Chimi Shakohoxha and Spencer Vella Sultana examine how proposed changes in the Charities Bill will impact small and large scale land disposals for registered providers.
On 11 May 2021, the Queen announced that changes to charity law would be brought forward in the form of a Charities Bill. In part, the Bill discusses the need to simplify the process for charities to dispose of land. The background accompanying the Queens Speech indicates that the Charities Bill will seek to implement the majority of the recommendations set out in the Law Commission’s 2017 report ‘Technical Issues in Charity Law’.
What are the key proposals?
- Charities will have access to a larger group of professional advisors on land disposals.
- The advice that charities are required to receive on such disposals, will be relative to the scale of the disposal, whether that may be a small strip of land or a complex development.
The default position is that a charity cannot dispose of land without the consent of the court or the Charity Commission. Certain transactions fall outside of this regime, including disposals by an exempt charity.
However, consent is not required if the charity can establish that the disposal of land satisfies two conditions, the second condition being that the charity trustees obtain and consider advice on the disposition.
The advice must be supplied by a RICS qualified surveyor acting exclusively for the charity in the form of a detailed report. This report must address numerous points, including the surveyor’s opinion on whether the manner of disposition is the best that can be reasonably obtained for the charity, and if not, their opinion and advice on which disposition would constitute best use.
The overall effect is that the disposal is subject to added costs in the form of the RICS valuation, and also delay in waiting for the land to be surveyed and the report provided. This has largely been considered as an interference with the disposal of land, particularly where the value of the land considered is worth less than the cost of the report itself.
It is proposed that the default position on disposal should be removed, and in its place, a duty on charity trustees to obtain and consider advice in respect of the disposal, from a person they reasonably believe has the ability and experience to provide it. Further, that the duty to obtain advice should not apply if the charity trustees reasonably believe it is unnecessary to do so.
This means that charities will be able to take advice from professionals other than a RICS surveyor, including for example, fellows of the National Association of Estate Agents. Of particular note, advice can also be taken from qualified charity trustees themselves.
It is intended that the report required is also simplified so that advice is proportionate to the scale of the disposal concerned. Advisers will be required to provide advice on just four key areas before self-certifying they have appropriate expertise and have no conflict of interest with the charity.
What does the proposal mean for registered providers?
The proposed reform of the default position on disposals by a charity will not affect exempt charities as they fall outside the scope of this regime.
For non-exempt charities, we believe the proposals should help to reduce administrative burdens, streamlining the process and providing more flexibility in disposals.
Although the Charities Bill will be included in the next programme of legislative reform, there is currently no precise timetable for when the changes will come into force.
We believe the changes will be welcomed by the social housing sector as they should simplify the requirements, making disposals easier and less cumbersome for non-exempt charities.
Capsticks provides multi-service support to registered providers nationally. Its Housing & Regeneration team is one of the largest in the country, advising on a multitude of land disposals and its Corporate and Commercial team offers corporate governance and charity law advice.