CLT Jargon Buster (pdf) - Community Land Trusts

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Company Limited byGuarantee (CLG)Custodian memberDeclaration of TrustEnglish BodiesEntrenched voting rightsEquity Loan/ MortgageFeasibility study/assessmentA CLG offers its members limited liability, as the outside worlddeals with the company as a separate entity and not the CompanyMembers on an individual basis. Should the company fail, thegoverning documents state how much the members are personallyliable for (usually a nominal £1). Directors also enjoy a level ofprotection from personal liability. A CLG can apply to become aregistered charity with the Charity Commission.This is a member of a Company Limited by Guarantee who has aspecific obligation to protect the company Articles, for exampleby vetoing any changes to the asset lock. They may be the localauthority or a third party organisation, such as a local church.This is a formal legal agreement between a CLT and someonebuying low cost housing from it. The declaration of trust sets outthe respective shares in the land held by the CLT and the buyer. It isusually contained in a 125 year lease between the CLT and the buyer.In some ways it is similar to shared ownership.This is an expression used in the Housing and Regeneration Act2008 setting out the legal entities that can register with the HCAas a Registered Provider in England (not Wales or Scotland).These are used to protect the Articles of a Company Limited byGuarantee, by requiring a unanimous decision by members beforeany clause of the Articles can be changed.In this method, the buyer acquires the property outright with amortgage from a High Street lender for (example) 70% of openmarket value, the remaining 30% being held on a second equitymortgage by the CLT.This is a piece of research which determines whether a scheme is (i)needed and desirable and (ii) possible to achieve. It is essential thata group considers from the outset how their plans will deliver theirobjectives, and whether their objectives meet local demand.JARGON BUSTER
Fit and ProperPerson TestFinancial ServicesAuthority (FSA)Ground rentThis test only applies to exempt charities (Community BenefitSocieties with charitable objects) – “exempt” means not registeredwith the Charity Commission. This is due to change in the nearfuture. In order to avoid the fraudulent use of tax breaks, a Charitymust check that anyone controlling it is a ‘fit and proper person’. Anindividual is ‘fit and proper’ if they ensure that charity funds and taxreliefs are used only for charitable purposes. A declaration is signedto declare that the person:• has not been disqualified from acting as a charity trustee;• has not been convicted of an offence involving deception ordishonesty (or any such conviction is legally regarded as spent);• has not been involved in tax fraud;• is not an undischarged bankrupt;• has not made compositions or arrangements with their creditorsfrom which they have not been discharged;• has not been removed from serving as a charity trustee, or beenstopped from acting in a management position within a charity;• has not been disqualified from serving as a Company Director; and• will at all times seek to ensure the charity’s funds, and charitytax reliefs received by this organisation, are used only forcharitable purposes.More guidance can be found at: www.hmrc.gov.uk/charities/guidance-notes/chapter2/fp-persons-test.htm A copy of the helpsheet and model declaration can be found at: www.hmrc.gov.uk/charities/guidance-notes/chapter2/model-dec-ff-persons.pdf.Currently this test only applies to Gift Aid, but will be extended tocover more aspects of a Charity’s dealings with the tax office (HMRC).The current regulator/registration body for Community BenefitSocieties (also known as Industrial and Provident Societies). Atsome point the FSA will cease to be the Regulating Body but it is notyet known when this will happen or who will take over. Draft plansto transfer this role to the new Financial Conduct Authority werepublished by the Government in January 2012. More information canbe found at: www.fsa.gov.ukThis is a payment (usually annual) for leasehold property to theperson who owns the freehold. A regular partnership model betweena CLT and a Housing association would see a CLT buy the land, withthe Housing association developing the scheme on a long-termlease. A ground rent is paid to the CLT by the housing association aspart of this lease.JARGON BUSTER
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CLT Jargon Buster (pdf) - Community Land Trusts

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