Section A - Introduction
You have received instructions to act in relation to the purchase of property to be held on the Methodist Model Trusts set out under Part III of Schedule 2 to the Methodist Church Act 1976 (Model Trusts). Your clients will be the managing trustees (Managing Trustees) of such property (Property). However, legal title must be vested in the Trustees for Methodist Church Purposes (TMCP) as Custodian Trustees. Please read these guidance notes carefully as they contain important information about the charity law and Methodist law, policy and best practice requirements that must be fulfilled and the procedures that must be followed when acting for Managing Trustees in relation to a purchase. Managing Trustees rely on their legal advisers to ensure that their transactions are managed in a way that has due regard for the charity law and Methodist law, policy and best practice requirements and procedures so that the matter can proceed to conclusion as smoothly as possible.
A1 Brief description of roles
TMCP are a body corporate established under the Methodist Church Act 1939 and are Custodian Trustees in whom legal title to the Property will be vested. TMCP will have no beneficial interest in the Property. As Custodian Trustees, TMCP are obliged to concur with and act upon the lawful instructions of the Managing Trustees to enable them to administer the charity effectively. It is the Managing Trustees who will have responsibility for the day to day control and management of the Property. The Managing Trustees are the charity trustees.
Please ask your client, the Managing Trustees, to confirm the name of the relevant managing trustee body to which they belong and whether this body is itself a registered charity. Usually the managing trustee body will be the local Church Council or Circuit Meeting. You may however be instructed by the District Trustees, Connexional Manse Trustees or Methodist Council, for example. Clarification of this point will enable you to draft the contract and transfer deed correctly.
The role of TMCP Legal in relation to the proposed purchase is to ensure that the Charities Act 2011 (2011 Act) and Methodist law, policy and best practice requirements and procedures relating to the purchase of property which will be held on the Model Trusts have been met. In addition TMCP will ensure the transaction is compliant with the general law because the terms of the purchase must be in the best interests of the charity. If you would like any further guidance to help you achieve this please do not hesitate to contact TMCP.
TMCP Legal will work with you to ensure that the purchase proceeds to completion, or otherwise concludes, as smoothly as possible. In this way TMCP strives to help legal advisers assist the Managing Trustees in achieving an outcome which is in the best interests of the charity.
A2 Charity property
As the Property will be charity property and the charity is a non-exempt charity, sections 117 to 129 of the 2011 Act will apply on future dispositions.
To assist you we have set out the charity law and Methodist law, policy and best practice requirements in Section B and provided template 2011 Act and Methodist law compliant clauses in the Purchase Template Clauses that MUST be included in the contract and transfer deed. Please ensure that the requirements set out in Sections B1 to B5 (and B6 and/or B7 if appropriate) have been fulfilled before asking for approval to proceed to exchange of contracts.
Contracts must not be exchanged until TMCP Legal has confirmed that all the charity law and Methodist law, policy and best practice requirements for the transaction have been satisfied and TMCP concurs with the transaction.
Please ensure that the following steps are fulfilled and forward evidence of this to TMCP before asking for approval to proceed to exchange of contracts. Please do not expect TMCP Legal to confirm TMCP's approval to exchange unless these points have been satisfied.
The documents listed at B2, B3 and B4 must be submitted to TMCP for approval.
B1 Final consent
The purchase should be logged as a “project” on the Methodist Property Consents Management System (Consents Website). This is the responsibility of the Managing Trustees, your clients. Once the project is logged, the necessary consents will be entered. Please note that the consents required here are quite separate to the approval of TMCP. The Final consent that is required, usually but not always that of the District, must be in place before TMCP can approve exchange.
The purchase will usually have been logged as a project before you are instructed but it is advisable to check the position. Your clients will be notified via the Consents Website when the Final consent is entered.
B2 Purchase survey
Managing Trustees are required to obtain a purchase survey (addressing the points set out in Section B2.2 of the Purchase Guidance for Managing Trustees) and to provide a copy to TMCP before exchange. This requirement reflects the statutory and common law duty on charity trustees to act prudently and only in the best interests of the charity.
Whilst a structural survey is highly recommended and reflects best practice, this is not a TMCP requirement. However, some Districts do insist on one being obtained and your clients should check whether this is a requirement of their District first. If your clients' District does not require a structural survey and your clients decide not to obtain one, the Managing Trustees need to consider whether proceeding without one is in the best interests of the charity.
If the purchase survey suggests that the Managing Trustees are paying more than market value the Managing Trustees will be required to explain, in reliance on the professional advice obtained from their surveyor in the purchase survey, why it is in the best interests of the charity to proceed. Any recommendations made by the surveyor must be dealt with before exchange.
B3 Connected Persons
TMCP require confirmation as to whether or not the proposed seller is a connected person within the meaning of section 118 of the 2011 Act.
If the seller is not connected, please complete the Connected Person Certificate available on the TMCP website or from TMCP direct, with details of the seller and the Managing Trustees and arrange for this to be signed by the seller. This will need to be sent to TMCP with confirmation that as far as you and your clients are aware the seller is not connected i.e. the statement is correct.
