Significant changes have been called for in the sector for a long time. The proposed changes include the following:
- Update in advice requirements so that the prescriptive Charities (Qualified Surveyors’ Reports) Regulations 1992 are repealed. Many charities and their advisors have struggled to see the relevance of various areas of qualified surveyors’ reports and the new advice requirements will be more direct and specific. A general requirement to advise on whether any additional terms might be necessary in the best interest of the charity is included to ensure any unique or bespoke clauses can be considered.
- The definition of ‘appropriately qualified’ for the purposes of the adviser giving advice has been extended to include estate agents and agricultural valuers. This extension may cause some concern in relation to the qualification requirements for estate agents. However, it is recognition that expert valuers are needed in certain areas.
- The advice may be provided by an appropriately qualified trustee or employee of the charity. This will bring the disposal requirements in line with the advice requirements currently in place when a charity uses its property as security for loans. Any such employee or trustee will need to excuse themselves from various decisions regarding the disposal. All advisers will also need to certify they have appropriate experience and expertise and do not have any interest that conflicts or appears to conflict with that of the charity.
- In the area of property legacies, the Law Commission has proposed making it clear that the Charities Act provisions on disposals will only apply where property is held by or on trust for a single charity. This will assist charities in legacy matters where a property is left under a will for a number of charities and it is unclear which charity is required to obtain the qualified surveyor’s report.
- The definition of connected person is to be updated to exclude the grant of short-term residential tenancies to employees and to exclude disposals to wholly-owned subsidiaries. This will reduce significantly the number of applications to the Charity Commission for connected person consent.
There are some significant conclusions reached from the consultation as highlighted in the Report, in particular the proposal to remove the property disposal restrictions entirely has been dropped. This is a significant acceptance that the current regime is a robust and effective one, with compliance monitored in an efficient way by the Land Registry. It is also recognition that disposals of property are not to be treated in the same way as disposals of other charity assets such as shares.
On the other hand, the Law Commission has not recommended applying these provisions to the acquisition of charity property. The justification for not applying this to acquisitions is not entirely consistent and best practice will still be to obtain similar advice on the purchase of any property. It was noted that the process for acquiring a property could become more protracted by imposing the same advice and compliance requirements, which could make a charity less attractive as a potential purchaser.
Overall, the changes seem to be a sensible modernisation of the current regime whilst retaining the best elements that help to maintain public trust in the system, protect trustees and focus their attention on their general obligations in relation to the governance of the charity and looking after its assets for its beneficiaries.
This information is necessarily of a general nature and doesn’t constitute legal advice. This is not a substitute for formal legal advice, given in the context of full information under an engagement with Bates Wells.
All content on this page is correct as of October 4, 2017.