Disposing of property can release funds or reduce operating costs for charities, but the process is far from straightforward. Lydia Hart, an Associate in our Real Estate team specialising in Charity law, provides the top 5 pitfalls that tend to stump charities:
1. Not getting the right advice
Under section 119 of the Charities Act 2011, most charities need to get written advice from a qualified surveyor. The report should cover value, marketing and anything else which might affect the marketability. By skipping this step or undertaking a more informal approach, there is a risk the disposal could be seen to be invalid by the Charity Commission and the trustees in breach of their duties.
2. Ignoring the legal complexities of charity land
Charity property is often burdened by legal complexities, such as covenants restricting the use, designation as permanent endowment or reverter clauses. Sometimes this means Charity Commission consent may be required pre-disposal. It is essential to review the title carefully, checking for historic trusts, dedications and restrictions in the early stages of the process.
3. Assuming Commission consent is always required
Some disposals do require Charity Commission consent (e.g. permanent endowment land). However, often trustees have the power to proceed without it provided the correct steps are followed. Understanding when formal consent is required and when it is not can save unnecessary delays and costs.
4. Not documenting the decision
Disposing of property is a significant decision for trustees to make. They must act collectively in the charity’s best interests and clearly document their reasoning. This is even more important where unusual terms are involved or it is below market value. Poor record-keeping can make it difficult to defend decisions if they’re ever challenged.
5. Underestimating the reputational impact
Even if the legal side is watertight, disposing of a building that has local or emotional significance (e.g. a village hall) can spark big reactions. Early engagement with those affected and clear transparent communication about why the charity is disposing of the asset can help to manage expectations and avoid reputational damage.
Disposals can open doors for charities, but only when the groundwork is done properly. Getting it right not only protects the charity’s assets, but also the trustees and the reputation of the charity. If you need further support with disposing of charity property, please get in touch – enquiries@stephens-scown.co.uk.