CLT Jargon Buster (pdf) - Community Land Trusts

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Registered CharityRegistered Provider (RP)Resale price covenantRural exception siteIf your charity’s income is over £5000 and it undertakes exclusivelycharitable purposes for the public benefit you must apply to registeryour organisation with the Charity Commission. A charity can take theform of a number of legal structures. These include UnincorporatedAssociations, Trusts or a Company Limited by Guarantee (CLG). A CLGmust register with and report to both the Charity Commission andCompanies House.After registering as a charity, there are a number of ongoing dutiesand responsibilities to the Commission that must be complied with.You will need to maintain your charity’s accounts and send theAnnual Return it issues each year. Depending on the level of incomeyou may also need to have the accounts audited or independentlyexamined and to file a Trustees’ Annual Report. You also need totell the Charity Commission when there are changes to the charity’sregistered details (for example, if the contact address for the charitychanges), inform it of any ‘serious incidents’ (such as fraud) andobtain its consent to sales or leases of land to people connected withthe charity.Once your charity is registered it may be eligible for some tax breaks– corporation tax (income tax for organisations), stamp duty land tax(buying land or property over a certain value), gift aid on donationsand rates relief. As outlined above, registered Charities have an assetlock in perpetuity.This is a legal entity (ie English Body) registered with the Homes andCommunities Agency to provide Social Housing in England. Beinga Registered Provider makes the legal entity eligible for HCA grantfunding (note: eligibility does not guarantee availability of funding).A Registered Provider can be for profit or not for profit. A CLT cannotbe a for-profit Registered Provider. If a CLT wishes to becomethe direct landlord of the HCA funded rent or shared ownershipproperties it must register as a Registered Provider by the time thehousing is available for letting.This is a method by which a buyer buys the property outright ata percentage of its open market value, but enters into a covenant(binding agreement) with the CLT not to sell the property except atthe same percentage of market value.An exception site is one that would not usually secure planningpermission for housing, for example agricultural land next to butnot within a local settlement area. It is deemed suitable for a smallscheme predominantly of affordable housing to meet identified localneeds, secured ‘in perpetuity’ via a legal undertaking or planningcondition, where permission would not normally be granted forgeneral market housing.JARGON BUSTER
Section 106 agreementSelf BuildService chargesShared equityShared ownershipSocial EnterpriseThis is a type of planning obligation where planning approval isgranted subject to a restriction e.g, concerning the allocations of thehomes developed. They form a legally binding agreement betweenthe local authority and CLT.This means a project where a group of people acquire plots or partbuilt properties and pool skills to build or finish houses/dwellings sothat they will each have a home suitable for their needs. The time ofother professionals may need to be bought in for certain aspects ofthe build, but by using this method the self-builders capture more ofthe final value of the property. This type of project raises questionsaround whether this can be classed as a charitable activity and legaladvice should be sought on the specific project being planned.These are charges to tenants or low cost home ownership homeowners by the CLT or housing association landlord for provision ofservices such as cleaning and communal lighting. This should beconsidered when defining an affordable rent or equity share for theproperties.Under this mechanism, an occupier buys a share in a property withthe aid of a high street mortgage lender. The remaining equity shareis owned by the seller (CLT or housing association partner), unlike ashared ownership mechanism, the occupier does not pay rent on theremaining equity share.Under this mechanism, an occupier purchases a property at aproportion of its value and pays a rent to cover the share in theproperty retained by the CLT. The lessee would have the ability toacquire further shares at open market value (“Staircasing”). Insteadof outright purchase, a lease of (usually) 125 years may be used.These are businesses that trade in the market with a social rather thancommercial purpose. Profitable trading will be for sustainability ratherthan wealth creation for individual members of the organisation. Asocial enterprise is not defined by its legal status but by:– its nature;– its social aims and outcomes;– the basis on which its social mission is embedded in its structureand governance;– the participation of its shareholder groups in its governance andactivities; and the way it uses the profits generated by tradingactivities.Typical legal structures are: Community Interest Companies andCommunity Benefit Societies.JARGON BUSTER
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Page 3 and 4: Community InterestCompany (CIC)This
Page 5 and 6: Fit and ProperPerson TestFinancial
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CLT Jargon Buster (pdf) - Community Land Trusts

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