218: Charities Bill – implications for property

The Charities Bill was introduced to Parliament on 26 May 2021. It aims to make the process of disposing and dealing with land more flexible and less prescriptive for charities. The Bill intends to make the following changes:

Restrictions on dealing with charity land

The Charities Act 2011 imposes restrictions on dispositions of charity land. Currently as a general rule, land cannot be transferred, leased or otherwise disposed of by a charity without the consent of the court or the Charity Commission, unless either the charity obtains a report from a RICS qualified surveyor or the disposition is a lease of less than seven years which has less stringent requirements.

The Charities Bill amends this to provide that these restrictions will not apply where:

• a charity is one of several beneficial joint tenants or tenants in common of land and the entirety of the land is being disposed of;
• land is left to multiple beneficiaries under a will and one of these beneficiaries is a charity;
• a trustee holds land on trust for multiple beneficiaries and one of these beneficiaries is a charity; and
• a disposition is by liquidators, receivers, administrators or a mortgagee.

Another exception to having to comply with the current restrictions is a charity-to-charity disposal at less than best value which is authorised by the trusts of the charity. The Charities Bill will amend this exception to only apply when the sole purpose of the transaction is to further the charity’s purpose. If such a transaction is intended to generate a financial benefit in addition to a charitable benefit then the usual restrictions would apply.

Report requirements relating to disposition of charity land

When a charity wishes to dispose of land, they must obtain and consider a written report on the proposed transaction from a RICS qualified surveyor to ensure the charity is satisfied that the terms for a transaction are the best that can reasonably be obtained for the charity.

The Bill will widen the advisors who can provide such a report to also include (provided they have the required expertise and do not have any conflict of interest with the charity):

• the National Association of Estate Agents;
• the Central Association of Agricultural Valuers; and
• qualified charity trustees, officers and employees of the charity.

There is a statutory requirement to advertise a proposed transaction as advised in the surveyor’s report. The Charities Bill proposes that a charity will only need to ‘consider’ any advice on advertising rather than having to strictly follow such advice.

The requirements for the contents of the report will also be simplified. The report will have to include the value of the land, how the value could be enhanced, anything which could be done to ensure that terms are the best that can reasonably be obtained for the charity, how the land should be marketed and any other material points which should be flagged to the charity.

This will make the reporting process simpler as currently the report has to include all the prescribed information in the Charities (Qualified Surveyors’ Reports) Regulations 1992.

Charities Act wording requirement in contracts

The Bill introduces a new requirement to include in a sale contract a statement that the Charities Act has been complied with, which you would usually see in a transfer or lease rather than the contract for sale or agreement for lease.

This highlights the need for trustees to ensure full compliance with the Charities Act requirements and that they have taken proper advice and achieved best terms by exchange rather than by completion.

Residential tenancies granted to employees

A disposal to a ‘connected person’ by a charity requires Charity Commission consent. The Bill will amend the definition of ‘connected person’ to exclude employees of a charity where the disposal is the grant of a short, fixed-term or periodic tenancy to such an employee to use as their home and in connection with their work for the charity.

These will therefore no longer require Charity Commission consent. This is a helpful and practical change but trustees will need to be mindful of any employment and tax law issues connected to this.