Regulator finds serious mismanagement at the Spiritualist Association of Great Britain

The Charity Commission says the organisation sold a London property for far less than it subsequently went for; the charity says it could not have foreseen what would happen in future

The property sold by the charity
The property sold by the charity

The Charity Commission has found serious mismanagement at the Spiritualist Association of Great Britain after it sold a property for £15m less than it was potentially worth.

In a statutory inquiry report published today, the regulator says that in 2010 the charity sold a property in one of the most expensive areas of London for £6m to a company registered in the British Virgin Islands, only for it to be sold immediately to another BVI-registered company for £21m.

The commission opened the inquiry in July 2013 after media reports raised concerns about the transactions involving the property, situated on Belgrave Square in London, which consisted of the premises from which the charity operated and a mews house, which the charity used to generate income.

The report says the association, which had an income of £584,351 and expenditure of £379,986 in the year to the end of March 2016, decided to sell the property because although it paid only minimal rent it was being asked by the landlord to spend substantial sums on the upkeep of the property.

The sale was also complicated by what the commission found was a "particularly restrictive clause" in the lease about the use of the property, as the headquarters of a "non-profit learned or charitable or cultural association or society", or as an embassy.

The commission’s report says that, in dealing with the sale, the charity’s trustees failed to conduct proper due diligence or obtain up-to-date specialist independent advice on how they could achieve maximum value on the property in the sale.

Trustees had been advised before the sale that they might be able to increase the value of the property substantially by securing a change of use for it, but trustees told the regulator that this advice was not acted upon on the basis that they considered it to be speculative and they could not know what would happen in the future.

The report says the evidence suggests that Platinum Prime Property Investments, the company that bought the property, was able to secure a change of use for it and immediately sell it to a company called Rose Season Enterprises for a profit of £15m.

"The failures and breaches were not minor or technical in nature, which could be ignored or passed over in light of an apparently successful outcome," the report says. "They amount to basic and serious mismanagement by the charity trustees."

But the regulator found no evidence that any of the charity’s trustees gained any private benefit in relation to the sale. It also concluded that there was no evidence that PPPI acted in bad faith.

The commission’s report says the regulator decided against trying to take any further action in relation to the sale because of factors including the length of time that had passed between the transaction and the opening of the inquiry and the slim prospect of being able to unpick the sale, which would require demonstrating bad faith on the part of the purchaser.

The regulator’s report notes that the charity raised a formal complaint in February 2016 about the length of time the inquiry was taking, which was upheld by the commission, "and steps were taken to ensure that the inquiry was concluded expeditiously". The inquiry was closed with the publication of the report today.

Nobody from the Spiritualist Association of Great Britain responded to a request for comment from Third Sector.

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