Take care when disposing of charity property

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Clearance from the Charity Commission may need to be obtained

The Charities Act 2011 (which superseded the Charities Act 1993) places an obligation on certain charities that are regulated by the Charity Commission to comply with specific procedures when proposing to transfer or relinquish ownership of property that is owned by the charity. In some circumstances, this could involve obtaining clearance from the Charity Commission.

However, most usually, this involves obtaining advice from a suitably qualified surveyor before entering into any arrangement to dispose of the property. The rationale behind this obligation is to ensure that trustees take appropriate advice in relation to achieving the best possible terms for the charity’s disposal.

What should I be considering as a charity trustee?

1. First of all, check the basics…

Before charity trustees enter into a proposed disposal transaction, they must be sure that:

  • They have permission to dispose of the property – either pursuant to the charity’s governing documents or current law;
  • There is nothing within the governing documents that prevents or restricts the charity’s disposal;
  • The charity has good title to the property;
  • The disposal is in the charity’s best interests; and
  • The disposal is not to a connected person (charity trustee, a donor of any land, a relative of a trustee or donor and employees of the charity) unless specific consent of the Charity Commission has been obtained.

2. Is the proposed transaction a ‘disposition’?

The obligations contained within the Charities Act 2011 concern ‘dispositions’ of property. A disposition can be generally defined to mean where ownership of property is either transferred or relinquished. The following are examples of transactions that are dispositions:

  • A transfer of property to another entity;
  • The grant of a lease of property for at least 7 years or more;
  • The assignment of a lease; and
  • The surrender of a lease.

The types of transaction that do not constitute a disposition (but where other obligations for trustees may arise) include:

  • The grant of a licence to occupy property;
  • A tenancy at will;
  • The exercise of a break right under a lease; and
  • A rent review under a lease.

3. Is the property held by the charity for a particular purpose?

‘Stipulated property’ is that held by the charity for a particular use or purpose, for example a children’s recreational ground. Charity property of this nature requires an additional statutory public notice procedure under section 121 of the Charities Act 2011 to be complied with.

4. Instructing a surveyor

Charity trustees must obtain written advice, including a valuation, from a Fellow or Professional Associate of the Royal Institute of Chartered Surveyors. The given surveyor must have sufficient relevant experience to not only value the type of property being disposed of (for example, an historic listed building or a purpose-built commercial office space), but also within the appropriate geographic area to where the property is located.

5. Surveyor’s report

The surveyor must advise as to how (and whether) the disposition should be advertised and provide guidance on the terms of such disposition. This advice must be given before the charity enters into any binding obligation to dispose of the property.

6. Considering the advice

On the basis of the surveyor’s report, the charity trustees must decide whether the intended disposition is on the best terms that can reasonably be achieved for the charity. The trustees must carefully consider their general duties to act prudently and in the best interests of the charity. Trustees also have a duty to consider professional advice appropriately, but ultimately it is their decision whether to proceed with a proposed transaction or not.

For further information, charity trustees should consult the Charity Commission’s useful guidance leaflet.

If you are a trustee considering a proposed disposal of charity property, our Commercial Property team has a wealth of experience in handling all forms of charity property disposal. For further information and to speak with a member of our team please email [email protected] or call us on 01733 882800.

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