Friday, 3rd May 2024

Charities Act 2022 – Sale of Charity Land

The third and final tranche of provisions of the Charities Act 2022 (the ‘2022 Act’) came into force on 07 March 2024.  Designed to reduce unnecessary regulation on charities in England and Wales, saving them both time and money, the 2022 Act implements many of the recommendations made by the Law Commission in its 2017 report Charity Law: Technical Issues in Charity Law.

The 2022 Act has wide ranging implications for trustees, employees and indeed legal professionals working in the charity and not for profit sector.  In this article, we examine some of the key changes made by the 2022 Act which charity trustees should be aware of when selling charity land.

  1. Designated Advisors

As was the case prior to the 2022 Act, trustees must obtain a written report on the proposed disposition from an advisor acting exclusively for the charity.  Importantly, however, the 2022 Act has widened the category of advisors who can provide such a report to include fellows of both the Central Association of Agricultural Valuers and the National Association of Estate Agents in addition to members of the Royal Institute of Qualified Surveyors (collectively referred to as ‘designated advisors’).  Section 21 of the 2022 Act has further confirmed that trustees, officers or employees of the charity can act as designated advisor so long as they have the requisite qualifications and experience.

By expanding the choice of advisors who can be instructed, trustees have greater discretion to choose the most suitable advisor for the transaction in question.  In the case of the disposal of residential property, for example, it is likely that a local estate agent may be most suited (and offer better value for money) to advise on a marketing strategy than a surveyor.  Furthermore, in lower value transactions, the ability to instruct an internal officer to act as designated advisor offers a cost-effective alternative to external professional advisors. Charity trustees should, however, ensure that they are always acting in the best interests of the charity and that no conflict of interest arises.

  1. Designated Advisors Report

The content of the designated advisor’s report has been simplified by The Charities (Dispositions of Land: Designated Advisors and Reports) Regulations 2023 which has replaced the previous ‘one size fits all’ approach under the Charities Act 2011 regulations.  The designated advisors report must now cover the following points:

  1. The value of the relevant land and any steps which could be taken to enhance that value;
  2. Whether and, if so, how the relevant land should be marketed;
  3. Anything else which could be done to ensure that the terms on which the disposition is made are the best that can be obtained for the charity;
  4. Any matters the designated advisor believes should be raised with the trustees.

The above requirements are less prescriptive than under the previous regulations, allowing the designated advisor to give more tailored advice to the charity trustees.

Charity trustees must consider the designated advisors report and be satisfied that the terms of the disposition are the best that can be reasonably obtained for the charity before committing the charity to the relevant disposal (s.119(1)(c) CA 2011).

  1. Advertisement of Charity Land

Prior to the 2022 Act, charity trustees were required to advertise the disposal of land in the manner that was advised in the surveyor’s report, regardless of whether such advertisement was out of proportion to the transaction in question.  The 2022 Act has granted charity trustees more discretion as to whether, and how, they advertise the disposal of land.  Charity trustees should still consider the advice of the designated advisor and importantly, where they choose to ignore such advice, keep accurate minutes of the charity’s decision-making process to be used if questions as to the sale process arise after the event.

  1. Statutory Instruments

Section 23 of the 2022 Act has given further guidance on the information to be included in certain statutory instruments. Section 23(2) of the 2022 Act has confirmed that a contract for the sale of charity land must include a statement which confirms that the land is held by or on trust for a charity and that the disposal has been made in accordance with the provisions of s.117-121 of the Charities Act 2011 (as amended by the 2022 Act as described above).  HM Land Registry Practice Guide 14 sets out the specific wording that should be included.

Where such a statement is omitted from a contract for sale, section 122(6) of the 2022 Act provides protection to the purchaser of charity land who has acted in good faith by confirming that the contract will remain enforceable.

  1. Impact of the Charities Act 2022

The changes made as a result of the 2022 Act are welcome and should result in more tailored and useful advice to charities on the disposition of charity land. The trustee’s legal duties remain the same: generally speaking, to obtain the best value for the property in question.

This article is for general purpose and guidance only and does not constitute legal advice.  It should not replace legal advice tailored to your specific circumstances.

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