Charity trustees have a general duty to act in the best interests of their charity. When it comes to sales of land this general duty has been supplemented by legislation, most recently in the form of the Charities Act 2011, (CA 2011) which permits disposals of and the mortgaging of charity land without the consent of the Charity Commission provided that certain restrictions and requirements are complied with.
Amendments to the Charities Act
In 2017 the Law Commission issued a report suggesting that the CA 2011 be amended and a draft bill is currently making its way through Parliament.
If enacted, the new legislation will amend the CA 2011 and clarify a number of its provisions as well as reduce certain formalities in relation to dealings with charity land. Many of the provisions will be welcomed by charities particularly where the proposed disposal is low value but they will require charity trustees to adapt their processes to ensure compliance with the overall duty imposed on them.
Changes to designated advisers
One of the main changes relates to the advice which charity trustees must receive in connection with any proposed disposal or mortgage of its land. Under the CA 2011 on any disposal or on the proposed grant of a lease for seven years or more, charity trustees are required to obtain and consider a written report on the proposed transaction from a qualified surveyor acting exclusively for the charity. The surveyor must be a member of the Royal Institution of Chartered Surveyors and the report must cover all of the matters specified in the Charities (Qualified Surveyors’ Report) Regulations 1992.
Whilst it is critical that charities receive professional and appropriate advice when dealing with charity assets the Law Commission report recognises that the current requirements may be too prescriptive and not always appropriate to the transaction especially given the breadth of transactions that are considered ‘disposals’ of land for these purposes. By way of example, the grant of an easement is a disposal for the purposes of the CA 2011 but many of the areas required to be covered by the current Regulations are not applicable to it. The CA 2011 requirements will be relaxed and enable charity trustees to rely on a written report from a designated adviser provided that that party has the appropriate expertise and experience to provide the advice and there is no conflict of interest with that of the charity. The effect of this is that charity trustees will be able to rely on advice from a broader range of property professionals which may include an officer or the charity, an employee and indeed a charity trustee provided that they are suitably qualified to provide the advice required.
The designated adviser’ report
The scope and content of the report which the designated adviser will need to prepare will also be determined by regulations but the expectation is that these will require that advice be given as to the value of the land (and whether any offer received is at market value), whether, and if so how, such value could be enhanced, how the land should be marketed (or if an offer has already been made any further marketing that would be desirable) and anything else which could be done to ensure that the terms of the transaction are the best that can reasonably be obtained for the charity. This broader categorisation of advice in place of the more rigid requirements of the 1992 Regulations should ensure that charity trustees receive advice that is suitably tailored to the transaction in question.
The prospective changes will enable charity trustees to take a more commercially sensitive approach in deciding whether to go ahead with a disposal and the terms on which it does so – these changes are welcome. They will enable charity trustees to exercise discretion in a way that the current rules do not permit.
However, this enhanced flexibility will still present challenges for charity trustees. They will have the responsibility of deciding who is the right party to provide the advice required and it would be sensible for them to record the basis on which their decision has been made. Cost and potential speed may be two considerations but trustees will need to be comfortable that their choice will still result in the charity receiving the best advice from an appropriate adviser and that the designated adviser has addressed all relevant considerations in providing the advice on which they will rely.