Charitable trustees must always act in the best interests of the charity. When selling, leasing or otherwise transferring property, the trustees must consider whether they must comply with the procedures in the Charities Act 2011. In the majority of cases, charities can dispose of land without the Charity Commission’s authority but this is not always the case and so it is advisable to speak to a lawyer with experience of charity law.
Commercial property solicitor Laura Pyatt, a member of the specialist charities law team at Ansons, explains that “Understanding the rules regarding the disposal of property owned by a charity may prevent a delay in a property transaction. It may also prevent the transaction from being declared invalid which could lead to a loss for the charity, for which its trustees may be held personally liable.”
Certain charities are exempt from the requirement to register with the Charity Commission and as it is supervised by a government department or other authority it is not regulated by the Commission. Examples of exempt charities include Universities, certain galleries and museums and charitable societies. Certain bodies relating to the Church of England also do not fall under the Charities Act.
However, non-exempt charities (and this will be most charities) must comply with the procedures regarding disposal in the Charities Act.
Section 117 of the Charities Act sets out the procedure required to be followed by a non-exempt charity when disposing of property. This states that, subject to certain exceptions detailed below, land held by or in trust for a charity may not be sold, leased or otherwise disposed of without an order of the court or the Charity Commission unless the provisions of the Charities Act are complied with. Section 117 provides that:
The trustees must ensure they have the power to dispose of charity property. In most cases the trustees can rely on the statutory power contained in the Trusts of Land and Appointment of Trustees Act 1996. There may however be restrictions set out in the governing documents of the charity and, as mentioned above, in some cases an order of the court or the Charity Commission’s authority may be required.
The following are the main exceptions where the Charity Commission’s authority is not required:
Specific wording must be included in disposal documentation. This includes a statement that the land is held by the charity or in trust for the charity. It must state whether the transaction is subject to the statutory requirements, or whether the charity is exempt or the transaction comes within section 117(3) of the Charities Act.
It is important that these rules are followed, as any disposal completed with disregard to the same may be declared void. In a recent case a charity granted a lease to a connected person without the Charity Commission’s consent and without independent professional advice. The rent was below market value and the lease was granted without a court order. The court held that the charity was disadvantaged and so the lease was void.
For more information please contact Laura Pyatt in the Ansons commercial property law team on 01543 267192 or firstname.lastname@example.org.