The new Charities Act was passed in early 2022 and sought to reduce the unnecessary administrative and financial burden on charities when disposing of land.
The Charities Act 2011 contains restrictions to ensure that charities are protected from imprudent decisions by ensuring that the best terms are obtained when disposing and charging land. Charities must apply for an Order from the Court or the Charity Commission prior to disposing of their land unless certain exceptions apply or unless they follow the statutory procedure within the Charities Act. The new legislation seeks to allow greater flexibility and a simpler process for charities.
The changes to be made are to be implemented in three stages, with the most recent changes coming into effect on 14 June 2023. The final changes are expected to be implemented before the end of 2023, with the exception of those relating to Universities and Colleges which it is anticipated will be implemented in Spring 2025.
Previously, the restrictions on dispositions applied to all land which was held “by, or in trust for a charity”. This meant that if a trustee held land on trust for multiple beneficiaries and only one of these was a charity, the restrictions would still apply. This is no longer the case and the restrictions only apply where land is held solely for a charity’s own benefit. This is particularly beneficial where charities have received only a part share in a property as a gift in a Will.
Before disposing of land, charities must obtain advice relating to the proposed disposal. Prior to the changes being implemented, this advice could only be provided by a qualified surveyor. This has now been expanded to allow for a “designated adviser” to provide that advice, which can include suitably qualified trustees and employees of the charity.
There was previously a requirement for charity trustees to advertise a proposed disposition in accordance with advice provided by a qualified surveyor. This requirement was frequently not complied with as often charities did not obtain a surveyor’s advice until after the land had been advertised. Charities are no longer required to follow advertising advice, but the charity must still consider any such advice.
When charities dispose of land to parties who are connected to the charity, they must first obtain consent from the Charity Commission. This remains the case for most dispositions, but charities can now grant a short-term tenancy for less than one year to an employee of the charity where this is to be used as their home. Trustees must still obtain advice prior to granting any such tenancy.
The restrictions on dispositions imposed by the Charities Act will no longer apply to sales or mortgages of charity land which are effected by liquidators, receivers, mortgagees or administrators.
Where a charity disposes of land to another charity and certain conditions are met, those dispositions are exempt from the general restrictions. The exceptions will no longer apply to commercial transactions (which are not intended to achieve the best price for the disposing charity) or social investments. There will also no longer be a requirement for the disposition to be authorised by the trusts of the charity (but this does not allow a charity to make a disposition which is not permitted by its governing body).
Documents which give rise to dispositions (including contracts, transfers and leases) must include certain prescribed statements. Under the current legislation, the statements are to be provided by the trustees of the charity. The new legislation is to place this obligation upon the charity itself. The wording of the statements is also to be amended to make this clearer, although the wording has little effect on how the provisions operate.
The current legislation potentially enables a charity to invalidate a disposition as a result of its own failure to comply with the Charities Act. As this is unfair to a purchaser who is acting in good faith, a purchaser for value acting in good faith will be protected by the new provisions.
Dispositions and mortgages under the Universities and College Estates Act 1925 must now comply with the provisions of the Charities Act.
Although there are no specific restrictions placed upon charities when acquiring land, charity trustees should always ensure that they are acting in the best interests of the charity when acquiring land and should obtain appropriate advice. Charities should also ensure that appropriate advice is sought at an early stage of any proposed disposition of land.
Please do not hesitate to contact Rhiannon on 01740 646046 or rmelrose@tbilaw.co.uk if you would like any advice in relation dealing with charity land.
Call:01740 646046
