There are many different reasons why you may wish to sell your charity’s or church’s property. Perhaps you are relocating or perhaps you want to release some cash to use in other ways. Selling any property can be a lengthy, complex process and extra care needs to be taken when disposing of a charity’s asset. How can you ensure that you do this in the best way for your church or organisation which complies with charity law?
In this article we assume that all churches or organisations are charities and therefore need to comply with charity law.
Authority and Restrictions
Whatever you do as a trustee of a charity, you need to have the best interests of your charity in the forefront of your decision-making. This particularly applies when it comes to disposing of property. You need to carefully consider if selling any property is the best course of action for your charity. You will also need to establish if you have the power to sell the property and if there are any restrictions on it. Your governing documents are key to this process. You should have both your governing documents and the title documents reviewed by a solicitor at this point. Here are some key questions to consider:
- do the trustees have a power to dispose of the land?
- would the disposal be in the best interests of the charity?
- do the trustees own the title to the land?
- is there anything in the governing document that prohibits the disposal?
- do you need authority from the commission or the Court? (see the Charity Commission’s CC28 leaflet for more information
Once you are satisfied that selling the property is the best course of action, and that you have the authority to do so, you can now move onto getting the property valued.
Formal Valuation and Marketing Advice
Section 119 of the Charities Act 2011 sets out that all charities must get a valuation report from a qualified surveyor (being a fellow or a professional associate of the Royal Institute of Chartered Surveyors or of the Incorporated Society of Valuers and Auctioneers) who has experience in the area in which your property is situated. The report (known as a Section 119 Report) must comply with the Charities (Qualified Surveyors’ Reports) Regulations 1992 and will include far more detail than a normal valuation from an estate agent. It will cover the best means of marketing the property as well as advising on the price required.
The trustees must consider the written report and decide how to proceed in the light of it. If you do not wish to follow the recommendations in the report relating to marketing the property, formal legal advice must be sought before further steps are taken. At this meeting, the trustees can also pass a resolution in accordance with Section 333 of the Charities Act 2011 agreeing that any two of the officers can sign all the documentation relating to the sale on behalf of the others (Edward Connor Solicitors can provide the wording of such a resolution).
Marketing the Property
Not until the Section 119 report has been received can the marketing of the property be commenced. This is because the sale price cannot be less than the value set out in the report by the surveyor. You should appoint estate agents to deal with the marketing of the land in the manner recommended by the surveyor. It is best practice to ensure that the estate agent and the surveyor are not connected and are completely independent of each other. If there are no offers on the property equal to or above the Section 119 Report, then you must go back to the surveyor and ask them to review their valuation. You can only sell a property at a price below the Section 119 report valuation if the surveyor recommends it. In these circumstances, the surveyor will usually do an update of the report without charge.
Please note that under Section 117 (3) of the Charities Act 2011 it is possible to transfer a property for less than market value to a charity with the same objects and purposes as the selling charity. Please contact us if you require more advice on this point.
Receiving and Accepting Offers
The Charities Act 2011 requires your charity to accept the highest offer unless there are very good reasons for rejecting it. You cannot reject an offer just because it comes from another group whose beliefs you don’t agree with. If the offer is from a person connected to the Church, it is likely to require the consent of the Charity Commission and you should talk to your solicitor about this. Once an offer has been provisionally accepted, the trustees should hold a meeting formally recording that they are satisfied, having considered the surveyor’s report that the terms of the sale are the best that can reasonably be obtained for your church or organisation.
This information has been provided by solicitors working for Edward Connor Solicitors. It is designed for the purpose of knowledge sharing only and does not constitute legal advice.