The first group of changes to charity property disposals have come into force.
At the time of our May 2022 article on this topic (which can be read here here), the changes were imminent.
A second commencement order under the Charities Act 2022 (made on 12 June 2023) brought them into effect on 14 June 2023, as well as other reforms to the rules on permanent endowment and charity names.
New guidance on disposals of charity land
The Charity Commission has updated its guidance on disposing of charity land and the new guidance can be found here.
The Commission’s new guidance includes updated information about the wider range of ‘designated advisers’ who can provide the reports required for sales, leases of more than seven years and other disposals which do not require Charity Commission consent. Reflecting the legislative changes, it also confirms that a designated adviser can be a trustee, employee or officer of the charity, provided they have the requisite professional qualification, but flags up, in such cases:
- the need to manage conflicts of interest;
- the importance of checking the charity’s insurance cover to ascertain whether it covers negligent advice from someone who is a trustee, employee or officer; and
- that any payment to a designated adviser who is a trustee can only be made if the governing document does not prohibit such payments and in accordance with the general legal requirements for paying trustees.
For shorter leases, there is a more relaxed requirement to obtain a report from a person believed to have the ability and experience to give competent advice on the lease. Although not required by law, the updated guidance recommends that such a person should be a member of a professional body (such as the bodies to which designated advisers belong or the Institute of Revenues Rating and Valuation).
Contents of the advisers’ reports
The Designated Advisers Report Regulations 2023 also came into force on 14 June 2023. These Regulations revoke what were known as the Qualified Surveyors’ Reports Regulations 1992, replacing them with the following requirements for inclusion in a designated adviser’s report:
- the value of the relevant land;
- any steps which could be taken to enhance that value;
- whether and, if so, how the relevant land should be marketed:
- 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; and
- any other matters which the designated adviser believes should be drawn to the attention of the charity trustees.
It is hoped that the new list of requirements will assist advisors with providing shorter and more tailored advice on disposals and that charities may see cost savings when commissioning reports on more straightforward instructions. Please note that the 1992 Regulations will continue to apply where trustees have instructed a surveyor to prepare a report on a proposed disposal prior to 14 June 2023.
The report must also include a statement by the adviser that:
- the adviser has ability in, and experience of, the valuation of land of the particular kind, and in the particular area, in question; and
- the adviser has no interest which conflicts, or would appear to conflict, with that of the charity.
Advertising charity property disposals
The updated guidance reflects the fact that it is no longer necessary to advertise the disposal, even if the adviser’s report suggests doing so: trustees are now only required to consider the report, including how to advertise the disposal.
The Commission emphasises that trustees must, however, in all cases still:
- check they own the land in question;
- check they have power in law or under the charity’s governing document to dispose of the land;
- be satisfied that the proposed disposal is in the charity’s best interests and the terms are the best that can be reasonably obtained;
- include the statutory statements and certificate in the disposal documents; and
- know when they need the Commission’s consent on a land disposal.
In all cases, the Commission’s best practice suggestion is that trustees should make and keep a written record of the decision regarding the disposal together with a note of the factors considered and the reasons for the decision.
We recommend that those responsible for charity governance and administration should:
- ensure that they, and relevant staff and officers within their charity, are aware of the recent changes;
- read the updated guidance from the Charity Commission; and
- consider whether changes to their policies and procedures are needed, particularly in relation to the selection of suitable advisers and use of “in-house” staff or trustees.
We will publish updates to this blog as and when further provisions of the Charities Act 2022 come into force, and provide links to the new and updated guidance provided by the Commission whenever possible. In the meantime, the Commission’s implementation plan can be read in full here, and the Charities Act 2022 and its explanatory notes can be read in full here.
Enjoy That? You Might Like These:
Public Sector Insights – Disability discrimination in education – PAST EVENT - Webinar, Wednesday, 22 November - PAST EVENT