If the seller is connected, a Charity Commission Order authorising the purchase (or confirmation from the Charity Commission that an Order is not required) must be in place before TMCP can approve exchange.
B4 Approval of documents
The sale contract, transfer deed (or lease) and SDLT form must be approved by TMCP before TMCP Legal can approve exchange of contracts.
Please ensure that you insert the Purchase Template Clauses and that the drafting is in accordance with these guidance notes before sending documentation to TMCP for approval.
You need to send the draft documents to us as soon as possible and contact us if you have any queries. Ultimately the Managing Trustees are relying on you to ensure that the documents are drafted correctly and are in the best interests of the charity.
Please note that the Purchase Template Clauses are available in a format that will enable you to copy and paste the clauses into the documents making only amendments necessary to take account of differences in terminology.
- No liability on the Board - As Custodian Trustees, the Board will not give any covenants nor undertake any obligations in the contract (or transfer deed). Any obligations or other liability on the part of the buyer must fall on the Managing Trustees instead. Accordingly, please ensure the drafting adequately reflects the position of the Custodian Trustees and Managing Trustees. (Paragraph 2(b) of Part 1 of the Purchase Template Clauses must be included.)
- Authority to sign - A simple contract can be signed by two or more Managing Trustees. If the contract is to be executed as a deed (e.g. a development agreement) then the Board will also need to seal and the clauses set out in paragraph 4 of Part 1 of the Purchase Template Clauses are required.
B4.2 Transfer deed
- Covenants by the transferor - If any covenants are to be imposed on the transferor in the transfer deed, please ensure that the covenants are enforceable by both the Board and the Managing Trustees by using the wording set out in paragraph 5.2 of Part 2 of the Purchase Template Clauses.
- Indemnity covenant - If the seller insists that that an indemnity covenant is entered into, please ensure that the transfer deed contains the provision set out in paragraph 5.1 of Part 2 of the Purchase Template Clauses confirming that the Managing Trustees rather than the Board are liable for any breach.
- Authority to sign - TMCP will seal and two of its Board Members will sign the transfer as set out in the template execution clause.
Two Managing Trustees will sign the transfer with the authority of the rest of the Managing Trustees by resolution pursuant to Section 333 of the 2011 Act. The usual execution provisions for individuals apply, as set out in the template execution clause.
B4.3 New build lease
- Please refer to the Lease to TMCP Template Clauses if the purchase is being effected by the grant of a long lease. Please also refer to the Purchase of a New Build Focus Note.
B4.4 SDLT form
No SDLT should be payable due to the charitable status of the buyer. HMRC has confirmed that the online SDLT form needs to be completed as follows:
- Please complete Box 51.1 to indicate that TMCP is not a company
- Please ensure that TMCP’s Charities Reference Number is inserted in Box 51.2. The number is X63916.
- The SDLT form will need to be signed by two TMCP Board Members. The pdf version of the online form (or hardcopy form if you are not submitting the form online) must be sent to TMCP for approval and signature ideally before or immediately following exchange. The Managing Trustees are relying on you as their solicitor to submit the SDLT form in time, bearing in mind the need for TMCP’s approval to the form. TMCP will not be held responsible for any penalties incurred due to late submission of SDLT forms.
Please note that TMCP is not registered for VAT.
B5 Title issues and new builds
TMCP Legal will ask you to confirm whether the Church is acquiring good and marketable title to the Property and whether the Property can be used for the intended purpose.
By confirming this you will be confirming that you have (1) examined and considered all appropriate documents of title and (2) considered the results of the searches and replies to enquiries, being those searches and enquiries which you consider necessary in the circumstances of this particular purchase and having regard to the nature of the Property.
Given the duty of care that you owe to the Managing Trustees as your client, and the fact that you will be carrying out the usual title investigation process as part of this duty, it should therefore not create any additional work for you to confirm that the Methodist Church will be acquiring good and marketable title and can use the Property as intended.
If any adverse interests are uncovered that would materially affect the Methodist Church’s interest in the Property these should be reported to your clients, the Managing Trustees, as usual together with your advice as to how your clients should proceed in the best interests of the charity. When advising your clients please have regard to the fact that your clients are charity trustees and the risks that a commercial client may choose to take may not be suitable for prudent charity trustees using charitable funds. If your advice is that legal indemnity insurance is required, it is expected that this would be at the seller’s expense. If the Managing Trustees are to pay for the insurance, your specific confirmation will be required as to why this is the case.
If the Property that your clients are buying is a new build, there are specific requirements as set out in Section D of the Purchase of a New Build Focus Note. The legal officer dealing with the purchase at TMCP will ask you to confirm the points set out in the Purchase of a New Build Focus Note. Please ask your clients for a copy of the Purchase of a New Build Focus Note if you have not been given one already.
B6 CPD requirements – Manses ONLY
If your clients are buying a new Manse, they are obliged under Methodist law to check that the Property is suitable for use as a Manse satisfying the requirements set out in Standing Order 803 and associated guidance. TMCP will ask the Managing Trustees to confirm the Property satisfies these requirements before approving exchange.
