Charities Act 2022; What you need to know
The implementation of the first and second tranches of provisions of the Charities Act 2022 has seen relaxations concerning disposals of charity land. There are other changes but this article concentrates on disposals by charities.
Charities are, other than in limited circumstances, required to take certain actions prior to the disposal of an interest in charity land such as a transfer or a lease. This is usually cumbersome and time-consuming but more importantly, costly.
The new provisions in the Charities Act 2022 simplify some of the requirements which should make disposals of interests in land easier. The changes include:
- The 2022 Act clarifies that the restrictions will only apply where the whole of the charity land being disposed of is held either by a corporate charity which owns the land beneficially and solely for its own benefit and not as a nominee or in trust for another person; or by an unincorporated charity which holds land in trust solely for that charity. This means that the current restrictions will not apply where the charity is one of several joint owners of the land and the whole of the land is being disposed of, for example where land is held partly by or in trust for the charity and partly by or in trust for others.
- At present, charity-to-charity transactions for less than best price are generally exempt. The 2022 Act recognises that this light touch approach may not be appropriate and includes a new section to confirm that the exception only applies to disposals to another charity that are intended solely to further the disposing charity’s purposes. There will also no longer be a requirement for the disposition to be authorised by the trusts of the charity (but this does not allow a charity to make a disposition which is not permitted by its governing body).
- Previously, charities were required to obtain a written report from a “qualified surveyor”, this requirement has been widened to obtain a report from a “designated adviser”. This will allow trustees greater flexibility on who can advise a charity on the disposal (including certain estate agents and agricultural valuers).
- Qualified trustees, officers and employees of a charity may also now provide advice on a disposal of charity land as the “designated adviser” provided that they meet the relevant requirements. However, the person advising should be made aware of the risks in doing so, particularly where the matter is complex or of high value and potential conflicts of interest must be managed. There is a clear benefit to the charity in relation to liability by obtaining independent advice, especially for complex or high value transactions. However, the vast majority of charities are small and simply don’t have in house expertise to be able to perform this function so this benefit will mainly be for larger charities.
- The requirement to advertise in the manner described in the Qualified Surveyor’s Report (QSR) has been removed. This will give trustees greater freedom to determine how and when to market a property or to determine whether any marketing is required at all based on the nature and circumstances of the transaction
- Employees are no longer deemed to be “connected persons” so Charity Commission consent is no longer required to grant a short, fixed-term or periodic tenancy (for less than one year) to an employee of a charity where the property is to be used as their home.
Alongside the implementation of these provisions, new regulations have been introduced to simplify the content of the written reports that trustees are required to obtain under s.119 Charities Act 2011 (the old QSR).
The following changes are expected to come into force before the end of this year to give time for the Charity Commission to agree changes in procedure with the Land Registry. The changes will be:
- Changes to the statements and certificates required disposals of charity land and mortgaging of charity land. Currently, charities must provide a statement that the property is held by the charity within a certain category of section 117(3) of the Charities Act 201 so that restrictions on disposition imposed by sections 117 to 121 of that Act apply to the land. A Certificate is also required by the charity company directors and also by trustees to certify that they have power to effect the disposal and that they have complied with the provisions of sections 117 to 121 of the Charities Act. Under the new regime, the personal trustee’s certificate is replaced by a second statement by the charity that it has complied with the provisions of sections 117 to 121 of the Charities Act.
- Provisions relating to the disposal of land by liquidators, mortgagees and administrators so that restrictions on dispositions will no longer apply to sales or mortgages of charity land which are effected by liquidators, receivers, mortgagees or administrators.
For more information on the implementation of the Charities Act 2022, please visit the GOV.UK website.
James Chisholm is a partner and head of the Real Estate team at Keelys LLP.