Where a charity is constituted under a trust deed or is an unincorporated association, any property owned by the charity must be held by trustees.
In the case of a trust it is most common for the charity trustees generally appointed under the trust deed to hold the charity's property in their names.
However sometimes there are a limited number of ("holding") trustees whose sole role its to hold, and sometimes also to some extent to manage, the trustee's property.
These individuals are not charity trustees, and must act on the instruction of charity trustees. They do however also have trustee duties of care and must not follow instructions from the charity trustees where such instructions are unlawful.
Updating property titles
Where there is a change of trustee whose function it is to hold property, freehold and leasehold property should be transferred into the names of the new trustees, and it is usually necessary to register the transfer at the Land Registry, which attracts a fee based on the value of the property.
More often, however, this whole procedure is overlooked. The result will then be that at some point the property is found legally to be held at the Land Registry or under a lease by individuals who in fact no longer hold the property on trust for the charity and cannot be traced or are deceased, whilst apparently retaining full legal liability for all aspects of the property, and in some cases potentially being liable for outgoings relating to the property.
It is possible to manage the issue of incorrect ownership of trust property permanently, so that leases do not have to be transferred and registered.
Some of the options are:
- To incorporate the trustees under part 12 of the Charities Act 2011 (so that the trustees may in all documents and registers be described as "the trustees of [name of charity] incorporated under part 12 of the Charities Act 2011". One disadvantage here is that the liability of the individual charity trustees remains unlimited, which is not the case with respect to the following options.
- To establish a corporate trustee, charitable or otherwise, and obtain a vesting order from the Charity Commission to transfer the property to the new trustee.
- To undertake a full "incorporation" as a Charitable Incorporated Organisation, Charitable Company Limited by Guarantee or a Community Benefit Society by transferring all assets and the whole of the undertaking of the charity to the newly constituted organisation in question.
Dealing with particular problems
If the charity does not have the appetite for such constitutional change, it is usually possible to change the parties in whom property remains incorrectly vested by use of sections 280 and 334 of the Charities Act 2011.
Appropriate documentation can then be sent to the Land Registry, and the Land Register updated. For leasehold property, however, it may be necessary to obtain landlord's consent.
The importance of obtaining advice
Unincorporated charities are often complex with respect to their constitutional arrangements, the property that they hold and how they hold it.
In each case it is unwise to try to correct apparent problems of property ownership without expert legal advice, as it is rarely the case that efforts will be successful and problems can simply be worsened.
In many cases, the involvement of the Charity Commission will be necessary or desirable. Legal advice can ensure that only the facts that the Commission will consider relevant are put to them and that they are presented with the correct legal emphasis. This will enable swift progress to the desired outcome.