Purchase Guidance for Managing Trustees

• Section A is a general introduction to purchases and Methodist best practice
  Sections B to E guide you through the stages of a typical purchase
• Section B sets out the first steps
• Section C takes you through the steps to be taken  to fulfill the requirements and prepare for exchange of contracts
• Section D - exchange of contracts
• Section E - completion
• Section F issues to consider following completion

A1 Introduction

As Managing Trustees you may decide that you need to buy property, whether that is a new Manse, land on which to build a new church that meets the needs of today’s congregation or otherwise. TMCP has prepared these guidance notes to help you to understand your responsibilities, both as Managing Trustees and as charity trustees, when buying property and to explain the steps that need to be followed. Your legal advisers will assist you with any technical matters but please feel free to contact TMCP Legal if you would like any further guidance on the Methodist and Charity law considerations.

The guidance in these notes is also applicable to circumstances where Managing Trustees are dealing with a transfer of property to the Methodist Church such as a gift from a church member or a transfer of land from a neighbouring land owner to rectify a title problem.

A2 The role of the Trustees for Methodist Church Purposes (TMCP)

So why does TMCP need to be involved in the purchase process? All new land and property acquired by the Church must be held on the Model Trusts set out under Part III of Schedule 2 to the Methodist Church Act 1976 (Model Trusts). This is a requirement under Standing Order 901. This means that the legal title will be held by TMCP, in its capacity as Custodian Trustee, on trust for the local Managing Trustees. Under Standing Order 930(3) TMCP is required to give approval to all matters where it is Custodian Trustee. TMCP is therefore required to approve the substance of the transaction in accordance with Standing Order 930(3) and must also approve the documents on behalf of the Connexional Team under Standing Order 931(3).

TMCP’s legal officers will work with you and your professional advisers so that the purchase can proceed to conclusion as smoothly as possible.

A3 Charity law and Methodist law and policy requirements

There are various requirements under charity law and Methodist law, policy and best practice that must be fulfilled before TMCP can approve the substance of a transaction and your legal advisers can proceed to exchange of contracts. The requirements are summarised in the Purchase Checklist with details of the steps to be taken to comply with the requirements set out in Section B and Section C.

TMCP cannot confirm its approval to the transaction and permit your solicitors to proceed to exchange of contracts until the requirements set out in the Purchase Checklist are fulfilled and evidence of this has been sent to TMCP.

A4 Further information

In addition to this guidance note, you may find the following guidance notes of assistance in relation to the proposed purchase:

• Purchase Checklist
• Purchase FAQs
• Replacement Project Focus Note
• Purchase Guidance for Solicitors
• Purchase Template Clauses
• Purchase of a New Build Focus Note
• Lease to TMCP Template Clauses  

Once the Managing Trustees have found a suitable property, they should take the steps set out in this Section B in order to help them to negotiate the best deal that they can for the charity and fulfill the charity law and Methodist law, policy and best practice requirements that can be dealt with at this stage of the purchase.

B1 Logging the purchase as a project on the Property Consents Management System

The first step is for the Managing Trustees to log a project on the Property Consents Management System (Consents Website). The appropriate consent giving bodies will indicate their consent to the principle of the purchase via the Consents Website. Final consent must be in place before TMCP can approve exchange.

Please note:

• Before logging the project Managing Trustees will need to create a new property record against which the project can be logged. To ensure that the information on the Consents Website is as helpful as possible, please describe the property using its address. If the Managing Trustees have not found a property yet please go back and insert the address as soon as possible to avoid leaving generic terms such as “new Manse”.
• It is the responsibility of the Managing Trustees to ensure that the project record is completed and final consent has been given to the project. Your Superintendent will be able to assist you with this. If training on how to use the system is required please contact your District Property Secretary or Superintendent Minister in the first instance. If you have any further queries, you can contact the Consents Team. 
• Note that final consent is quite different to TMCP’s approval to the substance of the transaction required by Standing Order 930(3).

