A charity disposing of property (such as by sale, lease or mortgage) must fully understand and comply with all of their legal obligations. Failing to do so could result in:
– a delayed disposal
– an invalid transaction
– trustees who are personally liable for the consequences
So what does the charity have to consider?
(1) Does the charity “own” the property?
Charities can acquire rights other than ownership (such as the right to use a property), so must clarify this by checking the property’s title.
(2) Power to dispose?
Usually the charity’s trustees will be able to dispose of property because of:
– a statutory power (such as the Trusts of Land and Appointment of Trustees Act 1996) and/or
– powers contained in the charity’s governing document
However, this must be checked thoroughly because, without the necessary power, you must involve the Charity Commission. Certain disposals, such as those to people connected with the charity, will also involve the Charity Commission.
(3) Are there restrictions?
Even with the necessary power you must check that there is nothing restricting/preventing you from disposal, such as if the property is designated for a particular use. Designated property also means that you will have to hold a consultation.
(4) Is disposal in the charity’s best interest?
Trustees have a duty to act in the charity’s best interests which means considering all the relevant disposal options. For example, if you are thinking of selling property, would leasing be better for the charity?
You may also wish to consider who would be affected by the disposal, such as the charity’s supporters or beneficiaries.
(5) Additional legal obligations
There are extra legal obligations imposed when a charity disposes of property (there are very limited exceptions, such as for some short-term leases) including
– obtaining a written report and valuation from a qualified surveyor and
– satisfying yourselves that you are getting the best terms that you could reasonably achieve and
– properly advertising the disposal and
– providing statements and certificates regarding the charity, ownership and that the disposal is legal to the buyer
These obligations are quite complex and trustees should take legal advice to avoid breaching personal duties and putting the whole disposal in jeopardy.
As experienced property solicitors in Bristol, we understand what’s involved in selling and buying charity property and can help you with every step of the transaction. Speak to us by calling 0117 962 1205 or email Janine Harris in the Commercial Team at email@example.com.