The Charities Act received Royal Assent in February 2022 and is currently being brought into force in stages. The second group of changes were implemented in June 2023 and have some significant impacts on the way in which charities may deal with property and land.
The intention behind the changes is largely to simplify the administrative burdens that have previously been faced by charities when dealing with and disposing of property.
Dispositions of property under the Charities Act 2011
When making a disposition of property or land, charities must do so in accordance with the requirements set out in Part 7 of the Charities Act 2011, unless they can obtain consent from the Charity Commission or the court, or where the transaction is exempt. The term ‘disposition’ has been interpreted very broadly, to include matters such as the granting and surrender of leases and the granting of easements, to name a few.
The requirements are:
- obtaining a written qualified surveyor’s report on the proposed disposition;
- advertising the disposition; and
- the charity’s trustees must be satisfied that the agreed terms are the best that can be reasonably achieved for the charity.
Prior to the implementation of the Charities Act 2022, the required content of the report was extremely prescriptive and detailed. Often, this would lead to disproportionate costs being incurred for the relevant charity, especially in relation to relatively simple dispositions such as wayleave agreements.
Designated advisers’ reports
Under the changes implemented in June, the process of obtaining a report has been updated to try and combat the financial burden that charities have previously faced. Now, a designated advisers’ report is required as opposed to a qualified surveyor’s report, broadening the categories of those who can provide such a report for the charity. In the report, this adviser must state that:
- they have ability in, and experience of, the valuation of land of the kind and area in question, and
- they have no interest that conflicts with that of the charity.
Through the 2022 Act, section 118 of the 2011 Act has been amended to enable charities to grant fixed-term tenancies of one year or less to employees of the charities, for use as their residence. Previously, trustees would have required consent of the Charity Commission in order to grant such a tenancy, due to the nature of the employees as ‘connected persons’.
There are further changes that are expected to come into force towards the end of 2023, which again will affect how charities can deal with land and property.
Some notable changes include:
- the requirement for an additional statement in sale contracts to confirm that the disposition:
- complies with legislative requirements; or
- has been sanctioned by the Charity Commission/court;
- dispositions by liquidators, receivers, mortgagees or administrators where the land is held on trust for a charity will not be caught by the rules contained in the Act; and
- certain disposals to other charities will not be caught by the restrictions, in situations where the disposal is made with the sole intention of furthering the charity’s objectives.
It will be crucial over the coming months for charity trustees to keep up to date with the upcoming changes in the law, to ensure that they do not end up falling foul of the requirements. If you require further information in relation to this topic, please get in touch with our commercial property team by calling 0116 289 7000 or emailing us at email@example.com.