Once the project has been logged, please ensure that you and your solicitors use the project ID number when you contact TMCP.

B2 Purchase surveys

The next step is to commission a purchase survey. Managing Trustees, as charity trustees, have a legal responsibility to act prudently and only in the best interests of the charity. The purchase survey should confirm that the acquisition is in the best interests of the charity and the Managing Trustees as prudent charity trustees have negotiated a good deal for the charity. The survey itself or an accompanying letter of advice (together the purchase survey) must address the points set out in Section B2.2. This is TMCP policy based on guidance from the Charity Commission.

• B2.1 - What type of survey do Managing Trustees need to obtain as prudent charity trustees?

Unlike the procedure for selling a property, there is no specific charity legislation stipulating what form a purchase survey must take. However, the Charity Commission provides detailed guidance on the specific points that should be addressed by a qualified surveyor before charity trustees proceed with an acquisition.

To ensure that Managing Trustees are acting in accordance with Charity Commission guidance and can justify their acquisition, should any questions be raised at a later date, it is a requirement of TMCP,  that Managing Trustees must obtain a purchase survey that addresses the following points:

• a description of the property
• a valuation of the property
• advice on the price the Managing Trustees ought to offer to pay
• details of any planning permission needed
• a description of any repairs or alterations the Managing Trustees would need to make, and the estimated cost
• a positive recommendation (with reasons) that it is in the interests of the charity to purchase the property
• anything else the surveyor thinks relevant, including a description of any restrictive or other covenants to which the property is subject

Providing a survey which covers these points should also limit any queries TMCP Legal may need to raise.

Some Districts also insist on a full structural survey being obtained and you should contact a member of your District consent giving body to ascertain their specific requirements. If this is not a requirement of your District, it is still highly recommended that a full structural survey is obtained in accordance with the Managing Trustees' responsibilities as prudent charity trustees.

Whatever the case, the purchase survey must address the above points. The purchase survey should provide the Managing Trustees with confirmation, for their own comfort, that they have negotiated a good price for the charity and have complied with their duties as charity trustees.

Please provide a copy of the purchase survey to TMCP for approval.

• B2.2 - Paying more than market value

If the Managing Trustees agree to pay more than market value, they will need to explain to TMCP why this is in the best interests of the charity. Given the requirement for the surveyor to confirm in the purchase survey, the amount the Managing Trustees should offer to pay, the Managing Trustees should be able to rely on this advice and the reasons given by the surveyor as to why it is in the best interests of the charity to buy the property at that price. The Managing Trustees should record their decision in the minutes of a local church council/circuit meeting so that if questions were to be asked at a later date they could point to the reasons why the decision was made and the evidence to support it in the purchase survey.

• B2.3 - New build purchase survey

Even if you intend to purchase an incomplete new build property, TMCP still need to see a purchase survey to show that charitable money is being used appropriately and to indicate whether the Managing Trustees have negotiated a good deal for the charity. A local surveyor should be able to provide advice on the points set out in Section B2.2 including a valuation based on 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.

B3 Funding for Purchase

Before agreeing a purchase the Managing Trustees will have to work out how the project will be funded. The money may be in the Circuit Model Trust Fund from a previous sale, the Managing Trustees may be relying on the proceeds of sale from another property or otherwise.

• B3.1 - Funding advice and help

When funding a purchase, the Managing Trustees can contact Methodist Chapel Aid for funding advice.  This can be particularly helpful where a purchase is to be funded with the proceeds from a concurrent sale and interim finance is required. Loans can also be sought from the District. In terms of grants, Managing Trustees can contact their District or the Connexional Grants Team to see if there is any help available;

• B3.2 - Funding Information

When you log the purchase project on the Consents Website you will need to enter full details of how the project will be funded.

The funding information on the Consents Website needs to be correct to avoid delays later in the transaction. You should ask your solicitors to prepare a draft completion statement as soon as possible setting out exactly what monies will be required on exchange (a deposit is usually, but not always, 10% of the purchase price) and on completion (the balance of the  purchase price together with all the fees, costs and other expenses of the purchase). You should ensure that the funding information is entered in such a way that you can request the deposit and the monies required on completion separately. The monies should not be held in your solicitor’s client account longer than required.

