Charities’ Dealings with Land – Update

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The aim of the ChA 2022 is to reduce unnecessary bureaucracy for charities in England and Wales and reforms the existing land disposal regime.

The provisions contained in the ChA 2022 which relate to land are yet to come into force. However, it is anticipated these will take effect from Spring 2023.

What are the current requirements?

Dispositions of land other than leases of 7 years or less

The current requirements to be met before agreements for most disposals are entered into are as follows, and are contained within s119 of the ChA 2011:

  • The charity is to obtain a written report from a qualified surveyor who is to:
  1. Be a fellow or professional associate of RICS; and
  2. Have experience of valuing land that is the same kind and in the same area as that being disposed of;
  • The proposed disposal is to be advertised in the manner recommended in the written surveyors’ report; and
  • The charity trustees are to decide that they are satisfied the terms on which the disposition is proposed are the best that can reasonably be obtained.

Grant of a lease of 7 years or less

The requirements to be met before granting a lease of 7 years or less are as follows, and are contained within s120 of the ChA 2011:

  • The charity is to obtain and consider the advice of a person who is reasonably believed to have the ability and experience to do so in relation to the proposed disposition (there is no requirement for this advice to be given in writing or for the advisor to be a qualified surveyor); and
  • The charity trustees are to decide they are satisfied the terms on which the disposition is proposed are the best that can be reasonably obtained.

Additional procedures

Additional procedures are to be followed when land is held by the charity and is to be used for the purposes of the charity (i.e. the land is “designated land”) and are contained within s121 of the ChA 2011. This includes giving public notice of the proposed disposal, inviting representations to be made and taking into consideration any representations that are made within the requisite timeframe.

Exceptions

There are some transactions which are exempt from the above requirements, including:

  • a disposition for which the consent of the Secretary of State is required under the Universities and Colleges Estates Acts 1925 (which applies to certain Universities and Colleges in England only);
  • any dispositions of land held by or for a charity that is made to another charity otherwise than for the best price that can reasonably be obtained, and is authorised by the trusts of the disposing charity; and
  • the grant of a lease to a beneficiary under the trust of the disposing charity, provided the lease is granted otherwise than for the best rent that can reasonably be obtained, and it is intended to enable the property to be occupied for the purpose of the charity.

Statements

In most cases, statements should also be included in the document effecting the disposition, confirming the above procedures have been followed or do not apply.

Consequences of non-compliance

If the ChA 2011 requirements are not complied with, and the disposal was to a party that knew or should have known the statements contained in the disposal documents were incorrect, the disposal may be void or voidable. It is therefore important that the correct procedures have been followed, and the statements contained in the disposal documents are accurate.

What Changes will be made by the ChA 2022?

Disposals of land other than leases of 7 years or less

There will no longer be a requirement to advertise the proposed disposition in a manner advised in the surveyor’s report (s19 ChA 2022).

The category of persons who can give advice will now include fellows of the National Association of Estate Agents and the Central Association of Agricultural Valuers. Reference to a “qualified surveyor” in s119 of the ChA 2011 will be substituted by “designated adviser” (s20 ChA 2022).

Disposals of all land

Qualified charity trustees, officers and employees will also be able to provide a report or advice on the proposed disposition (s21(2) ChA 2022).

Exceptions

The exceptions will not apply to dispositions of charity land by:

  • a mortgagee;
  • an administrator;
  • a receiver;
  • a liquidator; or
  • a provisional liquidator.

The exception for dispositions for which the consent of the Secretary of State is required under the Universities and Colleges Estates Act 1925 will be removed.

The exception for dispositions made to another charity otherwise than for the best price that can reasonably be obtained, and authorised by the trusts of the disposing charity, is to be amended so that this will not apply if the disposition is:

  • a commercial transaction (i.e. intended to achieve the best price that can reasonably be obtained); or
  • a social investment (i.e. the use of funds to achieve both a financial and social return).

That exception will remove the requirement for the disposition to be authorised by the trusts of the charity.

Statements

Section 23 of the ChA 2022 also makes it clear that the relevant statements are to be included in contracts for dispositions of land and not just the documents effecting the dispositions themselves (i.e. transfers and leases).

If you require specific advice relating to the requirements of the Charities Acts on a disposal or acquisition of land or other related topics, please get in touch.