You will need to ensure that your clients have satisfactory arrangements in place to finance the transaction. Managing Trustees sometimes finance purchases entirely from monies held by TMCP on the Model Trusts. Sometimes Managing Trustees obtain a mortgage or unsecured bridging loan, (often but not always from Methodist Chapel Aid), or use funds held locally or a mixture of some or all of the above.
- Your clients will require confirmation of the funds required for exchange and completion from the outset (including an allowance for anticipated fees and disbursements) to enable them to log the purchase correctly on the Consents Website. If some or all of the funds are coming from TMCP, you will need to provide your clients with this information as soon as possible to ensure that they are able to request funds from TMCP Finance at the appropriate time and for the appropriate amount.
- If some or all of the funds are coming from TMCP your clients will need to make payment requests via the Consents Website. Guidance is provided on this in the Purchase Guidance for Managing Trustees.
- If an unsecured loan is being obtained, TMCP will need to see evidence that the Managing Trustees have obtained professional advice on the terms of the loan in accordance with their general duties as charity trustees to act prudently and in the best interests of the charity.
- If a secured loan is being obtained, TMCP will need to see evidence that the Managing Trustees have obtained professional advice on the terms of the loan in accordance with s.124 of the Charities Act 2011. TMCP will need to see this advice and approve the legal charge to which TMCP will need to be party and which should include specific template clauses. Please contact TMCP for further guidance if your clients are obtaining external funding including funding from Methodist Chapel Aid.
Section C - Exchange of Contracts
C1 Authorisation to exchange contracts
Contracts cannot be exchanged before TMCP has given its approval in accordance with Standing Order 930(3). TMCP will confirm approval once TMCP Legal is satisfied that all the requirements set out in the Purchase Checklist have been fulfilled. Contracts can then be exchanged subject to your clients’ final instructions. If contracts are not exchanged within one month from the date that approval is confirmed, you will need to contact TMCP again for new approval. At this stage please confirm why there has been a delay and whether there have been any material changes to the transaction since approval was last confirmed.
C2 Authority to sign the contract
The Managing Trustees have the power to sign the contract on behalf of the buyer. The signatures of at least two Managing Trustees are required and you should satisfy yourself that those signing have been duly authorised by the relevant managing trustee body. Note that nobody else can sign the contract. Your clients should have arranged for a resolution to be passed under s.333 of the 2011 Act authorising at least two of the Managing Trustees to sign documents relating to this particular transaction or to property transactions in general. If the managing trustee body is a registered charity the authorised Managing Trustees should be registered as charity trustees on the Charity Commission website. You may want to check that such a resolution is in place early in the transaction to avoid delays when the contract is sent out for signature.
C3 Agreeing the completion date
When agreeing a completion date with the seller please bear in mind that TMCP require 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 Board signatories at short notice cannot be guaranteed.
The contractual completion date should therefore allow for this timescale. Sometimes an “earlier by agreement” provision can be useful. If a shorter period is agreed by the Managing Trustees or you as their solicitor, TMCP cannot be held responsible for a delay in executing the documentation. Please ensure that engrossments are sent to TMCP Legal as soon as possible to ensure that there is sufficient time to arrange for sealing.
Section D - Period Between Exchange and Completion
D1 Requirements Post Exchange
Once exchange has taken place please let TMCP have the following:
- a copy of the signed contract to place on file;
- confirmation of the contractual date of completion;
- engrossed approved transfer for sealing;
- SDLT form for signing by two Board Members; and
- completion statement for approval (please see Section D2).
D2 Completion funds
If some or all of the purchase monies are coming from TMCP, you will need to provide TMCP Legal with a completion statement confirming the amount required on completion as soon as possible, ideally not less than 3 days before completion. TMCP Finance will ensure that TMCP Legal has confirmed TMCP’s approval to the purchase and the completion statement before transferring the balance of the purchase monies to your client account. TMCP Legal can only do this if it is has seen a completion statement confirming the amount required.
D3 Transfer deed and SDLT form
The legal officer dealing with the purchase will send the sealed transfer deed and signed SDLT form to you once these are available.
Section E - Completion
Please confirm to TMCP once the purchase is complete.
Section F - Post Completion
F1 TMCP requirements
Following completion please send to TMCP:
- Confirmation that completion has taken place;
- Copy completed transfer deed signed by the Transferor; and
- Office copy entries following completion of registration (see Section F2).
F2 Registration of title
When you register the purchase at HM Land Registry please ensure that:
- Title is registered in the name of "Trustees for Methodist Church Purposes" only (see para 1 of Part 2 of the Purchase Template Clauses);
- The only Restriction entered against the title is the standard Form E Restriction and NOT Form A. If the Land Registry enter a Form A restriction in error you will need to arrange for the Land Registry to amend the Title;
- The only address for the registered proprietor is TMCP’s address being; Central Buildings, Oldham Street, Manchester, M1 1JQ.
Please send TMCP a copy of the updated office copy entries following completion of registration. You should send all of the original deeds and documents relating to the Property to your clients for safekeeping. TMCP does not retain title deeds.
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.
Please feel free to contact TMCP Legal if you would like any further guidance on the charity law and Methodist law, policy and best practice considerations.