Charities and Property: Deciphering Disposals

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Charities and Property: Deciphering Disposals

Charities and Property: Deciphering Disposals

When dealing with charities in property disposals (a disposal simply being a transfer of property), it is important to be aware that there are additional requirements to comply with in order for the transaction to take effect.

The key legislation which applies here is the Charities Act 2011 (CA 2011).

It is worth noting there are a few transactions which are exempt from the additional CA 2011 requirements, but these are relatively rare. The majority of the transactions you will encounter will fall under the CA 2011.

If you are the Charity

The CA 2011 differentiates between two types of charity: (1) Exempt Charities and (2) Non-Exempt Charities, and different rules apply to each.

1. Exempt Charities

This is a charity that is exempt from the requirement to register with, and is not directly regulated by, the Charity Commission because it is supervised by a government department or other public authority.

Exempt charities are not subject to the statutory restrictions on disposing of land, but the charity trustees of exempt charities must still fulfil their general duties when disposing of the charity land and specific statements must be included in the deed that effects the transfer or lease effectively stating that the land is currently held in trust.

2. Non-Exempt Charities

A non-exempt charity is a charity which is subject to the controls of the Charity Commission.

A non-exempt charity must not dispose of land unless either:

(a) an order of the court is obtained;
(b) an order of the Charity Commission is obtained; or
(c) the charity trustees have followed the correct “advice” procedures set out in the CA 2011.

Rather than applying to the court or the Charity Commission, following the “advice” procedure is the most convenient method for charities to dispose of land.

In order to use this method the deed effecting the disposal will need to include statements that the land transferred is held by or on behalf of the charity, that the transfer is not one of the exempt transactions which we mentioned above (again these are relatively rare), and that the restrictions on the transfer of property imposed by the CA 2011 apply (i.e. the requirement for a court order, an order from the Charity Commission, or the need to follow the “advice” procedure before the land can be transferred).

In order to follow the “advice” procedure, the charity trustees must (for anything other than a lease for 7 years or less):

  • Obtain and consider a written surveyor’s report on the proposed disposal prepared by a suitably qualified surveyor, who must be a fellow or member of the RICS or the ISVA, and who must act exclusively for the charity;
  • advertise the property for such period and in such manner as the surveyor advises; and
  • decide, having considered the report, that the terms of the disposition (including the price) are the best that are reasonably obtainable.

If the lease is for 7 years or less, the charity trustees must:

  • obtain and consider the advice on the proposed disposition of a person (who may or may not be a surveyor) who is reasonably believed by the trustees to have the ability and practical experience provide them with competent advice on the lease; and
  • decide that they are satisfied, having considered that person’s advice, that the terms of the lease are the best that can reasonably be obtained for the charity.

Buying from a Charity

If you are buying or taking a lease from a charity, your key concern will be whether the sale or lease being made by the charity will be void for failing to comply with the statutory advice requirements.

To ease your concern, you may rely on a statutory certificate (which will be given in the deed effecting the disposition).

Where the statutory certificate has been given by the charity trustees, it will be presumed that the facts in the certificate are true and you, as the buyer, do not need to make any further enquiries regarding the statute.

The buyer can rely on the certificate and the certificate ensures that the transfer will not be voided by the Act.

If you have any queries regarding anything touched on in this article, or if you would like further information, please contact Nick Ripper, or give us a call on 0345 070 6000.

Article written by Harnaek Rahania.