Updates to the Charities Act 2022: recent changes in charity property law

Posted: 25/04/2024

Charities play a crucial role in society, and as such, it is essential for charities and their trustees to stay informed about changes in the legal landscape that governs them. The Charities Act 2022 underwent various updates in October 2022 and then again in June 2023. Recently, there have been further changes, with the latest tranche having come into effect on 7 March 2024 as a result of the Commencement No 3 Regulations.

These regulations introduce new rules governing the disposal and mortgaging of charity land, and provide welcome clarification on existing rules. The key changes are set out below.

Exception for disposals to other charities

The Charities Act already contained an exception to the usual restrictions on disposing of charity land where the relevant disposal is being made to another charity. This exception can, in certain circumstances, allow for land to be disposed of other than at the best price reasonably available in the market.

The update clarifies that the exception for disposing of charity land to other charities at less than the best price will only apply when the disposal is solely intended to further the transferring charity's purposes. It also notes that the exception may apply even where the charity’s governing document does not include an express provision authorising a disposition. It is important to note that the restrictions will apply where a disposal is made with the intention of achieving the best price, or as a social investment.

This change in emphasis to focus on the intention behind the transaction is a helpful gloss on the existing legislation and should give charity trustees greater confidence in deciding when it is appropriate to rely on this exception from their usual statutory obligations.

Dispositions by liquidators, receivers, mortgagees and administrators

The update confirms that dispositions or mortgages of charity land by liquidators, receivers, mortgagees and administrators will not be caught by the general restrictions on charity land disposals, on the basis that these parties are already subject to their own professional duties. Again, this is a pragmatic approach aimed at reducing the burden of double regulation previously affecting such dispositions.

Specific statements required in disposal documents

The Charities Act now requires charities to include specific statements in certain instruments specifying whether part 7 of the Charities Act 2011 applies to the disposal. Most notably, these statements will now need to be included in contracts to effect a disposition, rather than just the disposal deed itself (eg in a freehold sale, the prescribed statements will need to be included in the sale contract as well as in the transfer deed).

This change in practice should encourage the parties to a disposal to consider at an earlier point in the transaction the effect that the Charities Act will have on their disposition. Being able to build time for the required processes (eg obtaining a surveyor’s report or Charity Commission consent) into transaction timelines from the outset should reduce delay and help to manage all parties’ expectations more effectively.
It is noted that HM Land Registry has updated its practice guide 14 to reflect this change and also provide useful guidance on the revised statements.

Conclusion

The Charities Act 2022 has already undergone various updates, with more on the horizon. These updates are designed to streamline the governance and operation of charities, and this pragmatic approach is welcome; however, the continuing changes can be tricky to navigate.

Should you have any queries on the topics mentioned in this article, or if you would like advice on how these changes may impact your charity, please do not hesitate to get in touch with Laura Gorman, Laura Tozer or your usual Penningtons Manches Cooper contact.

This article was co-written with Laura Tozer, associate in the commercial real estate team. 

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