Will the new Charities Act impact your Charity land sale?
On 14th June 2023, the Charities Act 2022 came into force, making key changes to the procedures that you will have to follow if you are selling or mortgaging charity land as a trustee.
Provisions for charity trustees selling or leasing land
It is important that trustees are aware that land held in trust for a charity cannot be sold, transferred or leased without an order from the Court or the Charity Commission, unless you have complied with certain legislative provisions. The main provision is that trustees must obtain a specialist valuation report, known as a section 119 report (referred to in this article as ‘the report’).
This report provides protection to you as a trustee, ensuring that, as part of your duty to act in the charity’s best interests, you do not accept offers below the property’s market value. The report should establish an appropriate sale price, and provide you with guidance on marketing the property. We are pleased to see that the new rules have relaxed some of these requirements in the section 119 report.
What are the new requirements I need to be aware of as a trustee?
Previously, trustees were required to advertise the sale for ‘such period and in such a manner’ as recommended within the report. The new Act has removed this wording, so now you can proceed with a sale to a buyer who offers the price in the report without the delay involved in advertising and marketing the property. This amendment may also reduce the frequency of non-compliance, as charities were often not aware of the need for a s119 report until after they had already found a buyer and instructed solicitors.
Prior to the changes, the report had to be given by a ‘Qualified Surveyor’, which in practice meant it could only be given by members of the Royal Institute of Chartered Surveyors. The advice can now be given by a ‘Designated Advisor’, which also includes fellows of the National Association of Estate Agents and the Central Association for Agricultural Valuers. Expanding the category of advisors will hopefully lead to greater flexibility when you are commissioning the necessary reports.
Furthermore, qualified charity trustees, officers and employees are now able to produce the s119 report, providing that there are no conflicts of interest. The trustee/officer/employee must be qualified to the required level in one of the three above named professional bodies- “Mr Smith” may be able to give a good guess as to the property’s value but unfortunately he is not able to give this advice!
The report can be given in the course of a person’s employment to the charity, but if you would like a trustee to act in this capacity you should check that this would be covered by your insurance. Whilst this change has the potential for greater flexibility and reduced costs, it is hard to imagine a situation where there would not be a potential conflict of interest. It seems unlikely most trustees would be willing to take on this risk, so this particular change may have little effect in practice.
What important factors does the report need to consider?
Finally, the actual content of the report has been simplified from an extensive and in-depth list of requirements, to the five points below which will need to be considered:
- The value of the land
- Any steps that could be taken to enhance the value of the land
- Whether, and how the land should be marketed
- Anything else that could be done to ensure the sale/lease is on the best terms that can reasonably be obtained by the charity
- Anything else that the advisor believes the trustees should be aware of
We anticipate that further changes will come into force by the end of 2023, and the date of these is yet to be announced.
For further information about how the Charities Act will affect you as a trustee, you can follow the links below: