Sarah Bradford, a Legal Director in the commercial property team at Higgs LLP, welcomes the forthcoming changes in the Charities Act 2022, which received Royal Assent early in 2022 and alters a number of the rules affecting dispositions of charity land, updating the Charities Act 2011.
Changes to the Charities Act 2022 will significantly alter the way charities dispose of or mortgage land they own, reducing the administration required while also saving them money.
The exact date this new Act comes into force is yet to be announced, but it is important charity trustees are aware of the changes to avoid breaching their duties to the trust, which can result in personal liability and costs.
The Act will offer increased flexibility for charities when seeking professional advice prior to a land disposal, allowing them to access a wider pool of professional advisers and have greater control over the costs to ensure they remain proportionate to the transaction and fit with the timescales involved.
Those acquiring land from charities will have greater certainty and there will be less ‘red tape’ and confusion about which statutory statements are required in documents, which can cause delays in these transactions.
Why are charity land disposals different?
By law, charity trustees cannot freely dispose of land held in trust for the charity. Most charities involved in property transactions are “non-exempt” charities and are subject to Charity Commission regulation.
While trustees of a non-exempt charity are generally allowed to sell, mortgage or otherwise dispose of land held in trust for the charity without an order of the Court or of the Charity Commission, they are required to follow the correct procedures set out in the Charities Act and regulations.
When is land held in trust?
The 2022 Act amends what is meant by land being held “by or in trust for a charity”.
It provides that land is held by or in trust for a charity only if:
“the whole of the land which forms the subject matter of the disposition is held
- (a) by the charity solely for its own benefit (and, accordingly, is not being held as nominee or in trust for another person), or
- (b) in trust solely for the charity.”
If a charity was only one of several tenants in common of the land and the entirety of the land is being disposed of by the trustee of the land the restrictions on disposing would not apply.
However, the restrictions would still apply if the charity, as one of several tenants in common, was separately disposing of its share in land.
Relaxing requirements for reports before disposition
One of the current requirements imposed on the trustees of a charity before entering into a contract for a disposition of land is that the trustees obtain and consider a written report on the proposed disposition from a “qualified surveyor” instructed by the trustees.
Instead of requiring a qualified surveyor to issue the report, amendments now permit a “designated adviser” to report on the proposed disposition who could be a charity trustee, or an officer or employee of the charity.
This will allow a wider category of advisors to provide reports, including fellows of the National Association of Estate Agents and the Central Association of Agricultural Valuers.
Removal of automatic requirement to advertise
The 2022 Act removes the automatic statutory requirement for “advertising” the proposed property disposition. Instead, the trustees must consider the report that has been obtained in relation to the disposition which may recommend a period of advertising.
Loophole for letting to charity employees
Currently, land held by or on trust for a non-exempt charity may not be sold, leased or otherwise disposed of to a “connected person” without an order of the court or of the Charity Commission.
The 2022 Act will permit the grant of a tenancy to an employee of the charity for a fixed term of up to one, or on a periodic tenancy (yearly or less), provided the property is occupied as a home.
Red tape restructure
The statutory statements and certificates required to be included in contracts, transfers and other documents for property dispositions have been restructured to ease procedural requirements where the charity trustees are not the registered proprietors of the land so their certificate in the instrument is no longer required.
Buyers acting in good faith will be protected whether or not the correct statements are included in the disposition documents.
Sometimes you still need to ask permission
Whilst the changes under the 2022 Act will assist charities seeking to dispose of land in some circumstances, it is important to remember that some land disposals will still require consent from the Charity Commission, whose guide “Permanent endowment: rules for charities” states that you must obtain consent from the Charity Commission before disposing of “Designated Land” without replacing it.
The guide describes “Designated Land”, sometimes referred to as “specie land” and/or “permanent endowment”, [as] being land required by the charity’s governing document to be used for a particular purpose of the charity”, although different rules apply for each of these types of land so this is a somewhat simplistic overview.
Failure to obtain consent when required from the Charity Commission can result in the property disposal being void and the charity and its trustees could find themselves facing legal action and liability.
Charities and their trustees should seek specialist legal advice as early as possible when considering any disposals of charity land and property as each case will differ depending on its facts.
