By Geldards at WCVA's Charity Law Conference 2013.

1. Property Pitfalls for Charities
Tuesday 21 May 2013
Harriet Morgan, Senior Associate

2. 3 common pitfalls
• Who needs to do what?
• Restrictions on a charity’s ability to dispose of
land
• Practical pitfalls

3. Who needs to do what? – Case Study 1

4. Decision making
• The board of Charity Trustees make the decisions
on behalf of the Charity
• The Charity Trustees are responsible for making
sure that the Charity is run properly
• The risks for Charity Trustees in not doing so are:
• The transaction may be void or voidable
• Breach of statutory duty

5. Parties to the lease
• Both the Company and the Charity Trustees need
to be a party to the lease where the Charity is
incorporated
• The Charity Trustees must give a certificate under
the Charities Act 2011 that they have the power
to effect the lease and to confirm compliance
with the Act

6. How many need to sign?
• The Company signs through 2 directors, a
director and secretary or 1 director and a witness
• It is vital that the Charity Trustees also sign the
document
• Not all of the Charity Trustees have to sign the
document if authorisation has been given under
s333 Charities Act 2011

7. S333(1)
• Charity trustees may, subject to the trusts of the
charity, confer on any two or more of their body -
• a general authority, or
• an authority limited in such manner as the charity
trustees think fit,
to execute in the names and on behalf of the charity
trustees documents for giving effect to transaction
to which the charity trustees are a party

8. • Must be in writing or a resolution of the board;
• Can be in respect of any trustees or named
trustees only;
• Can have restrictions attached to it;
• Continues until it is revoked
The authority under s333 (1)

9. What if the charity is unincorporated
• Charities that are not incorporated cannot hold
land in its own name
• Property holding function can therefore be
divested to a third party such as the Official
Custodian, a Holding Trustee or a Custodian
Trustee
• That third party may need to be a party to the
document and to sign it

10. Risks
• If the correct people are not party to the
document or have not signed the document
properly, the transaction could be invalid

11. Restrictions on dispositions by
charities – Case Study 2
• There are restrictions on a Charities’ ability to
dispose of land
• The risk of not complying with these restrictions
are that:
• The transaction could be invalid
• Trustees could face action for breach of statutory
duty and or reputational damage
• The relevant law is s117-123 Charities Act 2011

12. Ss117-123 Charities Act 2011
• Non compliance a big problem
• Obligations can be missed altogether
• Can increase costs and delay completion of a
transaction

13. S117 Charities Act 2011
This section prevents charity land being disposed of
by a non-exempt charity without an order of the
court or an order of the Charity Commission unless:
•the charity has followed the statutory procedure
laid out at s119 and 120; or
•it is a disposal between charities; or
•it is a disposal made by a charity pursuant to a
statutory authority or order of the court; or
•the disposal is a lease to a beneficiary

14. The statutory procedure
• Trustees to obtain a report on the terms of the
disposition from either:
• a surveyor; or
• if the disposal is a lease for 7 years or less with no
premium a person reasonably believed to have
requisite ability and practical experience to
provide competent advice on the disposition
• Trustees to consider the report
• Statements and certificates in the lease or
transfer

15. Why is a surveyor’s report needed?
• To protect the Charity Trustees
• To prevent Charity Trustees rushing into
transactions
• To consider what is in the best interests of the
Charity
• The certificate gives comfort to the other party to
the transaction

16. Saving clauses s122(6)
• In favour of a person who (whether under the
disposition or afterwards) in good faith acquires
an interest in the land for money or money’s
worth the disposition is valid whether or not –
a) the disposition has been sanctioned by an order of
the court or of the Commission, or
b)The charity trustees have power under the trusts of
the charity to effect the disposition and have
complied with s 117-121 so far as applicable to it

17. What are the risks of non compliance?
• The Transaction may be invalid
• The Charity Commission can
• Make the Trustees start the process again;
• Ratify the unsustainable disposition;
• Make an order authorising the execution of
confirmatory disposal documents; or
• Require the Trustees to take or the Charity
Commission can take necessary steps to re-vest
the Property in the charity or its trustees

18. Disposals between charities
• No need to follow the statutory procedure if a
disposal between charities other than for the
best price
• Must be authorised by the Charity Trustees
• No surveyor’s report is needed
• A certificate from the Trustees in the document is
required

19. Disposal by lease for 7 years or less
• Do have to follow statutory procedure on the
grant of a lease for 7 years or less with no
premium
• No surveyor’s report required
• Advice required from competent person
• Can save time and money
• Certificate from Charity Trustees is required

20. Do all charities have to comply?
• Not exempt charities – i.e. those prevented from
registering as a charity
• Examples include charitable housing associations
and higher education establishments

21. Acquisitions
• No restrictions on acquisitions
• Best practice would be to obtain advice that an
acquisition is in the best interests of the Charity

22. Practical Pitfalls

23. Practical Pitfalls – Case Study 3
• Break clauses
• Security of tenure
• Business rates and Stamp Duty Land Tax

24. Break Clauses
• Get the dates and address for service of the
notice right
• Plan ahead if conditions are attached to the right
to break
• Beware as a tenant about conditions attached to
a break right and resist where possible

25. Landlord and Tenant Act 1954
• As a landlord consider carefully before agreeing to
exclude security of tenure – only 7 statutory grounds
on which a landlord can oppose a tenant’s statutory
right to renew a lease
• As a tenant, consider if willing to agree to give up
statutory right to renew the lease at the end of the
term
• Statutory procedure, serving of notice by the
landlord on the tenant and a declaration or statutory
declaration completed by the tenant

26. Business rates and SDLT
• Mandatory relief of 80% and discretionary relief of a
further 20% when property occupied by a charity that is
wholly or mainly used for charitable purposes
• An empty property owned by a charity can be “zero
rated” if it appears that when the property is re-
occupied it will be wholly or mainly used for charitable
purposes;
• SDLT relief for charities when holding land for own
charitable purposes or as an investment where the
profits are applied for the charitable purposes of the

27. Cardiff Derby Nottingham
Thank You

28. Contact Details
Harriet Morgan
DD : 029 2039 1781
harriet.morgan@geldards.com