Charities may merge for numerous reasons – to have a greater impact, expand on resources or ensure long-term sustainability etc. When they do, dealing with their property can often cause some of the biggest headaches. Here are my top 5 tips for navigating this complex process:
1. Ownership and Title
Trustees need to confirm who actually owns the property – is it in the charity’s name? Is it vested in the Official Custodian for Charities? Is it held by individual holding trustees? This needs to be established early on as it will affect how the property is dealt with. If the charity is unincorporated, appointment of new trustees or revision of the trust deed may be required before the transfer can take place.
2. Use and Restrictions
Charity property can be subject to restrictions under trust deeds, governing documents, planning agreements or within the title to the property. These can affect how the property is handled. Maybe a deed of gift sets out that the land can only be used for a specified purpose which doesn’t accord with the purpose of the merged charity? Or a disposal needs consent from a third party? There are numerous sources that could hinder a merger so it is key to get the full picture early on to overcome any issues that arise.
3. Leased Premises
If a charity occupies property under a lease, it will need to be considered whether the lease can be assigned and if so, whether consent of the landlord needs to be obtained. It may be that the landlord requires a licence to assign the lease to the new entity, which can incur legal costs that were not anticipated.
It is also important to review any break clauses, rent reviews or personal guarantee provisions as the leases are not typically negotiated with such change in mind and can raise unexpected challenges during a merger.
4. Consents and Notifications
The Charities Act 2011 imposes specific requirements when dealing with charity property, such as obtaining proper advice and potentially a valuation on disposals, sometimes even Charity Commission consent (e.g. permanent endowment or designated land). It also needs to be considered whether the merger needs to be registered with the Charity Commission to preserve legacy entitlements.
5. Liabilities and Maintenance
It is vital not to overlook ongoing liabilities, such as maintenance obligations, environmental factor or outstanding repairs. These may not be apparent at first glance but can present serious risks to the merged charity – imagine merging with a charity only to find their property needs a new roof which costs thousands. A full property survey and environmental report to prevent any nasty surprises.
Trustees involved in merger discussions should obtain legal advice early on, especially where property is involved. This allows issues to be spotted before they become severe obstacles and ensure the merged charity starts off with solid foundations. Remember: it’s not just about bricks and mortar – it’s about managing charity assets wisely for the future.
If you would like more information then please contact our Charities team or call us direct on 0345 540 5558.