New guidance on charity property disposals – what trustees need to know

In most cases, it is possible to sell, lease or otherwise dispose of a charity’s land without obtaining the Charity Commission’s authority.  It is necessary to get the best terms that can reasonably be obtained unless the disposal falls into a very limited number of exemptions.

The guidance defines ‘land’ and ‘disposal’ widely – although there is separate guidance on mortgages.  The only interests relating to property which are not covered by the guidance are the grant of purely personal rights, such as licences.

The guidance sets out (A) four key actions which apply to al types of disposal, then (B) and (C) details slightly different legal requirements for different types of disposal and (D) it ends with exemptions and further detail on designated land (see (A)3).

1. There are four key actions which apply all types of disposal:
2. Be certain that your charity owns the land. We can check this at the Land Registry for you.
3. Be satisfied that the disposal is in the charity’s best interests. The charity must use reasonable care and skill when disposing of land.  There can be different reasons for disposing of land: to raise money, or relocate, or reduce the administrative burden.  It is necessary to think about how the charity will operate without the land and how the disposal may affect the charity’s beneficiaries or public support for the charity.
4. Know if the charity has the power to dispose of the land. Most charities have this power, but it is necessary to check the charity’s governing document and ensure that the land is not what is termed ‘designated land’ (that must be used by the charity for a designated purpose – e.g., an endowment).
5. Know when you need the Charity Commission’s authority. The guidance helps to inform charities when an application to the Charity Commission may be required.
6. Legal requirements for sales, longer leases (over 7 years) and other forms of land disposal

• Carry out the ‘four key actions’ summarised above.
• Comply with the following two legal requirements unless an exemption applies:
• Obtain and consider a report from a designated adviser (usually a suitably qualified and experienced chartered surveyor). It is possible for a trustee, officer or employee of the charity to do this if they are suitably experienced and qualified.  The report must comply with new regulations – the Charities (Dispositions of land: Designated Advisers and Reports) Regulations 2023.
• Be satisfied that the proposed terms are the best you can reasonably obtain for your charity. This includes considering the report’s recommendations, being satisfied that the proposed terms are the best that can be reasonably obtained and including certain statements and certificates in the disposal documents.  It is important to keep an audit trail of the decision-making process.
• Obtain Charity Commission consent if required. Charity Commission authority is required in three main circumstances:
• If the charity does not follow the two legal requirements.
• If the disposal is to a person ‘connected with’ the charity (this is defined in the Charities Act 2011).
• If the disposal is of ‘designated land’ (in most instances).

1. Legal requirements for leases for 7 years or less

• Carry out the ‘four key actions’ summarised above.
• Comply with the following two legal requirements unless an exemption applies:
• Obtain and consider a report from a person you believe to have the ability and experience to give competent advice on the lease. This does not ned to be a qualified professional and can be a trustee, officer or employee of the charity.
• Be satisfied that the proposed terms are the best you can reasonably obtain for your charity (as above).
• Obtain Charity Commission consent if required. Charity Commission authority is required in the three circumstances set out above.  Charity Commission consent is not required for a lease of a dwelling for a fixed term of one year or less or a periodic tenancy for one year or less to a charity employee having the right to live in the property as their home.

1. Exemptions to following the legal requirements

There are exemptions that mean disposals can be completed without complying with the legal requirements in section B above.  These are the main exemptions:

• Leasing land to a beneficiary of the charity – which can be below the best rent.
• Disposing of land to a charity with a same or similar purpose as your charity.
• Disposing of land using statutory powers or schemes.
• Disposals if the charity is an ‘exempt’ charity.

Conclusion

In this note, we have provided a summary of the guidance.  The guidance covers certain topics (particularly designated land) in greater detail.  For further information, please refer to Charity Commission Guidance Note CC28.  This note is not intended to constitute legal advice and charity trustees and officers and those advising them are advised to take specific advice on a case-by-case basis.

Please contact Richard Higgs, a Partner in our Commercial Property with significant experience of charitable disposals, for more information.