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LEASE COMMERCIAL GUIDANCE FOR MANAGING TRUSTEES

Before you begin the process of letting your property, you need to be thoroughly prepared. There is alot to do and plenty to think about before you can think about getting your tenants through the door.

As with most things legal, it is a complex area and the present guidance does not seek to examine the minutiae of a lease transaction but rather draw your attention to some key procedural steps and useful information.

A few basics

A lease is a contractual arrangement between a freeholder and tenant for temporary, but exclusive, occupation of land. A lease must have a finite duration (although it can be renewed) and this is called the term. The interest retained by the freeholder entitling reoccupation of the land when the term has expired, is called the reversion. Leases for upto three years are often called tenancies, although this term is colloquially used to describe all types of leases.

Managing Trustees are Charity Trustees

You will also be aware that as charity trustees the managing trustees must comply with the Charities Act 1993, The relevant sections for present purposes are sections 30-40. Your solicitor will advise you on these provisions where appropriate.

Section 36 (3) – Leases of 7 years or more

Leases of more than 7 years are considered more onerous and as such the requirements prescribed by statute are the same as for the sale of a freehold property. Before entering into a contract for a lease for more than 7 years the charity trustee must;

  • Obtain and consider a written report on the proposed disposition from a qualified surveyor instructed by the trustees and acting exclusively for the charity. The report issued by the qualified surveyor will have to contain such information and deal with such matters as may be prescribed by regulations made by the Secretary of State. The current regulations are contained within the Charities (Qualified Surveyors’ Reports) Regulations 1992 (SI 1992/2980).
  • The trustees must advertise the proposed disposal for such period and in such manner as the qualified surveyors advises. However, this requirement will not apply if the surveyor has advised that it would not be in the best interests of the charity to advertise the proposed disposal. It is rare that in the case of leases the surveyor will recommend advertising prior to disposal.
  • The trustees must consider the surveyor’s report and satisfy themselves that the proposed terms of disposal are the best that can be reasonably obtained.

Section 36 (5) – Leases of less than 7 years

Leases of less than 7 years (sometimes referred to as “short term disposals by the Charity Commission) are regarded as being a lower risk to the charity and the section 36 requirements are commensurately less onerous. They are governed by section 36 (5). Before entering into a contract for a short term disposal the charity trustee must;

  • Obtain and consider advice on the proposed disposition from a person who is reasonably believed to have the ability and experience to provide the trustees with competent advice on the disposition, and
  • Decide that, having considered the advice received, they are satisfied that the terms of the disposition are the best that could reasonably be achieved for the charity.

The role of TMCP

As you know, as Custodian Trustees, we have no power to manage the property, and play no part in the administration of the charity. We do not enter into obligations in any of the transactions we deal with. We can only act on the directions of the managing trustees, and have a duty to do so unless we are directed to do something that is not allowed by the governing document or by charity law.

On-Line Consents Management System

The On-line Consents Management system has been up and running now since January 2010. Circuit and District support to a transaction is given on a new on-line consents website. This is a matter for the managing trustees to attend to but the lease cannot be completed until District support has been given. Once a project has been created and a Project ID generated by the system please notify TMCP. Ask your solicitor to quote the Project ID in all correspondence with us. This will help us progress matters for you without any unnecessary delay. Please note that the system we have at present unfortunately does not have the capability of generating alerts to TMCP that a project has been logged.

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