Real Estate Update: Disposals of land and property by Charities

Section 73 of the Charities Act 2006 (CA 2006) requires the Minister for the Cabinet Office to appoint a person to review the operation of CA 2006 within five years of its commencement. Lord Hodgson of Astley Abbotts was appointed as the reviewer and on 16 July 2012 his report, Trusted and Independent: Giving charity back to charities, was published and presented to Parliament. The 159 page report contains over of 100 detailed recommendations.

Insofar as disposals – the sale, leasing or mortgaging – of land or property by charities are concerned, the report has concluded that the current regime is disproportionate. It recommends complete deregulation, leaving charity trustees to instead act under their general duty of care and with reference to Charity Commission guidance. However, sensibly, it has also recommended that charities continue to obtain the Charity Commission’s consent for the sale or leasing of charity land and the granting mortgages and other charges to “connected persons”.

While most practitioners will agree that the current restrictions on disposing of charity land and mortgaging can be cumbersome and add unnecessary time delays and costs to transactions, Lord Hodgson’s proposal to entirely deregulate these areas is a little surprising. Deregulation may give practitioners freedom to give more appropriate and proportionate advice on charity land transactions, but it would also scrap rules that help to reinforce the duty of charity trustees to make properly informed decisions before committing to transactions that are often vital to their charity’s activities.

It remains to be seen which of Lord Hodgson’s recommendations are implemented and how quickly, but watch this space.