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Are You Complying With the Requirements of the Charities Act 2011 When Disposing of Property?

Gemma Tipping, Senior Solicitor in our Commercial Property team highlights the importance of the Charities Act 2011 when disposing of property.

Charities and their Trustees were given a stark reminder of the potential costs of not complying with the requirements of the Charities Act 2011 (“the Act”) when disposing of property following a recent Charity Commission report relating to a property sale by the Spiritualist Association of Great Britain Limited (“the Spiritualist Association”).

The Spiritualist Association sold its leasehold interest in a property for £6 million. The purchaser then quickly turned around a sale of that same leasehold interest for £21 million.

The Trustees of the Spiritualist Association were unable to show the Charity Commission that they had taken sufficient steps to ensure that the disposal was in the best interests of the charity in accordance with the provisions of the Act and the Charity Commission found that this amounted to serious mismanagement.

Sections 117 to 122 of the Act restrict disposals (including leases) of land held by non-exempt charities. There are some exceptions to this provided certain requirements are met, including:

  • a sale or lease to another charity where the land is to be used for charitable purposes for the best price reasonably obtainable
  • a lease of less than 7 years provided the Trustees obtain and consider advice in respect of the proposed disposition from someone they believe has the necessary experience to give such advice and having considered this advice they deem that the disposition in question is the best that can reasonably be obtained by the charity
  • a sale or lease (of over 7 years) provided that the Trustees obtain and consider a report on the proposed disposition prepared by a qualified surveyor acting for the charity, advertise the proposed disposition for the time and in the manner set out in the report and having considered the surveyors advice they deem that the disposition in question is the best that can reasonably be obtained by the charity.

If a proposed disposal does not fall within one of the exceptions set out in the Act, then consent of the Charity Commission or a court order must be obtained prior to the disposal.

If you require assistance with property held by a charity please contact Gemma Tipping or Katja Wigham in our commercial property team.  

For other legal advice in respect of charities please contact our charities specialist, Nick Burrows.

This article is intended for the use of clients and other interested parties. The information contained in it is believed to be correct at the date of publication, but it is necessarily of a brief and general nature and should not be relied upon as a substitute for specific professional advice.