Charities Act 2022; changes effecting charity land

06 July 2022

Our charity and not for profit team is shining a light on the changes brought in by the Charities Act 2022 as a practical guide for charity trustees and those working with charities.

Today, Associate, Ellie Williams, focuses on significant changes effecting charity land.

Disposal and acquisition of charity land

The aim of the current charity land disposals regime is to safeguard charity assets and to ensure that charity trustees obtain the best terms available for their charity when they either dispose of or mortgage land. The Charities Act 2022 (“ChA 2022”) will bring in some changes to the procedures for disposals of and mortgaging of charity land which are expected to come into effect in spring 2023.

  • Restrictions on dispositions: Currently charities cannot dispose of land without either an order of the court or the Charity Commission unless certain exemptions apply or the process set out in the Charities Act 2011 is followed. Usually this means that charities can follow the statutory procedure as long as there is no connected party involved and the charity obtains appropriate advice on the proposed terms of the disposal.  The Charities Act confirms that the restrictions on disposals of land will only apply where the whole of the land which is being disposed of is held by a charity solely for its own benefit or in trust solely for the charity.  This means that where land is held partly by or in trust for a charity and partly by or in trust for others the disposal will not be subject to the requirements under Charities Act.  There is further detail about when the restrictions will, or will not, apply in the Explanatory Note and charities should seek professional advice if this level of technical detail is required.
  • Exceptions to restrictions on disposal or mortgages of charity land: the existing exceptions to the general restrictions on disposals or mortgages of charity land have been amended, for example, to exclude a disposal by a liquidator or administrator.
  • Charity to charity disposal: the existing charity to charity exception is reformulated to confirm that it applies only to disposals to another charity that are solely intended to further the disposing charity’s purposes.  The exception will not apply if the disposal is a commercial transaction (i.e. to achieve the best price possible), or a social investment.  The requirement that the disposal be authorised by the trusts of the charity is also removed. The reason behind this was to make clear that the charity’s governing document does not need to include an explicit provision authorising such a disposal for this exception to apply.
  • Advertising and surveyor’s report: the requirement to advertise in the way advised in the surveyor’s report is no longer required and the detail required in the surveyor’s report has also changed to “deal with such matters” as are prescribed in regulations.
  • Advice on disposals: the requirement for advice from a “qualified surveyor” will be replaced by “designated advisor” to widen the scope of those who can advise on a disposal of charity land so that advisors need not be members of the Royal Institution of Chartered Surveyors. 
  • Advice from Trustees, officers and employers: a new section will allow qualified trustees, officers and employees to provide a report or advice, including in the course of their employment by a charity.  This has the potential to save charities time and money as well as ensuring advice is proportionate to the disposal involved.
  • Connected persons: the current definition of connected persons includes (but is not limited to) a charity trustee and officers or employees of a charity and any disposal to such a party would need the consent of the Charity Commission or the court.  The definition will be amended to exclude employees of a charity where the disposal is the grant of a short, fixed-term or periodic tenancy (of one year or less) to use as their home. Trustees will still need to obtain advice on the grant of those leases but will no longer need to get consent from the Charity Commission.
  • Information included in contract: in addition to the current requirement to include a statement in the instrument effecting the disposal or mortgage of land (eg the transfer deed), trustees must now also include a statement in the contract to confirm that they have complied with the requirements in Charities Act 2011.  In practice this will mean that all disposal documents will now contain the same statutory statements.   Further changes to provisions safeguarding purchasers and mortgagees will mean that a charity can no longer rely on its own failure to comply with the Charities Act 2011 disposals regime to avoid completing a contract for the disposal of an interest in land.  This will provide comfort to purchasers acting in good faith.
  • Universities and colleges: changes will mean that certain universities and colleges will have all the powers over land of an absolute owner.  Exercise of this power will be subject to various restrictions, for example, in the institution’s governing document or statute.

Dealing with charity land is a complex and specialist area and we recommend trustees obtain appropriate professional advice early on in the process and before entering into any agreement

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