Charities and land disposal changes for trustees to be aware of

Trustees should be aware that sections of The Charities Act 2022 came into force in June 2023 which amends some of the rules relating to the disposal of charity land. There are still some final sections of the Act, namely 18 and 23 which at the time of writing this article are still due to come into force.

There are a number of legal requirements that charities need to comply with before they sell, lease or mortgage land.  This also applies to land which is held by or in a trust for the charity with the purpose of ensuring it isn’t sold undervalue which would be detrimental to the charity.

There are some key changes which trustees should now be aware of and act upon.

The Trustees must now obtain and give regard to a written report prepared by a designated advisor who is acting solely for the charity and who has been appointed by the trustees. Once the trustees are happy with the recommendations in the report on achieving the best result for the charity then the sale can progress and be advertised as the trustees decide following the advice in the report.

The designated advisor can now be a Fellow of the CAAV, NAEA Propertymark as well as a fellow or associate of RICS.

The report needs to provide advice and information on:

The value of the land and steps which could be taken to increase its value.  How it should be marketed for sale and other considerations which could help to maximise funds for the charity or which the trustees should be aware of.

The designated advisor will also need to provide a written statement that they have suitable experience to value the type of land being sold and knowledge of the local area and also state they have no conflicts of interest which are detrimental to the charity’s interests.

There may be some circumstances where the trustees, officers or employees of the charity may be qualified to carry out the work and provide the written report as long as there are no conflicts of interest.

Where the charity is considering either a short lease (typically 7 years or less) there is no requirement for the designated adviser to have a professional qualification and they could also be a trustee or employee of the charity.  Where the charity is seeking a mortgage and using the land as the collateral for the loan then the trustees must get written advice on whether the loan is necessary, the terms of the loan are reasonable, and it must have the ability to repay the loan in accordance with the mortgage terms. It is recommended that this is provided by someone with a relevant professional qualification i.e., the charity’s accountant or a financial adviser but it can also be a trustee or an employee.

Whilst these changes might offer some charities the opportunity to make cost savings when selling land, the process itself is complex and it is advised a solicitor with expertise in both charity and property law is used to ensure the trustees are compliant with the Charity Commission regulations at all times. Secondly this will also help to minimise any claims against trustees in the future.

Marianne Webb can be contacted at m.webb@gullands.com