• B3.3 - Payment requests

If the Managing Trustees require monies from their Model Trust fund as part of the funding package for the purchase, they will need to submit a payment request online via the Consents Website under the purchase project. This payment request should be made as soon as possible and at the latest before 10am on the day three working days prior to the day the monies are required by your solicitors. Next day payments are possible if TMCP Finance is notified before 10am on the preceding working day but these would incur a banking charge.

TMCP Legal is not involved in the financial aspects of the transaction. Any queries relating to inputting the funding information are directed towards the Consents Team. Please also refer to the Money Out pages on the TMCP website.

The purchase cannot exchange or complete unless sufficient funds are available and you must ensure that appropriate funding is in place and that funds have been requested in good time, especially if you are relying on funds from a concurrent sale or a CPF Levy refund. 

B4 Replacement projects

If Managing Trustees would like the purchase project to be considered as a replacement for another project e.g. a sale, the procedure to be followed is set out in the Replacement Project Focus Note. This will mean that any Connexional Priority Fund Levy (CPF Levy) already taken/ or that would otherwise be taken on a concurrent or future sale would be refunded on the replacement project/ once the sale completes.

Please note that it is Property Support who actually decide whether a project can be designated as a “replacement” under Standing Order 931(1)(ix). This is not a decision that can be taken by TMCP and TMCP is not involved in the process as it is now handled entirely through the Consents Website.

If Managing Trustees have any questions about replacement projects please direct these to Property Support or the Web Applications Team if the issue relates to the Consents Website. Please resolve any issues as early in proceedings as possible so that your funding requirements are clear and you have time to plan accordingly.

Please refer to the Criteria for Replacement Projects produced by Property Support for details of the criteria taken into consideration by the Director of Property Support when reaching a decision and the Replacement Project Focus Note for guidance on the procedure to be followed.

B5 Authorised Managing Trustees

Documents relating to the purchase such as the contract and transfer deed will need to be signed by two authorised Managing Trustees. But what are “authorised” Managing Trustees?

Two or more Managing Trustees can be “authorised” to sign property documents relating to a particular transaction (or to  property transactions in general) by a resolution passed under s.333 of the 2011 Act by the appropriate managing trustee body, usually the Church Council or Circuit Meeting. If the managing trustee body has authorised more than two Managing Trustees to sign property documentation generally then any two of these people could sign. If the managing trustee body is a registered charity, please ensure that the authorised Managing Trustees are registered and listed as charity trustees on the Charity Commission website.

Managing Trustees can assist the smooth running of a transaction (and avoid having to pass a last minute s.333 resolution) by ensuring that an appropriate resolution is in place from the outset, that is if, a general resolution has not been passed already. Please also check that at least two of the duly authorised Managing Trustees will be available to sign documentation when required, especially during holiday periods. Authorising more than two Managing Trustees can be useful to ensure availability. Plese refer to the Section 333 Resolution Template Clauses.

B6 Instructing a solicitor

The Managing Trustees will need to instruct a solicitor to deal with the legal aspects of the purchase. As Custodian Trustees, TMCP is responsible for overseeing the transaction and to ensure the purchase is conducted in accordance with Charity law, trust law and Methodist law, policy and best practice. In addition TMCP Legal will provide guidance to help and assist Managing Trustees and their solicitors. However TMCP Legal cannot act as solicitors for the Managing Trustees. The Managing Trustees will need to instruct their own legal advisers to provide all necessary legal advice. The Managing Trustees' solicitors will report to them with full details of the contractual terms, title and search results etc to enable the Managing Trustees to decide whether or not to proceed.

Please provide your solicitors with a copy of the Purchase Guidance for Solicitors so that they are aware of the Charity law and Methodist law, policy and best practice requirements. Please also ensure that your solicitor has a copy of the purchase survey.

