then be “linked” on the Consents Website.
However, as no levy has yet been taken on the sale, the Managing Trustees must NOT enter; “CPF Levy Refund” as a funding type for the purchase project. Instead, they will need to state where the purchase monies are coming from pending receipt of the proceeds from the sale e.g. Methodist Chapel Aid.
Regarding the requirements surrounding the interim finance, if the Managing Trustees are obtaining an unsecured loan, they must obtain appropriate advice as to the risks of borrowing the monies and whether it is in the best interests of the charity. TMCP would need to see this advice before approving exchange of contracts. If the lender wants to secure the charge against the property being acquired (or another property in the Circuit), please contact TMCP Legal as soon as possible so that further guidance can be provided on the requirements under the 2011 Act. TMCP would need to be party to the legal charge, the legal charge would need to include specific template clauses and the Managing Trustees would need to obtain professional advice as set out under s124 of the Charities Act 2011. TMCP would also need to approve the form of legal charge under Standing Order 930(3) and Standing Order 931(1).
Q6 We have found a new build property that would be ideal for our new Manse. However, one of the Managing Trustees has told us that his friend was in the process of buying a property on the same estate and had to pull out because there is a restrictive covenant preventing use for business purposes (his friend runs a counselling business from home). Does this mean we will have to pull out?
This is an issue that your solicitors should advise you on as soon as possible. They should have details of any restrictive covenants applicable to the property in the legal pack that will be provided to them by the developer’s solicitors. Please ensure that your solicitors are aware of what the property will be used for (if they are not already) so that they can advise you whether the proposed use as a Manse is permitted. If there is any ambiguity as to whether use as a Manse would be in breach of covenant, your solicitors should ensure that the documentation is amended accordingly or alternatively clarification should be sought from the body with the benefit of the restrictive covenant that the intended use is permitted. Developers sometimes provide written confirmation that use as a Manse is not in breach of covenants requiring use of property as a single private dwelling house for example. Amended documents or confirmation from your solicitors or the developer/seller will be required before TMCP Legal can approve exchange of contracts. (Please see the Section C of the Purchase of a New Build Focus Note.)
Your solicitors may need you to explain what a Manse is. You may want to refer them to Standing Order 803 and point out that a Manse is; “a base for the work of ministry as well as a home”. Amongst other things this may include holding meetings or conducting pastoral interviews at the property or other work ancillary to the Minister’s role. This is different to running a "business" from the property but is not use for solely residential purposes. Your solicitor should clarify whether the property can be used for its intended purpose as soon as possible to avoid costs being wasted on a purchase that cannot proceed.
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.