Articles | Disposing Charity Property? Don’t get caught out

Anna Zatouroff, a commercial property senior associate at FSP, outlines the statutory duties for charity trustees before a charity disposes of its property.

Contact

Address
1 London Street,
Reading,
RG1 4PN

Telephone
+44 (0)118 951 6200

Email
enquiry@fsp-law.com

Anna Zatouroff

Anna Zatouroff

Introduction

The Charities Act 2011 (which replaced the Charities Act 1993) requires certain charities that are regulated by the Charity Commission to comply with specific procedures when looking to dispose of property that they own. This may include obtaining clearance from the Charities Commission.

More commonly, the charity must obtain advice from a suitably qualified surveyor before they enter into any arrangement to dispose of their property.

The purpose behind such obligation is to ensure the trustees have appropriate advice on what are the best terms that the charity the charity can obtain for its disposal.

What is a disposition?

Dispositions include:

  • a transfer of property
  • the grant of a lease of property for at least 7 years or more
  • the assignment of a lease 
  • the surrender of a lease

What is not a disposition?

The following are examples of transactions that are not dispositions:-

  • the grant of a licence to occupy property
  • a tenancy at will
  • the exercise of a break right under a lease
  • a rent review under a lease

What is involved?

1. Instructing a surveyor

Charity trustees must obtain written advice from a Fellow or Professional Associate of the Royal Institute of Chartered Surveyors who has the relevant experience to value the type of property being disposed of in the area where the property is located.

2. Surveyor’s report

The surveyor must advise as to how (and whether) the disposition is to be advertised and terms of such disposition.

This advice must be given before the charity enters into any binding obligation to dispose of the property.

3. What to do with the advice

The charity trustees must decide on the basis of the surveyor’s report whether the intended disposition is on the best terms that can reasonably be obtained for the charity.

The trustees should carefully consider their general duty to act prudently and also have a duty to consider professional advice appropriately but ultimately it is their decision whether to proceed with the transaction.

Other dispositions by charities

The grant of a lease for 7 years or less

A less onerous procedure applies to the grant of a lease for 7 years for less. The valuation advice can be from someone who is reasonably believed by the charity trustees to have the requisite experience to advise on the proposed disposition.

Connected Persons

Charities are prohibited from disposing of the property to a connected person unless they have the consent of the Charity Commission. A connected person includes a charity trustee, a donor of any land to the charity a relative of any trustee or donor and employees of the charity.

Is the property held by the charity for a “stipulated purpose”?

Property held by a charity for a stipulated purpose (was it donated for a particular purpose) requires an additional statutory public notice procedure under section 121 of the Charities Act 2011 before it can be disposed of.

If you would like to discuss any of the issues raised in this article then either Anna Zatouroff or Dean Bickford would be happy to assist.