The Charities Act 2022, explained: revisiting the key changes to the rules relating to charity land

Now that the majority of the changes to the rules on disposals of charity land introduced by the Charities Act 2022 have been implemented on a phased basis, we revisit the various key amendments which could save charities time and money when disposing of property.

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 rules worked 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 had received criticism for 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 changes to Part 7 of the Charities Act 2011 which have been introduced by the Charities Act 2022 now 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 had previously required 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 only, who had to be a member of the Royal Institution of Chartered Surveyors. Under the provisions brought in by the Charities Act 2022 charity trustees are now able to obtain this advice from a wider category of “designated advisors” which includes fellows of both The National Association of Estate Agents (PropertyMark), of which 25% of estate agents are a member, and The Central Association of Agricultural Valuers as well as qualified surveyors. The changes also now allow advice from appropriately qualified charity trustees, officers and employees.

This wider pool of advisers from which a charity can obtain advice now allows 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 comes an added responsibility for charity trustees, who 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 and with current relevant experience?
• is the advisor a member of the appropriate 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 had previously provided that the advice had to contain such information and deal with such matters as prescribed by The Charities (Qualified Surveyors’ Report) Regulations 1992. These Regulations have been repealed and the new provisions simplify this requirement by replacing those regulations with The Charities (Dispositions of Land: Designated Advisers and Reports) Regulations 2023, which 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 of 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;
• any other matters that the adviser believes should be raised with the charity’s trustees.

These simplified requirements now hopefully 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.

How should the disposal documents evidence compliance with the Charities Act 2011?

Under the old regime, any instrument which effected a disposal by a charity (including a lease, deed of assignment or transfer deed) needed to contain a “certificate” executed by the charity trustees confirming that the Charities Act 2011 had been complied with. This added an additional logistical burden as each trustee would need to execute the disposal document (or otherwise pass a resolution which delegated authority to two specified trustees to do so on behalf of the board of trustees).

The Charities Act 2022 has replaced the need for a certificate with the requirement for a “statement” in both any contract for the disposal (if there is one) and the document effecting the disposal. This often obviates the need for additional signatories and instead only the legal proprietor of the land will need to execute the transaction documents (whether this is the charity itself where it is incorporated, or any trustee(s) or other body holding the property on behalf of the charity where it is unincorporated).

If the necessary statements are inadvertently missed, the Charities Act 2022 now clarifies that the disposal is presumed to be valid and binding so long as the purchaser acquired the land in good faith, meaning inadvertent non-compliance with the Charities Act 2011 will not render a transaction void. There may still of course be other consequences flowing from non-compliance, particularly where a disposal in breach of the requirements results in a loss for the charity.

What does this mean for your charity?

The provisions mentioned above in this blog are now in force, so charities dealing with disposals of property should familiarise themselves with the changes to these requirements and consider whether they could be used to the charity’s advantage. Charities disposing of property on a regular basis should consider whether alternative advisors may be better placed than RICS qualified surveyors to provide the charity with advice, for example with residential property.

Charities now 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 Act, or how it might affect your charity’s plans, please get in touch with Rebecca Rider, Joseph Rowntree or Jamie Huard. We’ll be happy to help.

The Charities Act 2022, which came out of Lord Hodgson’s review of the Charities Act 2006 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.

Check out the new edition of The Charities Acts Handbook for a definitive guide to modern charity legislation, including all of the regulation brought in by the Charities Act 2022. Written by our team of specialist charity lawyers, the Handbook provides comprehensive guidance on practical issues faced by charities and is an indispensable reference for lawyers, accountants, trustees and all those involved in the running and management of charities.

The material in this article is provided for guidance and general information only and is not intended to constitute legal or other professional advice upon which you should rely. In particular, the information should not be used as a substitute for a full and proper consultation with a suitably qualified professional. Please do contact the Bates Wells team if you require further information.