Selling Property in Scotland Guidance Note for Managing Trustees

If Managing Trustees in Scotland have any questions about this guidance or the charity law and Methodist law and policy requirements in Scotland, please contact your District Property Secretaries Revd Allan Loudon and Phil Haggis. If you do not have their contact details please ask TMCP Legal and we will share these with you.

A1 Introduction

As Managing Trustees you may decide that a property is surplus to requirements or that you want to sell a property for some other reason i.e. to fund a new, more suitable, Manse or worship space. Whatever the reasons Managing Trustees as prudent charity trustees need to make the sale as beneficial to the charity as possible; by securing best terms for the charity and maximising the funds raised to further Mission on any part of the property that may have been retained or for those funds to be used elsewhere in the Circuit, District or wider Connexion.

Before making the difficult decision to sell Managing Trustees in Scotland, like their colleagues in England and Wales, are encouraged to explore whether there are any alternative options available in accordance with the Connexional Strategic Guidance for Property in Mission  (see below).

Connexional Strategic Guidance for Property in Mission   In accordance with the Connexional Property Strategy launched in summer 2019 and later revised in February 2021, before making the difficult decision to sell property or getting into a position where sale is the only option, Managing Trustees will be anxious to explore whether there are any alternatives available. Can the property still be used, perhaps in a different way to further Mission? Is any additional support or assistance available to the Managing Trustees if they wish to explore alternatives?   Following a review of the Connexional Property Strategy in early 2021, new guidance from Property Support is now available which sets out key priorities to enable effective use of property for Mission across the Connexion.   Managing Trustees are encouraged to refer to the new "Strategic Guidance for Property in Mission" (particularly the questions referred to in paragraph 3.3 of the strategy) and to talk to their Circuit, District and the Connexional Team:   Strategic Guidance for Property in Mission Please also refer to the guidance on starting a property project as well as writing a Mission plan and property profile on the Methodist Church Website:   Starting a Property Project   Contact details for the Connexional Team can be found here.

 

 
TMCP Legal has prepared these guidance notes to help you to understand your responsibilities both as Managing Trustees and as charity trustees when selling Model Trust property in Scotland and to explain the steps that should be taken. Your legal representatives should be able to assist you with any technical matters but please feel free to contact TMCP Legal or your District Property Secretaries if you would like any further guidance on the Methodist law considerations. TMCP’s legal officers will work with you and your professional representatives so that the sale can proceed to conclusion as smoothly as possible.

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

So why does TMCP need to be involved in the sales process? The legal owner of nearly all Methodist land and property is TMCP. TMCP holds legal title in its capacity as Custodian Trustee on trust for the local Managing Trustees by virtue of the Methodist Church Act 1976. This Act also applies in Scotland and means that TMCP needs to be party to the sales documents. Under Standing Order 930(3) TMCP is also required to give approval to all matters where it is Custodian Trustee. TMCP is therefore required to approve 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 is obliged to concur with and act upon the lawful instructions of the Managing Trustees to enable them to administer the charity effectively. To this end TMCP will work with you and your solicitors to ensure that the sale complies with Methodist law, policy and best practice so that we can approve the sale as Custodian Trustee.

A3 Methodist Law and Policy Requirements on Sales of Methodist Model Trust Property

The Methodist law, policy and best practice requirements that must be fulfilled on sales of Methodist Model Trust property are set out in Section B and Section D of this Guidance Note. Please note that your solicitors must not proceed to conclude Missives until TMCP has confirmed approval for them to do so. TMCP cannot do this until the steps set out in Sections B1 and B2 have been taken, the requirements in Section D fulfilled and evidence of this has been sent to TMCP.

B1 Step 1 - Logging the sale as a project on the Methodist Property Consents Management System (Consents Website)

The first step is for the Managing Trustees to log a project on the Consents Website at: https://propertyconsent.methodist.org.uk. The appropriate consent giving bodies (usually the Church Council, Circuit Meeting and District Trustees) will indicate their consent to the principle of the sale via the Consents Website. Final Consent must be in place before TMCP can authorise Missives being concluded.

Please note:

• 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 and District Property Secretaries will be able to assist you with this. If you have any further queries, you can contact the Online Suites Team.
• In respect of Local and Circuit property, the required consent at each level must be given by a different person so that the project record will show approval and support to the project by three different people.
• Note that final consent is quite different to TMCP’s approval to the transaction which is required by Standing Order 930(3).

Once the project(s) has been logged, please ensure that you use (and ask your Solicitors to use) the project ID number when you contact TMCP.

B2 – Step 2 - Obtaining Surveyor’s Advice

In accordance with Model Trust 16(1)(b) the Managing Trustees, when selling property must do so for the best price that can reasonably be obtained. As charity trustees, the Managing Trustees are also under a duty to act with utmost care and diligence in relation to charity assets, which includes charity property.

In order to meet these obligations the Managing Trustees should obtain written advice from a Surveyor. Please refer to the Obtaining Surveyor’s Sale Advice (Scotland) Focus Note for details of what points that advice needs to address and general guidance on instructing a surveyor, who to instruct and who that surveyor is acting for. 

