When considering the disposal of charity land, as in anything else, charity trustees must consider their overarching duty to act in the charity’s best interests. Often there is a separate statutory requirement to obtain a surveyor’s advice on the disposal. While this might seem like just another procedural hurdle, failing to do so could leave questions over the transaction’s validity and the trustees personally liable for the failure to comply.
When do the requirements apply?
The Charities Act 2011 says that, subject to exceptions, a charity may not dispose of land without a court or Charity Commission order. However, in many cases an order is not required if the charity first obtains a surveyor’s advice on the disposal in accordance with certain procedures.
Under section 119 of the 2011 act, which sets out the procedure, the trustees must:
- Obtain and consider a written surveyor’s report.
- Advertise the disposal as the surveyor advises.
- Be satisfied that the terms are the best that can reasonably be obtained for the charity.
There is, of course, a lot more to it. The surveyor must, for example:
- Act exclusively for the charity.
- Be a Royal Institution of Chartered Surveyors fellow or professional associate.
- Have ability in and experience of the type of transaction in the relevant area.
- Comment and advise on specific issues relating to the transaction.
The requirements apply to many land transactions, including sales and leases. However, some are excluded – for example, tenancies at will and some dispositions to another charity, and dispositions by exempt charities. Less strict requirements apply for leases of up to seven years and there are additional requirements for disposals of "designated" or "specie" land (land held on trust requiring it to be used for the charity’s purposes). Mortgages are subject to separate requirements.
For disposals to "connected persons" (including charity trustees and employees), an order is always required; obtaining advice is not an alternative.
The commission’s extensive guidance is helpful bedtime reading.
Lord Hodgson's 2012 Report, Trusted and Independent: giving charity back to charities, contained recommendations on wide-ranging charity issues. On land disposals it concluded that the existing regulation, outlined above, was disproportionate and not fit for purpose. Lord Hodgson recommended deregulating disposals (other than those to connected persons), instead relying on trustees acting under their duty of care and developing the guidance.
According to commission guidance, the purpose of the restrictions is "to foster among trustees a greater sense of their own responsibilities and to relieve us from the need to give consent". One could ask whether existing regulations actually achieve the former at present. We would welcome further consideration of reform.
Whether or not such a rigorous exercise will always be required, for now compliance with both the letter and intent of the procedure is important and should at least reassure trustees that their decisions to dispose of land are well-informed.
Patricia Kempson is a partner at Hewitsons Solicitors