This month will see changes implemented in relation to the disposal of land by charities. Tom Jackson, Trainee Solicitor in Taylor Emmet’s Inheritance Tracing department, provides an overview.
The England and Wales Charity Commission has announced that further changes brought in by the Charities Act 2022 (“the 2022 Act”) will be implemented this month. The upcoming changes will amend Part 7 of the Charities Act 2011 (“the 2011 Act”) which governs the disposal of land by charities in England and Wales, with many of the amendments coming into force in June 2023.
What are the key changes to the 2011 Act?
Arguably the most important of the upcoming changes is the amendment to Section 117 of the 2011 Act. Following the implementation of the 2022 Act, the obligation to seek an expert report on a proposed disposal of land will only apply where the land is held by or appropriated to a single charity. Therefore, Part 7 of the 2011 Act will no longer apply where land is held in trust for multiple beneficiaries (for example, where a charity is named as one of several beneficiaries in a Will). However, Part 7 will still apply where an executor has appropriated land to a charity, and where a charity owns land as a tenant in common and wishes to dispose of its share.
The amendments significantly impact the requirements in Section 119 of the 2011 Act when charity trustees dispose of land (other than certain leases). Section 119(1) states that when disposing of land, charity trustees must:
- Obtain and consider a written report on the proposed disposition from a qualified surveyor instructed by the trustees and acting exclusively for the charity.
- Advertise the proposed disposition for such period and in the manner advised in the surveyor’s report (unless it advises that it would not be in the best interests of the charity to advertise the proposed disposition).
- Be satisfied, having considered the surveyor’s report, that the terms on which the disposition is proposed to be made are the best that can reasonably be obtained for the charity.
The 2022 Act amends Section 119(3) of the 2011 Act to extend what defines a ‘qualified surveyor’ for the purposes of Section 119(1)(a). The Charities (Dispositions of Land: Designated Advisers and Reports) Regulations 2023 (“the 2023 Regulations”), which will come into force alongside the relevant sections of the 2022 Act, allows the provision of advice from fellow-grade members of NAEA Propertymark and fellows of the Central Association of Agricultural Valuers (Regulation 3). Notably, the 2022 Act will also allow appropriately qualified charity trustees, officers and employees (including employees in the course of their employment) to advise.
The potential advisers must have ability in, and experience of, the valuation of land of the kind in question and in the particular area and must not be in a position of conflicting interest with that of the charity.
The written report required by Section 119(1)(a) will also be simplified by Regulation 4 of the 2023 Regulations to only be required to deal with the following matters:
- The value of the relevant land
- Any steps which could be taken to enhance that value
- Whether and, if so, how the relevant land should be marketed
- Anything else which could be done to ensure that the terms on which the disposition is made are the best that can reasonably be obtained for the charity
- Any other matters which the adviser believes should be drawn to the attention of the charity trustees.
Furthermore, the 2022 Act will mean that charities are no longer automatically required to advertise a proposed disposal in the manner advised by a surveyor as under Section 119(1)(b) of the 2011 Act. Such advice must still be considered, but charity trustees are no longer obliged to follow it.
What potential issues and additional considerations arise from the changes?
Whilst it appears clear that the changes will introduce a new level of flexibility in the disposal of land in which charities have an interest, some have suggested that the amendments could make the disposal of land more complex for less experienced trustees. For example, there is a potential to create uncertainty as to which type of adviser should be instructed.
In relation to the instruction of a suitable employee to provide advice, trustees should now consider professional indemnity insurance in the event of negligence, and weigh this up against whether an external advisor should be instructed. Any potential conflict of interest, particularly where an employee/trustee is being paid for their advice, must also be given consideration.
Although the changes to the requirements for an adviser’s report mean that the advice can be tailored to the most significant matters in question, there is a risk that significant yet complex matters may not be identified by a less experienced adviser.
With the changes gradually being implemented in law, and with further amendments due to come into force in October 2023 (including changes to charity-to-charity disposals, changes to restrictions on mortgages, and changes to the certificates and statements that must be included in disposal documents) it is important for trustees to be fully aware of their legal duties and obligations.
Taylor Emmet’s specialist httpss://www.tayloremmet.co.uk/our-people/?_people_search=wills-and-probateWills, Probate, Tax and Trusts department frequently advises charities and their trustees on a wide range of matters, including the disposal of land. It is important for charity trustees to seek legal advice at an early stage to ensure they are fully compliant and to avoid exposing themselves to a claim for breach of trust or a regulatory action.