22 Aug 23 by Stephen Maycock
Disposal of Charity Owned Land
We examine the two key modifications to the regulations governing the disposal of charity owned land following implementation of Sections 17 and 19-22 of the Charities Act 2022 on 14 June 2023. These changes have the potential to streamline the processes and reduce costs for charities during property disposals. The first change expands the range of professionals authorized to offer advice on charity land disposals. Additionally, the second change simplifies the prerequisites for the advice that must be obtained.
Charities Act 2011
Previously, Section 7 of the Charities Act 2011 places limitations on the disposal of charity land, aimed at ensuring that charities receive the best possible terms for their property. While these rules proved effective for charities seeking clear guidance for straightforward property sales, other charities engaged in more intricate property transactions or minor deals found them overly rigid. The latter situations sometimes incurred disproportionate advisory costs in comparison to the transaction’s complexity and value.
The revisions to Section 7 of the Charities Act 2011, introduced by the Charities Act 2022, aim to offer more adaptability to charities. This acknowledges the wide spectrum of property transactions these rules encompass.
1). Who Can Provide Guidance?
Formerly, Section 7 of the Charities Act 2011 obligated charity trustees to acquire advice on the terms of any charity land disposal (excluding leases under seven years or mortgages) from a qualified surveyor affiliated with the Royal Institution of Chartered Surveyors. The Charities Act 2022 introduces new provisions allowing charity trustees to seek advice from a broader category known as “designated advisors.”
This broader pool of advisors offers charity trustees more discretion in selecting the most fitting and cost-effective advisor for the particular transaction. However, this increased flexibility also places added responsibility on charity trustees to consider the following when assessing the most suitable advisor:
- Is the advisor suitably qualified to provide guidance?
- Is the advisor affiliated with the relevant professional regulatory body?
- Are there any conflicts of interest?
- Do the potential cost savings of utilizing a charity trustee or employee as an advisor outweigh the risks to the charity?
- Does the advisor possess professional indemnity insurance?
2). What Should the Advice Cover?
Under the previous regulations, the advice needed to contain specified information and address certain matters outlined in The Charities (Qualified Surveyors’ Report) Regulations 1992. The revised provisions simplify this requirement by replacing those regulations with The Charities (Dispositions of Land: Designated Advisers and Reports) Regulations 2023. These new regulations necessitate that designated advisors offer guidance on the following aspects:
- Anticipated value of the land or whether the offer reflects its true Market Value.
- Identification of any potential to enhance the value of the land.
- If applicable – the outline marketing strategy for the land.
- Actions to ensure that the transaction’s terms are as favorable as reasonably possible for the charity.
These streamlined requirements enable designated advisors to tailor their advice more effectively to each specific transaction. However, the key risk with this more flexible approach is that less experienced or qualified advisors might provide less robust advice due to the dilution of detailed directives.
Actions for Charities
The implementation of the Charities Act 2022 is occurring in stages until the end of 2023. However, the aspects mentioned in this blog post are now in effect.
However, certain changes have now been pushed back until 31 December 2023. This includes the changes to the statements and certificates to be included in property contracts and deeds.
Charities will now need to consider an enhanced decision-making process to ensure they appoint an appropriately qualified designated advisor on a case-by-case basis within the context of each individual charity property disposal.
For inquiries regarding this topic or any property-related aspects of the Act, and its potential impact on your charity’s plans, please don’t hesitate to contact our valuation team who will be happy to assist.