If a charity is considering selling land or granting a long lease over it, they must ensure that it complies with the requirements of the Charities Act 2011, so that it can demonstrate it has achieved the best price reasonably obtainable.
Our team of charity and social enterprise property specialists help clients with all aspects of their property legal needs, whether they own or rent a property as part of their charity’s operations or are holding it as an investment.
Our areas of expertise in the field of charity property law include:
- Freehold sales and purchases
- Permanent endowment
- Designated land
- Complying with the Charities Act requirements on disposals and mortgages
- Leasehold interests
- Residential property for charitable purposes
- Statutory notice procedures
- Management agreements
- Charity shops
- Property disputes
Legal requirements for charities disposing of property
Under most circumstances the trustees of a charity seeking to dispose of property, whether by freehold sale or the grant of a lease, will not need permission from the Charity Commission.
They will, however, need to comply with the requirements of the Charities Act 2011 and their own governing document. Trustees contemplating a disposal must, among other things:
- ensure that they have power under the charity’s governing document to sell or grant a lease of the property
- determine that the disposal is in the best interests of the charity
- obtain a written report from a qualified surveyor and market the property in accordance with the surveyor’s recommendations
- ensure that the transaction they agree represents the best deal reasonably obtainable for the charity
- ensure that the disposal documentation contains the statements required by the Charities Act and the Land Registry.
There are slightly different rules which apply to the grant of short leases.
Certain transactions may require prior approval of the Charity Commission including, but not limited to:
- disposals of land which constitutes Permanent Endowment or Designated Land
- disposals which don’t follow the advice of the qualified surveyor
- disposals to someone connected to the charity, such as a trustee, an employee or anyone related to them.
There are no specific requirements in the Charities Act relating to the purchase of property by a charity.
However, trustees will be bound by their normal duties to act only in the best interests of the charity and act prudently in their decision making.
Charities may want to borrow money, secured against property, either to fund the initial purchase or to carry out development works. There are separate requirements under the Charities Act relating to mortgages.
Trustees will need to:
- ensure that they have power under the charity’s governing document to borrow money and to secure the borrowing against the charity’s property
- take advice on the terms of the mortgage from someone experienced in financial matters
- be satisfied that the terms of the mortgage are reasonable and that they can afford the repayments.
To find out more about your legal obligations when selling or leasing charity property, contact our expert team at one of our offices in London, Southampton, Richmond, Lymington, Woking or Guildford.