The Managing Trustees must obtain this advice before proceeding any further with the proposed sale so that they can ensure that they are acting in the best interests of the charity and comply with Methodist Model Trust 16(1)(b).

Once the surveyor’s advice has been prepared it needs to be sent to TMCP for approval.

Please note that if the Managing Trustees are selling residential property they will need to provide any potential buyers with a Home Report on the property. The Home Report consists of a single survey, an energy report and a property questionnaire. The single survey contains a valuation and an assessment of the property's condition (including the roof, external walls and plumbing). The surveyor’s advice detailed in the Obtaining Surveyor’s Sale Advice (Scotland) Focus Note must sit outside the single survey contained in the Home Report, as it should not be disclosed to any potential buyers.

B3 Replacement Projects

B3.1 Replacement Project Process

If Managing Trustees would like one project e.g. a purchase 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.

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 Legal 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 Online Suites Team if the issue relates to the Consents Website. If you are relying on a Connexional Priority Fund Levy (CPF) refund in the funding of a project then please resolve any issues as early in proceedings as possible so that your funding requirements are clear and you have time to plan accordingly.

B3.2 Replacement Project Criteria

The Property Support team are in the process of producing guidance setting out the criteria used in deciding whether to designate a project as a replacement under Standing Order 931(1)(ix). If you have any questions about this please refer these to Property Support.

B4 Authorised Managing Trustees

The Missives and sale Disposition 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).  Model Trust 16(1)(n) permits Manging Trustees of Scottish properties to exercise the same powers relating to the execution of documents conferred upon charity trustees in England and Wales by section 333 of the Charities Act 2011. 

The appropriate managing trustee body, usually the Church Council or Circuit Meeting should pass a resolution detailing which individual managing trustees are authorised to sign the documentation. If the managing trustee body has authorised four Managing Trustees to sign property documentation generally then any two of these people could sign.

Managing Trustees can assist the smooth running of a sale (and avoid having to pass a last minute resolution) by ensuring that an appropriate resolution is in place at the beginning of the transaction, 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.

C1 Marketing

The Managing Trustees will need to market the property in accordance with the surveyor’s recommendations in their advice. Please refer to the Obtaining Surveyor’s Sale Advice (Scotland) Focus Note.

C2 Considering Offers

Managing Trustees will need to consider offers carefully and take advice from their surveyor to help them decide which offer represents “best price”. In some circumstances your surveyor may advise that a lower offer is “best price” due to there being no conditions attached to it, the conditions being less risky than another offer or the proposed buyer having the means to move quicker for example.

C3 Instructing a Solicitor

As the contract (Missives) become binding at an early stage of the transaction it is important that Managing Trustees instruct a solicitor to deal with the legal aspects of the sale at the outset. As Custodian Trustees, TMCP is responsible for overseeing the transaction and to ensure the sale is conducted in accordance with Methodist law, policy and best practice. Whilst we provide guidance to help and assist Managing Trustees and their solicitors, TMCP Legal cannot act as solicitors for the Managing Trustees and are not trained in Scots Law. Please share the Selling Property in Scotland Guidance Note for Solicitors with your solicitors.

Please ask your solicitors to contact us as soon as possible so we can work through the outstanding Methodist law, policy and best practice requirements with them in readiness for concluding Missives.

D1 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 Missives can be concluded. (See Section B1)

D2 Surveyor’s Advice

The Managing Trustees should already have obtained TMCP’s approval to the surveyor’s advice. If they have not done so already they should ensure that a copy is sent to TMCP without delay. (Please see Section B2 of the Guidance Note and the Obtaining Surveyor’s Sale Advice (Scotland) Focus Note.)

D3 Best Price Certificate

Before the Qualified Acceptance (please see Section D4 below) is issued please send TMCP a copy of a letter signed by the qualified surveyor to confirm that (1) the property has been adequately marketed and (2) that the agreed sale price is the best price reasonably obtainable.

D4 Qualified Acceptance

Once the Managing Trustees’ solicitor has received the written offer from the purchaser’s solicitor they will advise the Managing Trustees on the offer received and issue a “Qualified Acceptance”.  TMCP will have to approve the form of Qualified Acceptance (and any subsequent Qualified Acceptances) before it is issued.  It is imperative that your solicitors contact TMCP before issuing the Qualified Acceptance because when the purchaser accepts the Qualified Acceptance the contract is legally binding and Missives will have been concluded.

TMCP cannot agree to the Qualified Acceptance being issued until we are satisfied that all the requirements set out in this Section D have been fulfilled. Only then can TMCP approve the transaction as Custodian Trustee under Standing Order 930(3). During the sale process TMCP will therefore assist you and your professional advisers to ensure that the sale complies with Methodist law, policy and best practice requirements. This should also help you to ensure that your duties as managing trustees and charity trustees have been fulfilled. This will also provide comfort to Managing Trustees should any questions be raised at a later date as to why certain decisions were made and protect the charity to ensure that the transaction is in its best interests.

Your solicitors must not proceed to issue the Qualified Acceptance until they have TMCP’s approval to do so.

