Charities have additional obligations if they wish to dispose of their land according to Jonathan Crook in DMH Stallard’s Real Estate department.
Registered charities have to follow one of three options before disposing of their land.
- They can obtain a Court order.
- They can obtain an order from the Charity Commission.
- They can obtain a report from a qualified surveyor on the terms proposed for the disposal.
Most charities choose the third option. The report needs to comply with detailed requirements set out in regulations that were issued in 2002 and will often be longer than a non-charity might obtain to advise on a similar transaction. Among other points the report will deal with the state of the property, any alterations or repairs that may be recommended, title matters affecting the land, recommendations on advertising the disposal, any alternative proposals for the disposal and the surveyor's advice on the value. The Trustees of the charity then need to decide that they are satisfied that the agreed terms are the best that can reasonably be obtained for the disposal.
These rules apply to sales and leases, as you would expect, but also to other disposals such as deeds of easement and surrenders. A more limited report is required for leases for terms of seven years or less.
The report has to be obtained before completion (or, if there is an agreement, before exchange of contracts).
Both the agreement and the document effecting the disposal (for example, the transfer or lease) have to contain statements covering the fact that the land is owned by a charity. The documents effecting the disposals also need to confirm that the charity has taken the necessary steps to comply with the legislation. This wording will also be important to a buyer or tenant as it is needed for the successful registration of the disposal at the Land Registry. A restriction in the Land Registry title should alert a buyer that the Charities Act 2011 provisions need to be followed.
If the disposal is to a “connected” party, the charity will have to apply to the Court or the Charity Commission for an order (and the report route cannot be followed).
There are similar requirements relating to the grant of charges by registered charities, although the report would then be given by someone with suitable financial expertise.
The restrictions on disposals do not apply to an exempt charity unless it acts as a Trustee for a non-exempt charity. Exempt charities are supervised by a government department or other public authority, and not directly by the Charity Commission, and the steps that they would need to take would need to be checked on a case-by-case basis.