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Disposal of Land by Charities

Disposal of Land by Charities

The Charities Act 2022 ('the Act') received Royal Assent on 24 February 2022. Its provisions relating to charity disposal of land are effective from 14 June 2023 but there is no implementation date for the provisions discussed below (the exceptions mentioned under paragraphs numbered “2” and “3” and the provisions about statements to be included in documents) which are noted as not yet in force. 

The previous law on this topic is touched on in the Guidance Note: Charity Property Transactions. We have now updated the Guidance Note to explain how the law has changed.

Below is a summary of some of the key amendments made by the Act on this topic. There are some other specific changes in the Act, but they are beyond the scope of this summary.

Advertising and report requirements for the disposition of charity land

1. A key change impacting a number of charities is the change to the previous requirement for a Royal Institution of Chartered Surveyors (‘RICS’) qualified surveyor to provide a written report when a charity wished to dispose of land. A disposal here includes a sale or transfer of freehold property or a grant or disposal of a lease longer than seven years.

The Act expanded the category of those who can advise the charity and produce the written report to also include the following 'designated advisers':

• The National Association of Estate Agents;

• The Central Association of Agricultural Valuers; and

• qualified charity trustees, officers, and employees of the charity (including where they do so in the course of their employment).

Charities now have access to a greater range of external professional advisers and, as an alternative, the freedom to engage a suitably qualified charity trustee, officer, and employee if they have such a person in the charity.

2. The report requirements have also been relaxed by the Act, making them simpler and less prescriptive. The report need only cover the property price, whether this price could be enhanced, marketing and any other relevant recommendations. An adviser needs to self-certify that they have the appropriate experience and expertise and that there is no conflict between their interest and the interests of the charity.

3. Charity trustees no longer have to advertise the disposal as advised in the report. The charity need only consider the marketing recommendations in the report.

As under the previous rules, where a charity is permitted to use a report as the basis for it to dispose of land, it does not need a court order or consent of the Charity Commission to do so provided that the disposal is not to a “connected person”.

Statements to be included in documents on sale of freehold or grant of lease or mortgage

In addition to the current requirement to include certain statements in the transfer or lease, or mortgage, charities will need to include a further statement in the contract for the disposal of charity land (transfer/lease or mortgage) which confirms that the Act has been complied with, so that this confirmation will in future be given not only at completion but also at the time of exchange of contract. This new requirement is not yet in force.

Amendments to the restriction on disposals and the exceptions to the restriction

As mentioned above, in certain cases there can be a disposal of land based on an adviser’s report with no need for a court order or consent of the Charity Commission. Apart from those cases, the Charities Act imposes a blanket restriction on the sale (and also letting) of land held by or on trust for a charity without a court order or Charity Commission consent. A number of exceptions to that blanket restriction applied under the previous law, but the Act contains the following changes to it:

1. The blanket restriction now only applies where the whole of the land being disposed of is held by the charity in trust solely for that charity (if it is an unincorporated charity) or held by a charity solely for its own benefit and not as a nominee or in trust for another person (if it is a corporate charity). If, for example, land is being held on trust for the charity and other beneficial joint tenants, this would not be caught by the restriction;

2. Liquidators, receivers, administrators, and mortgagees disposing of charity land will be added as an exception to the restriction but this exception is not yet in force; and

3. Charities will be able to enter into a disposal of charity land with another charity for less than the best price that can be reasonably obtained for the disposing charity. This transaction will be an exception to the restriction if the charity disposing of the property does so to further its purposes. If it is in fact instead a commercial transaction, then it will be caught by the restriction. This exception is not yet in force.

Residential tenancies granted to employees

Charities can now grant a short, fixed term or periodic tenancy (of one year or less) of charity land to employees to use as their home without needing to obtain consent from the Charity Commission.

General

The intention of the Act is to now make the process of disposing of land easier for charities. The Act aims to give greater flexibility, remove certain prescriptive requirements, and make the legal framework for disposing of charity property clearer and less burdensome.

This page will be updated once further implementation dates are known and if any amendments are made and/or supporting legislation is passed following the Act receiving Royal Assent.  

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