The Charities Bill, explained: key changes to the rules relating to charity land

Our blog series, untangling the proposed Bill to pull out the key points your charity will need to know, action now and plan for.

Services
Charity
Sectors
Charities, Not For Profit
Type
News

In this blog we look at two of the proposed changes to the rules on disposals of charity land which could save charities time and money when disposing of property – the extension of the list of professionals who can advise on disposals of charity land and simplification of the requirements for the advice that must be obtained.

If you are interested in the proposed changes to the law relating charity legacies which include property please take a look at our charity legacies blog found here.

What do you need to know?

Part 7 of the Charities Act 2011 imposes restrictions on disposals of charity land which are intended to put safeguards in place to ensure that charities dispose of their property on the best terms that can reasonably be obtained for the charity. The existing rules work well for those charities looking for a clear framework of guidance to inform and provide protection in relation to their decision to dispose of charity property, but have been criticised as being too prescriptive by other charities engaging in more complex property deals or indeed charities dealing with small transactions for which highly detailed advice may be disproportionate to the cost and complexity of the disposal.    

The proposed changes to Part 7 of the Charities Act 2011 which are set out in the draft Charities Bill are intended to provide more flexibility for charities, recognising that the rules apply to a vast range of different property transactions.

Who can provide advice?

Part 7 of the Charities Act 2011 currently requires charity trustees to obtain advice on the terms of any disposal of charity land (other than a lease for a term of less than seven years or a mortgage) from a qualified surveyor who is a member of the Royal Institution of Chartered Surveyors. The draft Charities Bill proposes that charity trustees should be able to obtain this advice from a wider category of “designated advisors” which will include fellows of both The National Association of Estate Agents and The Central Association of Agricultural Valuers as well as qualified charity trustees, officers and employees.

This wider pool of advisers from which a charity can obtain advice will allow charity trustees to exercise discretion in choosing the most suitable and cost effective advisor in the context of the transaction. However, along with this greater flexibility will come an added responsibility for charity trustees who will have to bear the following things in mind when assessing who will be the most appropriate advisor in the circumstances:

  • is the advisor adequately qualified to provide the advice?
  • is the advisor a member of a professional regulator?
  • are there any conflicts involved?
  • do the cost savings of using a charity trustee/employee to provide the advice outweigh the potential risks to the charity?
  • does the advisor have professional indemnity insurance?

What must the advice cover?

Part 7 of the Charities Act 2011 currently provides that the advice must contain such information and deal with such matters as are prescribed by The Charities (Qualified Surveyors’ Report) Regulations 1992. The Charities Bill proposes to simplify this requirement by replacing The Charities (Qualified Surveyors’ Report) Regulations 1992 with regulations that require a designated advisor to provide advice concerning:

  • what sum to expect for the land/whether the offer represents market value for the land;
  • whether (and if so how) the value of the land could be enhanced;
  • marketing the land;
  • anything else which could be done to ensure that the terms of the transaction are the best that can reasonably be obtained for the charity. 

These simplified requirements should make it easier for designated advisors to tailor their advice to the transaction in question, but there is a risk that without such detailed guidance, less experienced or less qualified advisors could provide less rigorous advice.

What action should you take now?

The proposed changes will not become effective until the Bill becomes law. We anticipate that this will be later this year or early next year. For now charities dealing with disposals of property should familiarise themselves with the changes to the advice requirements and consider whether they could be used to the charity’s advantage. Charities disposing of property on a regular basis could start thinking about whether alternative advisors may be better placed than RICS qualified surveyors to provide the charity with advice in the future and start planning so that they are ready for when the Bill becomes law.

What action do you need to factor into future plans?

If the Charities Bill becomes law, charities will need to factor in an enhanced decision making process in order to ensure that adequate consideration is given to the appointment of a designated advisor on a case by case basis in the context of each disposal of charity property.  

If you have any questions on this or any of the property aspects of the Bill, or how it might affect your charity’s plans, please get in touch with Rebecca Rider or Jamie Huard. We’ll be happy to help.

The Charities Bill, which came out of Lord Hodgson’s review of the Charities Act back in 2012 and the Law Commission’s report on Technical Issues in Charity Law in 2017, is intended to make life easier for charities by reducing regulation and clarifying grey areas in the law. In this new blog series, we untangle the new Bill to pull out the key points your charity will need to know, action now and plan for. Catch up with all the blogs in the series here.

If you have any questions on this or any of the property aspects of the Bill, or how it might affect your charity’s plans, please get in touch with Rebecca Rider or Jamie Huard. We’ll be happy to help.


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 July 29, 2021.