Rob Walton, Partner and Layla Banfield, Associate in the health and social care team at law firm RWK Goodman, outline top tips for health and social care charities on dealing with land following the Charity Act 2022 update.
Charities have certain obligations when it comes to disposing of land. Some charities mistakenly think that disposing of land just means selling. In fact, the legislation applies to a range of disposals including the grant of a lease of more than 7 years, the grant of a lease of less than 7 years at a fine or a premium or the surrender of a lease. It also applies to the grant of wayleave agreement (contract with a telecoms provider) or other form of easement. If you are a charity that owns, occupies or lets property, this legislation should be on your radar when it comes to dealing with land.
Changes to legislation
The most significant update to the Charities Act legislation is the type of report a charity is required to undertake when disposing of land. Previously under the legislation a charity was required to obtain a Qualified Surveyor Report (“QSR”). The regulations provided much detail, including who was qualified to provide a QSR reports, what a QSR should include and how a charity should advertise its relevant disposal.
A significant change to the Charities Act is the replacement of a QSR with a Designated Advisor Report (DAR). DAR’s widen the category of designated advisers permitted to provide charities with advice, and give trustees themselves certain powers to provide the advice if appropriate in the circumstances. Charities will need a DAR whenever a charity disposes of land, unless one of the exemptions apply.
The changes to the legislation also give trustees a wider scope to decide how to advertise a disposal of charity land and the strict advertisement requirements under the previous rules no longer apply.
- If you are a charity that owns, leases or lets land, be familiar with what a disposal is and what the regulations require you to do. Consider taking advice at an early stage to be clear if one of the Charities Act exemptions apply. This will avoid nasty surprises close to completion. If it turns out your charity requires Charity Commission approval, this is likely to cause a significant delay to your transaction.
- Consult a solicitor who is experienced in disposing of charity land. The information required in documents concerning the disposal of charity land has changed and documents must use the correct wording to ensure an effective disposition will be registered at the Land Registry. These statements now need to be included in contracts and mortgages (previously just required in transfers).
- Do not underestimate the specialist knowledge required. Whilst the changes allow a trustee to provide the DAR, at this stage it is recommended to consult specialists familiar with charity land disposals to avoid any arguments of conflict of interest. The experts you consult should be familiar with the type of charity, type of property and location of the property.
- Document the decision-making process. One of the legal requirements of the legislation is for the trustees to be satisfied that the proposed terms of the disposition are the best that can be reasonable obtained for the charity, whether that is financial or otherwise. Minutes of meetings will be a valuable tool here to document the decision making process.
Conclusion
Whilst the changes provide a positive step in the right direction to remove some of the red tape disproportionately affecting charities on their disposal of land, more work is needed, and more clarity required. Following the tips above will give you the best chance to avoid last minute delays or costly surprises.
@RWKGoodman
rwkgoodman.com
[i] www.gov.uk/government/publications/sales-leases-transfers-or-mortgages-what-trustees-need-to-know-about-disposing-of-charity-land-cc28