Is Your Charity Property Sale Under Threat?

The sale of a charity property could fall at the final hurdle if a number of strict rules and regulations are not followed. That is the verdict of David Baybut, Head  of Commercial Property at Stephensons Solicitors LLP.

Charity property transactions are governed by a number of statutory regulations which are intended to protect the interests of the charities involved. Over time, the Courts have not been afraid to render sales void if the parties involved don’t comply.

Is your sale under threat?
The first point to consider is whether the seller is classed a charity. According to the Charities Act 2006, a charity is an institution, whether corporate or not, which was established for charitable purposes. But charities are also divided into two groups.

Non exempt charities like universities, museums and galleries must comply with the most stringent regulations when carrying out a property transaction. Exempt charities have much more relaxed procedures.

These charities can be structured as a company limited by a guarantee, incorporated and registered at a Companies House, or can be structured as a trust; where the charity is owned by the trustees and governed by a trust deed. Here, property is held on trust for the charity by the trustees.

When a sale concerns property owned by a charity which is owned by trustees, these trustees have a number of duties and responsibilities. They must only act in the charity’s best interests. Joint trustees must agree on a decision to sell and legal advice should always be sought where necessary.

It should be established whether or not the trust deed permits the trustees to make the sale to begin with and trustees should obtain permission to sell from the Charity Commission. They must be able to prove that the sale is in the best interests of the charity and its beneficiaries. If a property is being replaced, the replacement property must be of equivalent value to the charity. In order to establish this, a surveyor’s report may be required.

The sale of a charity property must be secured on the most favourable terms possible by marketing the property favourably and accepting the best financial offer available. There are, however, circumstances in which a lower bid could be excepted, such as when the buyer is a charity with a similar purpose, or if the highest bidder’s purpose conflicts with the principles of the charity.

In some instances, however, the consent of the Charity Commission is not required, such as when a legal statute or legally established scheme authorises the sale, the charity’s deed authorises a sale to a connected charity, or a lease is granted to a beneficiary further to the purposes of the charity. Commission consent  will also not be required on leases of less than seven years.

If a sale is rendered void, trustees could be held individually liable, which highlights the importance of complying to the rules and regulations in place.

David Baybut, Head of Commercial Property at Stephensons Solicitors LLP, said: “It is clear from the legislation that trustees must always act in the interests of the charity. 

For more information visit Stephensons Solicitors website

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