If you would like guidance on choosing a solicitor or agreeing fees please refer to the Instructing a Legal Adviser Focus Note.

Once the Managing Trustees have negotiated the best deal possible for the charity (in accordance with the advice obtained), their offer has been accepted, the steps set out in Section B taken and they have instructed a solicitor, they need to ensure that all the outstanding requirements set out in the Purchase Checklist are fulfilled.

Please ask your solicitors to contact TMCP Legal as soon as possible so the legal officer responsible for your project  can work through the outstanding charity law and Methodist law, policy and best practice requirements with them in readiness for exchange of contracts.

C1 Final Consent

Your final consent giving body is copied into all correspondence and will enter final consent when they deem it is appropriate to do so, if they have not done so already. Final consent to the project must be entered before contracts can be exchanged. (See Section B1)

C2 Purchase survey

The Managing Trustees should provide TMCP with a copy of the purchase survey (covering the points set out in Section B2.1) if they have not done so already. (See Section B2)

C3 Connected Persons

Your solicitors will be asked to confirm whether the seller is connected to the charity within the meaning of s.118 of the 2011 Act.

If the seller is NOT a connected person TMCP will ask your solicitors to arrange for the seller to sign a Connected Person Certificate to confirm this to be the case. Your solicitors must provide a copy of the signed certificate to TMCP with confirmation that as far as they and the Managing Trustees are aware the seller is not connected.

If the seller IS a connected person the Managing Trustees will need to apply to the Charity Commission for an Order authorising the purchase. Please refer to the Charity Commission guidance on:

• Why you may need to obtain Charity Commission approval

• How to make an application to the Charity Commission

Your solicitors should be able to help you make the application to the Charity Commission if you are unsure.

TMCP will need to see a copy of the Charity Commission Order or confirmation from the Charity Commission that an Order is NOT required before approval to the purchase can be given.

• C3.1 Conflicts of Interest

Managing Trustees as charity trustees are always under a duty to identify potential conflicts of interest and take steps to address any such conflicts. In short, any potential risks must be identified and addressed. It is highly recommended that Managing Trustees read the Charity Commission’s detailed guidance on conflicts of interest;

The Managing Trustees will need to pay particular interest to this if the seller is connected to the charity. The personal interests of the individual who is selling the property have the potential to conflict with the interests of the charity as buyer. Please remember that it is the potential for conflict that needs to be dealt with. For example, excluding a Managing Trustee from discussions and voting are steps that should be taken as a matter of course in accordance with the Charity Commission guidance. The Managing Trustees also need to ensure that they keep records of the steps taken to show to the outside world that the potential conflict had no impact on the decision making process.

Managing Trustees also need to consider the requirements under Standing Order 919. Standing Order 919(1) prescribes the steps that need to be taken including declaring an interest, participation in discussions and voting.

C4 Approval of contract, transfer and/or lease

Your solicitors must obtain TMCP’s approval to the sales contract, transfer and/or lease before TMCP can approve exchange of contracts.

To obtain approval the Managing Trustees' solicitors will need to include all the template Methodist and Charities Act 2011 clauses. It is important that they contact TMCP to ensure that they have up-to-date Purchase Template Clauses and the Purchase Guidance for Solicitors. TMCP will help your solicitors to put the documents in an approved form.

The Stamp Duty Land Tax form (SDLT form) must also be approved. Guidance for your solicitors is provided in the Purchase Guidance for Solicitors.

C5 Title issues

Your solicitors will be asked to confirm that the Methodist Church is acquiring good title.

TMCP is merely asking for confirmation that everything is in order. Your solicitors should be checking this in any event as part of the duty of care that they owe to you as their client. This should not create any additional work for your solicitors.

C6 CPD Requirements – Manses only

The Managing Trustees will need to confirm to TMCP, if they have not confirmed the point already that they are satisfied that any new Manse complies with the requirements set out in Standing Order 803 and associated guidance.

