Forthcoming reforms to the sale and valuation of charitable assets

News Posted 11/05/21
Vicky Phillips, Director, Hobbs Parker Property Consultants LLP looks at forthcoming changes affecting the sale of Property owned by Charities as a result of a Government Response to the Law Commission report on Technical Issues in Charity Law.

We regularly deal with valuation requests and handle agency transactions where the vendor is a charity. In addition to the well-known charities this often includes many sports clubs, educational institutions or other organisations with charitable status. In many cases this applies to assets left in a will to one or a number of charitable beneficiaries; a recent sale of ours dealt with 19 charitable beneficiaries! In these instances, when a charity wishes to sell its property assets, they are governed by the Charities Act 2011, in Part 7, sections 117-123 (The Act). These place certain obligations on the charity and its trustees upon disposal to ensure good practice and it isn’t simply a case of just giving.

Whilst everyone agrees safeguards need to be in place to ensure charities are protected, the current rules can be highly prescriptive and disproportionately costly. This is where the recent Government Response to the Law Commission report on Technical Issues in Charity Law (published 22nd March 2021) comes in.

We’ve highlighted a few areas for change that have been accepted by the Government:

When does The Act kick in?

Part 7 of the Charities Act (the bit regarding the sale of charitable property) only applies where the land is solely held by or held in trust solely for a single charity. Where the charity is one of several beneficiaries it would be for the trustee to advise on the best terms of the deposition and whether any advice is necessary.

The Surveyors Report

Currently prior to sale a Chartered Surveyor must produce a report advising on both the proposed sale strategy for the asset and the terms of a sale that are the best that can reasonably be obtained for the charity. In some cases, several reports can potentially be required prior to the sale, and then prior to acceptance for the recommended offer.

Reports can now be written by fellows of the National Association of Estate Agents (NAEA) and fellows of the Central Association of Agricultural Valuers (CAAV).

What to put in the Contract of Sale

Recommendation that in the sale contract:

  1. A statement that Part 7 has been complied with and that the sale contract of charity owned land is enforceable by a purchaser if they have a certificate, or
  2. If they do not have a certificate but have acted in good faith.

Currently the purchaser is not protected under a contract of sale when charitable trustees have not complied with the statutory requirements.

It is agreed that this is an onerous obligation on the purchaser and causes unnecessary delay and expense whereas a statement in the contract for deposition from the charity that Part 7 requirements have been met mitigates this.

Do you need advice if a Charity acquires land?

The process of obtaining advice for acquiring land reflects the recommendations suggested in relation to the disposal of land.

In addition to suggesting that advice could be obtained from designated advisers it explains that trustees might decide not to obtain advice from those advisors or from any advisors with examples of when the trustees might make such a decision.

It recognises that it is not always appropriate to obtain advice as the charity may have its own in-house expertise or the trustees may deliberately purchase land in excess of the market value in pursuit of the charity’s charitable purposes.

Summary

Of the total of 43 recommendations, the vast majority have been accepted by the Government in this latest consultation and they will look to implement them when parliamentary time allows.

If you are considering a sale or purchase of charity owned property, or advice in relation to undertaking a Surveyors Report our team are well placed to advise.

Vicky Phillips
Director- Hobbs Parker Property Consultants LLP
vicky.phillips@hobbsparker.co.uk
01233 506 201 / 07799 099 457

Tweets from @SEBmagazine