The Charities Act 2022 (2022 Act) introduced various changes to the Charities Act 2011 (2011 Act). Earlier this year, certain changes came into force in relation to the disposal of charity property. In this insight, we consider the impact of some of those changes for those dealing with charities on property transactions.

Requirements for documents – Sections 18 and 23 Charities Act 2022

The 2022 Act introduces a new exception to the general 2011 Act restrictions on disposing of or mortgaging charity land. As a result, liquidators, provisional liquidators, receivers, mortgagees and administrators will not be subject to the usual restrictions on disposing and/or mortgaging charity land.

Charity trustees no longer have to certify compliance with the restrictions in the 2011 Act in their personal capacity when disposing of charity land. Instead, documents must include a statement that there is power under the trusts of the (non-exempt) charity to effect the disposition and that the restrictions have been complied with. For example:

"The [land transferred / Property] is held by [(proprietors) in trust for] (charity), a non-exempt charity, and this [transfer / lease] is not one falling within paragraph (a), (aa), (b), (c) or (d) of section 117(3) of the Charities Act 2011, but there is power under the trusts of the charity to effect the disposition and sections 117 to 121 of that Act have been complied with."

The person responsible for providing the statement will be the person executing the contract or conveyance. In the case of an incorporated charity, documents no longer need to be executed separately by both the charity (as the party to the transaction) and the charity trustees (in their personal capacity, to provide the certificate). This should expedite the signature process when dealing with a charity. 

Other changes clarify when transfers of land from one charity to another are exempt. If the disposal to another charity is intended to further the transferring charity’s purposes, then the exemption will apply, but where the disposal is financially motivated (either with a view to achieving the best price or by way of social investment) the restrictions on disposal of charity land under the 2011 Act will continue to apply.

Guidance

HM Land Registry (HMLR) has provided guidance and advice in relation to applications sent to HMLR to register transactions involving charities and the required charity statements to be included in documents (Practice guide 14: charities). The Charity Commission has also produced guidance on the changes (Charities Act 2022 changes). Both are helpful resources for those dealing with charity land transactions. 

Other changes

Under the 2011 Act, charities are required to take certain actions prior to the disposal of an interest in charity land (which encompasses a broad range of transactions including sales and leases). The 2022 Act streamlines the requirements as follows:

• It used to be the case that on the disposal of property a non-exempt charity had to obtain a written report from a RICS qualified surveyor. This requirement has been widened so a "designated adviser" (including fellows of the National Association of Estate Agents and fellows of the Central Association of Agricultural Valuers) can provide the report. This allows trustees greater flexibility as to who can advise a charity on a disposal.
• Qualified trustees, officers and employees of a charity can act as the "designated adviser" as long as they meet the relevant requirements. The “adviser” will need to certify that they have the appropriate expertise and experience to provide the advice required and that they do not have any conflict of interest.
• The statutory requirement to follow the marketing and advertising advice in the disposal report has been removed. Therefore, trustees can decide to pursue, for example, a direct sale or proceed with an auction route as opposed to an open market sale. While all decisions should still be documented appropriately, there is no need for the “new style” disposal report to be in writing. Advice relayed by the appropriate advisor in a Board meeting and recorded in the minutes would suffice.

Key takeaways and how Capsticks can help

These new requirements have been introduced to streamline the processes applying to the disposal of charity land. They should be borne in mind when dealing with a charity on a property transaction or, indeed, where a local authority is involved in a property transaction in its capacity as trustee of a charity. 

Capsticks provides multi-service support to Local Government organisations nationally. Our Local Government team advises on a multitude of land transactions and offers corporate governance and charity law advice. 

 If you have any queries around what's discussed in this article, and the impact on your organisation, please speak to Vicki Moore or Sukhbir Bhadal to find out more about how Capsticks can help.