Disposal of charity property includes anything from a sale of freehold property to the grant of a long or a short lease, or the grant of rights of way or a wayleave for telecommunications. When disposing of property is held by or on behalf of a registered or excepted charity, the charity trustees must first:

  • take valuation advice, and then
  • decide on the basis of that advice whether the terms of the proposed transaction are the best that can reasonably be obtained for the charity

Generally speaking, the disposal of property involves the need to obtain a valuation report from a fellow or professional associate of the Royal Institution of Chartered Surveyors, which has to contain such information and deal with such matters as are prescribed in the Charities (Qualified Surveyors’ Reports) Regulations 1992 (known as the QSR). Circumstances where this may not occur are if:

  • the disposal is a lease of under seven years (in which case a lighter touch regime applies)
  • the disposal is to the charity’s beneficiary or to another charity on a less than full commercial basis
  • if rather than complying with the requirements, the charity seeks (and succeeds in obtaining) an order from the charity commission

There have been concerns that the requirement to obtain a valuation report is expensive, can cause delay, and is otherwise often disproportionate in terms of expense and effort where the transaction concerned is of low value or otherwise trivial.

The recent Law Commission review of Technical Issues in Charity Law followed Lord Hodgson’s review of the 2006 Charities Act (which in fact did not report until July 2012, after the consolidating 2011 Charities Act had been passed), which went over these perceived difficulties in some detail. 

Ultimately, the Law Commission felt that it was impossible to assess whether transactions were too small to merit the need for valuation advice, partly because that could only be assessed by appropriate valuation advice in the first place to confirm how small they were.

However they have made some helpful proposals, including: 

  • statements in contracts

Charity trustees must currently certify that the valuation procedure has been carried out in documents disposing of legal interests in land.

Other parties to the transaction have the comfort that they can rely on the certificates.

However, the regime does not currently apply to contracts for sales or leases, which means there is no certificate in those documents upon which the other party to the transaction can rely.

The proposals now are that a similar process should apply to contracts, which will especially be of comfort to people buying property from charities under long-term sales contracts, conditional on the buyer applying for and obtaining planning permission. This can often be an expensive and time-consuming process.

  • RICS qualification not always to be required for valuer

The Law Commission has also recommended that the requirement to use a RICS surveyor should be moderated depending on the transaction. 

They are promoting the very good idea that it should be possible instead for an individual with a greater range of possible professional qualifications (including fellows of the National Association of Estate Agents and fellows of the Central Association of Agricultural Valuers) to give the advice in circumstances that they consider appropriate.

Very importantly, as a protection for charities however, the individual giving the advice must certify that that advice is within their expertise.

  • simpler rules for the person giving the report

The Law Commission has proposed helpful provisions to replace those currently contained in the QSR. 

The current detailed stipulations in the QSR (which include for example, a requirement on the surveyor to produce plans or measurements for the property despite the fact that charity trustees will usually be well aware of the layout of the property on the ground) appear to confuse some valuers. The level of detail tends to obscure the fact that these are additional directions to be taken into account in relation to what is in fact, otherwise a professional engagement by the charity.

The new version of the regulations would generally require the advice to be geared towards valuation, marketing and other things which might enhance the value of the land, rather than bogging the valuer down in the unnecessary details of the current QSR. It will make valuers aware that what is required goes beyond a ‘current use’ valuation but leave them space to use their know-how and expertise to produce a report focused on the actual desired outcome of obtaining the best financial outcome for the charity.

Generally – a good effort

There are other detailed provisions which are helpful. There are nevertheless other instances where many thought reform was appropriate but there are no plans for change.  It is, however, never possible to please everyone and generally it looks like the outcomes of the first material review since 1992 should be positive.

Visit the Law Commission website for further information on technical issues in charity law.