D1 Approval to exchange contracts

TMCP Legal cannot approve exchange until it is satisfied that all the requirements set out in the Purchase Checklist have been fulfilled. The purchase must comply with Charity law and Methodist law, policy and best practice requirements, otherwise TMCP as Custodian Trustees cannot approve the substance of the transaction under Standing Order 930(3) nor concur.

Your solicitors should not proceed to exchange of contracts until TMCP has confirmed its approval to the purchase. Completing a purchase without TMCP’s approval would mean that TMCP did not concur with the transaction and the Managing Trustees would be in clear breach of trust.

D2 Instructing your solicitors to exchange contracts and signing the contract

Ultimately the purchase cannot proceed until the Managing Trustees instruct their solicitors to exchange contracts. This is quite separate (and in addition to) TMCP approving the purchase as Custodian Trustee. Before instructing your solicitors to proceed to exchange of contracts, please ensure that your solicitors provide you with their report on title and answer any queries or concerns that you have over the purchase.

Please note that the contract will need to be signed by two authorised Managing Trustees (see Section B5). It cannot be signed on your behalf by your solicitors. Your solicitor should arrange for you to sign the contract by inviting you into their offices or by sending the contract to the Managing Trustees by email or post. Exchange of contracts takes place between your solicitors and the seller’s solicitors, usually over the telephone, once your solicitor has a signed contract on their file, your final instructions to proceed and TMCP’s approval.

D3 Deposit payment request

If the monies required to pay the deposit are held by TMCP (on the Model Trusts), please refer to Section B3.3 for details of making a funding request through the Consents Website. Please note that TMCP Finance will check that TMCP Legal is happy that a transaction can proceed before releasing monies to your solicitors.

D4 Time period between exchange and completion

When agreeing a completion date with the seller, you and your solicitors need to bear in mind that TMCP generally requires at least 10 working days between exchange and completion. This is to allow sufficient time for the TMCP Board to seal the transfer deed. Availability of TMCP Board signatories at short notice cannot be guaranteed.

If the Managing Trustees require completion within a shorter timeframe due to a new Minister needing to move into a Manse or the seller requires completion, please ensure that TMCP is made aware as soon as possible so that the legal officer dealing with your project can see whether this is at all feasible.

D5 Insurance

As Managing Trustees of the property being purchased, you will be responsible for insuring the property. Please remember to put appropriate insurance in place on exchange of contracts.

Once exchange has taken place your solicitor will need to liaise with TMCP to ensure that everything is ready for completion. Full guidance is provided for your solicitors as to the process in the Purchase Guidance for Solicitors .

E1 Payment requests

If the monies required to pay the balance on completion are held by TMCP on the Model Trusts, please refer to Section B3.3 for details of making a funding request through the Consents Website.

Please note that TMCP Finance will check that TMCP Legal is happy that a transaction can proceed before releasing monies to your solicitors.

F1 Registration of title

Your solicitors will deal with registration of the purchase at the Land Registry and should send you a copy of the title deeds for safekeeping once registration is complete. Please ask your solicitors to send you all the original deeds and documents relating to the property so that you can place everything in the Circuit safe. TMCP does not retain title deeds. We will however ask your solicitors to provide a copy of the title to keep on file.

F2 Managing trusteeship

As Managing Trustees you will have day to day control and responsibility for the property, will be responsible for insuring the property and also ensuring that it is kept in good repair. This includes making sure that Quinquennial inspections are carried out as and when required under Standing Orders.

F3 Keeping TMCP informed

Please remember to keep TMCP (as registered proprietor and Custodian Trustees) advised of any property related issues going forwards such as third parties exercising rights of way over the property, Party Wall Act notices or title issues. TMCP can then give guidance to you and your solicitors as to any Charity law or Methodist law, policy and best practice issues that need to be taken into consideration and confirm what TMCP’s involvement will be.

If you intend to let or sell a property you will need to contact TMCP and fulfil the usual Charity law and Methodist law, policy and best practice requirements. We can then help you and your solicitors to navigate your way through such requirements and provide appropriate guidance notes.

 

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.