Charities must comply with certain legal requirements before they ‘dispose’ of land they own (whether that be selling, transferring, or leasing land). It is therefore important that churches and other Christian charities know their obligations.
The Charities Act 2022
As we have reported on in an earlier article, the Charities Act 2022 introduces a raft of changes to existing charity law and aims at simplifying a number of legal requirements for charities (read about the changes to charity names here for example).
Several changes have been introduced this month, and in this article, we cover those pertaining to the selling, leasing or otherwise disposing of charity land.
Changes introduced in June 2023
Changes rolled out in June 2023 include:
- widening the category of designated advisers who can provide charities with advice on certain disposals
- confirming that a trustee, officer, or employee of the charity can provide advice on a disposal if they meet the relevant requirements
- giving trustees discretion to decide how to advertise a proposed disposal of charity land
- removing the requirement for charities to get Commission authority to grant a residential lease to a charity employee for a short periodic or fixed term tenancy (but there will often be other reasons why the Commission’s approval is still required)
- The Commission has said that certain other changes to the property disposal requirements will be implemented later in 2023.
Our view on how the changes will affect you
The changes coming into force in June 2023 have been long-awaited. It continues to be the case that, for most disposals of charity land, the charity trustees must take specialist advice on the terms of the proposed transaction before exchanging contracts. However, some of the associated requirements have been relaxed in a way that should provide a bit more flexibility and sometimes reduce the compliance costs for charities.
The widening of the category of ‘designated advisers’ may not make much difference to the charities and churches for whom we typically act and for the vast majority of sales and leases we tend to deal with it is likely still to be sensible for the trustees to seek out a RICS-chartered surveyor to provide a report on the transaction.
However, the details that must be covered in such a report have been simplified, and the fact that trustees, officers and employees of the charity are now able to provide that report for all types of disposal (provided that they meet the requirements of a ‘designated adviser’) could well save time and cost for charities that do have a property professional on their trustee boards.
The removal of the previous requirement to strictly follow the adviser’s instructions on how to market a property is also helpful. Decisions as to marketing are now much more clearly down to the discretion of the trustees. The trustees must still consider the adviser’s report (which will continue to include advice about marketing) and be satisfied that the terms they agree for the disposal are the best that can reasonably be obtained. Therefore, trustees would be unwise to reject such advice. But this change will often simplify the process of demonstrating compliance with the legislation, especially in cases where the best offer was received before the adviser’s report or where marketing a property before disposing of it is either impossible or inappropriate.
Finally, the ability to grant certain residential tenancies (fixed for 1 year or less or automatically recurring at the end of that period) to employees of the charity without needing the consent of the Charity Commission first will afford a helpful degree of flexibility to charities with residential property that they wish to allow their staff to occupy but cannot for whatever reason grant a service occupancy agreement. Often the need to do so could be quite urgent and the previous requirement to obtain Charity Commission consent first was a significant practical impediment. It should be noted though that this does not absolve the charity from the general requirements of the Charities Act, alluded to above, to take advice on the proposed tenancy first. Furthermore, there will often be situations (particularly for churches) where the consent of the Charity Commission is required for other reasons – for instance any tenancy to a trustee (such as a pastor). Therefore, we anticipate that many clients will continue to grant a service occupancy agreement instead of a tenancy.
Overall, we welcome these changes and anticipate that they will be of practical benefit to our clients in many cases.