Keep it legal: Acquisition of land by charities

There are three main circumstances in which a charity can find itself wishing to acquire land. The first is when it needs to further its objects, such as when a care home purchases premises.

Second, a charity might wish to buy land as an investment with the aim of receiving a return from the letting of that land and selling it at a profit at some point in the future. Finally, a charity might seek to acquire land and use it for the administration of the charity - for example, as office accommodation.

Before acquiring a piece of land, the trustees must make sure that the charity has the power to acquire land - this power usually relates to both freehold and leasehold land.

Ultimately, the trustees should also be able to satisfy themselves that the price at which the land is being purchased is reasonable and that the property itself is the best property that can be purchased for the charity, other properties having been considered. They must also be satisfied the property will be suitable for the purposes for which it is being purchased. For example, if the trustees are purchasing a property for investment purposes, they will need to think about the potential income that could be obtained from rental and its potential future selling price. A power to buy land may also be derived under statute.

If no power to acquire land can be established, but the purchase is in the best interests of the charity, then an order should be sought from the Charity Commission authorising the purchase or, more generally, amending the governing document to add such a power.

There is no requirement for charity trustees to follow a statutory procedure when acquiring land. But they should take advice and obtain a surveyor's report to ensure they are getting value for money and that the property is in a good state of repair.

They should also be satisfied that the acquisition of that piece of land is in the best interests of the charity. These matters should be considered and confirmed in the minutes of a trustee meeting before any agreement to purchase the land is entered into.

If agreement is reached, the transfer documentation will need to contain a statement in accordance with Section 37 of the Charities Act 1993, confirming the basis on which the land will be held following the transfer.

- Ros Harwood, a partner and head of charities at Dickinson Dees solicitors

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