Your solicitor should send the draft Disposition to TMCP for approval.  This needs to be approved by TMCP in good time of the agreed date of entry.

To obtain approval the Managing Trustees’ solicitors will need to include the template Methodist clauses. It is important that they contact TMCP to ensure that they have up-to-date Sale Disposition Clauses and the Sale Guidance for Solicitors (Scotland). TMCP will help your solicitors to put the documents in an approved form.

Please bear in mind that TMCP generally require at least 10 working days to seal the Disposition and to procure the necessary Memorandum of Consent to the sale from the Methodist Council under Model Trust 26. Availability of Board signatories at short notice cannot be guaranteed.

F1 Sale proceeds

Sale proceeds, less permitted deductions only (see Section F2) must be sent to TMCP as Custodian Trustee in accordance with Standing Order 915(2)(i). The net sale proceeds will be applied as discussed in Section F3, any Connexional Priority Fund Levy taken as discussed in Section F4 and then placed in the appropriate trust fund as discussed in Sections F5 and F6. Please note that the trust fund the monies are placed in depends not on who the Managing Trustees of the property are but the type of property that has been sold.

F2 Permitted Deductions

Please note that the only deductions that should be made from the sale proceeds before the sale proceeds are transferred to TMCP by your solicitors are those deductions permitted under Methodist Standing Order 916(1)(i). In short, permitted deductions include legal and surveyor’s fees and any other costs incurred directly as a result of the sale of the property. Insurance and utility costs i.e. ongoing running costs for a property (even if the property is not being used prior to the sale) cannot be deducted from the sale proceeds before they are sent to TMCP and the CPF levy calculated.

TMCP Legal asks your solicitors to send TMCP a copy of their draft State for Settlement so that the legal officer dealing with your matter can check any proposed deductions and approve this before returning the sealed Disposition and Memorandum of Consent. It would help to speed up this process if you can provide your solicitors with details of any expenses that you want to deduct from the sale proceeds before the balance is sent to TMCP and the CPF levy is calculated as soon as possible. This will avoid discussions about what can and cannot be included delaying completion.

F3 Application of sale proceeds

When TMCP receives the sale proceeds, less permitted deductions, the sale proceeds will be apportioned in accordance with Standing Orders; (1) any returnable grants will be repaid on the sale of a whole site (but not Manse sales), (2) any levy due will be paid to the Connexional Priority Fund (please see Section F4) and (3) the balance will be placed in the appropriate Model Trust fund. (see Sections F5 and F6).

F4 Connexional Priority Fund levy (CPF levy)

Under Standing Order 970, the CPF levy shall be charged on all capital money arising from a sale. The amount of levy chargeable is 20% on the first £100,000 and 40% on any excess over £100,000. The amount of levy chargeable is set out in Standing Order 972.

However, under Standing Order 970(2), the CPF levy may not be applicable to the sale in the following circumstances:

• if the property is on the City Centre list (Standing Order 970(2)(ii));
• if the property has been sold due to compulsory purchase, usually by the Local Authority (Standing Order 970(2)(v));
• if the property was received within the last five years by way of devise or bequest and is no longer required for Methodist Trust purposes (Standing Order 970(2)(vii));
• if the sale is linked to a replacement project under Standing Order 973 - in this case the CPF levy would be taken on the sale and held pending a payment request via the Consents Website for the “levy refund” on the replacement project itself. Please see Section B3.

If you think one of the above scenarios applies to the sale, please inform TMCP Legal as soon as possible so that the legal officer dealing with the sale is aware of the position.

F5 Destination of sale proceeds – local property

The balance of the sale proceeds arising from the sale of local property, following the payments set out in Section F3, will usually be placed in the Circuit Model Trust Fund under Standing Order 945(1). It is then a decision for the Circuit Meeting as to what happens to those sales proceeds.

There are limited cases where sales proceeds are instead invested in a model trust fund for the local church. These circumstances are set out in Standing Order 945(2);

1. Standing Order 945(2)(ii) land received in the last five years by way of a bequest or devise in the circumstances set out in that Standing Order; or
2. Standing Order 945(2)(iii) Local Church caretaker’s accommodation.

Please advise TMCP Legal as soon as possible if you believe that the sale proceeds will be local funds. Sometimes further information is required to clarify the situation. Dealing with this in good time should ensure that the legal officer dealing with your matter has sufficient information on completion to confirm to TMCP Finance that the monies are local monies and available for your use.

There are also limited circumstances where sale proceeds arising from the sale of local and circuit properties are sent to the District. If a church, circuit or project is included on the official list kept under Standing Order 440(1) (the City Centre List) capital monies arising will be sent to the District and applied for district purposes.

F6 Destination of sale proceeds – circuit, district and Connexional property

The net sale proceeds (following the payments set out in Section F3), arising from the sale of circuit, district and Connexional property, will usually be placed as follows:

• Circuit property – circuit model trust fund (unless the project is included on the City Centre List when the sale proceeds will be sent to the District)
• District property – a district model trust fund for the relevant purpose
• Connexional property – appropriate Connexional trust