Charities selling property

Many people are involved with charities in one way or another. There are a large number of local charities, run by volunteers and interested parties. Charities often own land which they want to sell to raise funds – and there are rules governing the steps that must be taken by the charity when they want to do so. Compliance with these rules and processes is important for those running the charity and those buying land from the charity.

The Charity Commission is the regulator of charities in England and Wales and maintains the charity register. It is an independent, non-ministerial government department accountable to Parliament. It has just announced some changes which includes flexibility for trustees when seeking to dispose of charity land and new powers around the use of permanent endowment.

Changes now in place include simplified legal requirements that charities must comply with before selling, transferring or leasing land, and new statutory powers to enable:

• Charities to spend, in certain circumstances, a proportion or all of their permanent endowment fund where the market value of the fund is (£25,000 or less) without Commission authorisation.
• Charities to borrow, in certain circumstances, up to 25% of the value of their permanent endowment fund without Commission authorisation.
• Charities that have opted into a total return approach to investment to use permanent endowment to make social investments with a negative or uncertain financial return, provided any losses are offset by other gains.
• The Commission to direct a charity to stop using a working name if it is too similar to another charity's name or is offensive or misleading.
• The Commission to delay registration of a charity with an unsuitable name or delay entry of a new unsuitable name onto the Register of Charities. Working with the principal regulator, the Commission can also use these naming powers on exempt charities.

Aarti Thakor, Director of Legal & Accounting Services at the Charity Commission, said: “The latest changes introduced by the Charities Act 2022 give the charities we regulate more flexibility and greater powers. These are positive changes that will impact a significant number of charities, so it is important all organisations, big or small, take the time to check what this means for them.

“This is especially important if they are looking, for example, to dispose of land. We have updated our guidance to help trustees understand the changes, and our contact centre is open to those who need further support.”

The regulator's updated guidance now reflects several changes to the legal requirements when disposing of land (selling, transferring or leasing charity land), which are aimed at making the process easier for charities.

For example, the category of designated advisers who can provide charities with advice on certain disposals has been widened. A trustee, officer or employee can provide advice on a disposal if they meet the relevant requirements.

Additionally, trustees now have discretion to decide how to advertise a proposed disposal of charity land and charities are no longer required to get Commission authority to grant a residential lease to a charity employee for a short periodic or fixed-term tenancy.

These are significant changes and anyone dealing with charity land should obtain specialist advice to ensure compliance.

To discuss this or any other property or charity matter, contact us.