Trevalga Manor Estate (the estate) has brought into the spotlight the duties and obligations of charity trustees when dealing with land sales. The case is a good example of the 'once in a generation' property sales, which appear to be an increasingly common prospect for charities facing an uncertain economic climate.
The Charity Commission was called upon to examine the decision by the trustees of the Gerald Curgenven Trust (the Trust) to sell the estate after local residents raised concerns that the charity may have breached the provisions of its own governing document.
The Charity Commission concluded that the trustees were within their powers to sell and that trustees had a wide discretion to make decisions in the best interests of the charity.
The Commission appears to have got the Trevalga decision right. Charity trustees need to act at all times in the best interests of the charity and its beneficiaries. The purpose of the Gerald Curvengen Trust is to generate an income for Marlborough College from its assets, primarily Trevalga Manor.
If the trustees believe that the estate is no longer the best way of holding their capital to generate that income (which, given the high costs of direct property ownership, is an entirely understandable view) then it should be open to them to sell it, provided the capital is preserved.
The residents' concerns that the character of the estate would change, or that their status might become more precarious under a new freeholder, were rightly not viewed by the Trust as factors that should overturn the decision to sell, and it appears that the Trust did take proportionate steps to try to address some of those issues.
Nonetheless, the controversy that surrounds the decision has brought trustees' duties - and especially trustees' duties when opting to sell land - under greater scrutiny. Land is often a charity's single biggest asset, so it is understandable that trustees may wish to unlock wealth tied up in real estate.
What do trustees need to keep in mind when approaching a land sale?
When approaching a land sale, trustees need to consult their own governing document and consider their duties under charity law to assess whether they can proceed.
The trustees should first carefully review the governing document which will set out the purposes of the charity and the powers the trustees can exercise in achieving them.
The trustees will need to be satisfied that they have the power to dispose of the land in question and ensure that they follow the necessary procedures before such a step is taken. For example, charities will often seek advice on whether trustees can delegate their ability to take key decisions to a committee of the board, to give more flexibility.
The trustees will also need to consider the specific law concerning disposals of land held by charities, set out in sections 117-121 of the Charities Act 2011.
Sections 117-121 of the Charities Act 2011
Trustees are required to obtain and consider a written report on the terms of the sale from a qualified surveyor, to advertise the sale following advice, and on the basis of this advice to carefully decide whether or not the terms of the sale are the best that could be reasonably obtained in the circumstances. If selling to certain connected persons, the trustees will need permission directly from the Charity Commission.
The s117 regime will be simplified next spring when the provisions of the Charities Act 2022 are brought into force, but the overarching duties on trustees will remain.
The governing document or title deeds may also set out rules or special trusts concerning specific land owned by the charity. A common issue charities face when seeking to sell land is that it has been designated to be held for a particular purpose, known as specie or designated land.
There are requirements for additional public notice to be given where designated land is sold, and if the charitable purpose is inextricably linked with the land in question, then Charity Commission consent is likely to be needed.
The other additional category of restriction is permanent endowment, i.e., land that is held as part of charitable capital that cannot be spent or split up.
The Trevalga Estate appears to have been permanent endowment. This does not mean that the land cannot be sold, but trustees need to have a very clear business case for doing it and, depending on the size of the endowment and what is to be done with the proceeds of sale, there are various levels of engagement with the Charity Commission that are likely to be needed. Charities selling designated land or permanent endowment are likely to need specialist advice.
The decision by the Trust to sell the estate and subsequent rubber-stamping by the Charity Commission has certainly raised one or two eyebrows. That being said, the end result looks to be the correct one.
Perhaps more than anything else this case has highlighted the essence of trustee duties when approaching land sales, which is that, above all, trustees must act in the best interests of the charity in everything they do.
Trustees must keep a very tight focus on their core charitable mission and the interests of their beneficiaries, and not be distracted from those by less relevant considerations. As well as their overarching consideration though, trustees selling land must also comply with the specific legal obligations placed on them by the Charities Act and their governing document.
As long as trustees achieve all of these things, while they may still face criticism in high-profile and emotive matters such as the Trevalga Manor sale, they will ultimately be able to address that criticism and any interest taken by the Commission by showing they have acted properly at all times.
With kind permission from Civil Society – this article was originally published in the November edition of Charity Finance magazine’.
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