Spring 2023 update: Welcome changes to the charities act disposal regime

For registered providers (RP) who are registered charities (i.e. non-exempt charities), the Charities Act disposal regime process can be costly and difficult to navigate – meaning many such RPs have already taken the decision to convert to become exempt charities.

For those that remain, there is some welcome news on the horizon as simplification provisions contained in the Charities Act 2022 are due to come into force this Spring.

Welcome Changes:

The Charities Act 2022 introduces a number of changes to the current disposal regime aimed at providing greater flexibility and a more straightforward process:

1. Professional Advice – “The Surveyors Report”

Currently charities have to obtain written advice from a RICS qualified surveyor prior to disposing of land which can be both time consuming and costly.

Under the new provisions, the requirement to obtain advice from a “Qualified Surveyor” has been replaced with obtaining advice from a “Designated Adviser”. This new definition means charities will be able to obtain this advice from a wider range of advisers including fellows of the National Association of Estate Agents and the Central Association of Agricultural Valuers. Perhaps of even greater benefit, charity trustees, officers or employees who are appropriately qualified will also be able to provide this advice, potentially eliminating the need to obtain external advice. Employees who are suitably qualified will be able to provide this advice in the course of their employment.

2. Statutory Statements and Certificates of Compliance

Currently it is the charity trustees who must provide the required certificates which have to be contained in disposal documents confirming they have complied with the requirements of the Charities Act before disposing of the land/property.

Under the new provisions, it is the charity, rather than the charity trustees, that is obliged to provide this certificate. This will avoid the need for charity trustees to execute disposal documents as well as the charity, streamlining execution processes.

In addition, the new provisions remove the current uncertainty regarding which documents should contain these compliance statements and certificates. Going forward, the statements of compliance should be included in both the contract for sale (Contract) and the document effecting the disposal (e.g. Lease, Transfer).

3. Connected Person Disposals

Currently where there is a disposal to a “connected person” specific consent of the Charity Commission is required. Under the new provisions, short-term tenancies (under one year) to an employee to use as their home will not be considered a connected person disposal. This should be helpful as it will no longer be necessary to obtain specific consent from the Charity Commission in these circumstances.

However, it is worth remembering that the connected person consent regime still applies in other circumstances, so consent from the Charity Commission for intra-group transfers (for example) will still be required.

4. Greater Comfort to Third Parties

Under the new provisions, where a statement of compliance is included in a contract for a disposition or mortgage, it will be conclusively presumed to be true in favour of a third party acting in good faith and acquiring an interest for money or money’s worth. Also, where the statement is omitted, the disposition or mortgage will remain valid and enforceable. This provides greater comfort to third parties dealing with charities and may reduce delays and costs in terms of providing evidence of compliance as there is statutory protection when the statements of compliance are included in the disposal and mortgage documents.

Practical Recommendations:

1. Review qualifications of trustees, officers and employees to ascertain whether any are suitably qualified and have the requisite skill and experience to fall within the definition of a “Designated Adviser”.

Take care to check:

• employment terms and conditions to confirm whether suitably qualified employees can be asked to provide the required advice in the course of their employment; and

• check governing documents to ensure there are sufficient powers to pay suitably qualified charity trustees for services (if payment is required).

2. Review compliance and certificate wording and update to replace references to charity trustees with the charity;

3. Review precedent documents and ensure contracts as well as documents actually effecting disposals contain the required compliance statements and certificate wording;

4. Review precedent execution blocks as it will no longer be necessary for charity trustees to execute disposal documents to provide the compliance statements and certificate. For incorporated charities, this will remove the need to have two execution clauses in disposal documents;