Charity land disposals: new law is coming into force
by Shoosmiths LLP
The Charities Act 2022 is being introduced in phases. From June 2023 trustees will have greater flexibility over how they procure advice to ensure the terms on which they dispose of a charity’s interests in land are the best that can reasonably be obtained.
Voluntary Service Overseas is one of the latest major charities to scale down its office space as it responds to the long-term changes resulting from Covid-19. Most of its UK-based staff now work from home and it has decided not to renew the lease on its headquarters in London. Third Sector magazine has reported research that the number of fundraising jobs advertised as offering hybrid working has grown by 900 per cent since before the pandemic.
So it doesn’t take a crystal ball gazer to tell you that right now many other charities are probably assessing their property estate and whether they should downsize in order to release funds, especially during such challenging times.
Changes are about to be introduced to the charity land disposal regime, included within the Charities Act 2022 and which will amend the Charities Act 2011, arising from a review that began over a decade ago when Lord Hodgson famously said “charities face a number of historic obstacles under the current law. These unnecessary burdens on trustees act like barnacles on a boat, causing a drag when all should be plain sailing.”
However, some of those barnacles are going to stay a little longer on the hull of the Charities Act oil tanker as it slowly alters its course.
On 24 May the Charity Commission announced that while some changes will be introduced in June – on a date still to be announced - other provisions won’t now be implemented until by the end of 2023, in particular changes about what must be included in statements and certificates for both disposals and mortgages of land.
The changes to take effect next month will include:
- widening the category of designated advisers who can provide charities with advice on certain disposals;
- confirming that a charity’s trustee, officer or employee can provide advice on a disposal if they meet the relevant requirements; and
- giving trustees discretion to decide how to advertise a proposed disposal of charity land.
While these changes are designed to streamline the process which a charity must adopt in disposing of interests in land (and which many prudent boards would also follow in acquiring land, in order to discharge their fiduciary duty to their charity - even though they are not required to do so by legislation), it remains unclear whether charities will start to ask fellows of the National Association of Estate Agents or of the Central Association of Valuers to provide a so-called ‘section 119’ report, instead of the RICS qualified surveyors who have produced them to date.
There has been talk in the sector of charities being uneasy at a possible dual role some estate agents may have, in providing a valuation report about a property and also marketing it for sale, and the scope for possible conflicts of interest this may present.
Also, charities may be reluctant to place reliance on their own, qualified, people to provide the required report – whether trustees or staff – particularly when dealing with important and/or sizeable land disposals. If they were to do so, then their charity would probably want to check that its indemnity insurance would cover such advice if it was later called into question.
And some charities which regularly dispose of property may be comfortable with the established content of existing reports and the checklist requirements contained in the old regulations, and concerned that perhaps some relevant considerations might be missed when designated advisers are addressing the broad requirements set out in the new regulations, in particular, “anything (other than any steps which could be taken to enhance the value of a property) which could be done to ensure that the terms of which the disposition is made are the best that can reasonably be obtained for the charity. “
One view is given by Andrew Tompson Head of Valuation at Berrys property consultancy:
“The changes to the Act bring new possibilities and risks; the opportunity is that revision of the Qualified Surveyors Reports content may enable different levels of report to be obtained that balance cost and benefit e.g. undertaking a desktop review rather than a full inspection for a valuation; the risk is that by not having the statutory lever of requiring independent advice the charities lose the “marginal gains” frequently achieved through identification of issues that might affect a sale and the potential for adding value. “
Time will tell whether the changes being introduced next month will help trustees to make best use of their assets in order to further their charity’s work.