Charity Landlords: Coronavirus (COVID-19) and the June Quarter Day

In light of the upcoming June quarter rent payment date, we anticipate that a number of charity landlords will be approached by their tenants for some sort of rent concession, rent holiday, rent suspension or rent deferral. Hopefully landlords will already be in discussions with their tenants about what rent will be paid on or before 24 June, but please be aware that if you are a charity which has let property, there are extra requirements that you need to be aware of: 

  1. The trustees have to act in the best interests of the charity, which includes any dealings relating to the charity’s property and any changes to existing rental agreements. Legally, to agree to such a proposal, the charity needs to check whether it has an express power in its governing document to “compromise or settle” claims. If it does not, then an unincorporated charity (e.g. a trust or association) will need to confirm that it is content to rely on the power under section 15(f) Trustee Act 1925 to “compromise, compound, abandon, submit to arbitration, or otherwise settle any debt, account, claim or thing whatever relating to the … trust” but in relying on this power, they must remember to exercise their statutory duty of care, to act as is reasonable in the circumstances. For charities which are established as a company or as a charitable incorporated organisation (CIO), then the general powers to manage the company or CIO will include a power to compromise or settle claims, but again the charitable company or CIO must use reasonable care, skill and diligence in making that decision.
  2. If the charity is being asked to waive rent altogether or accept a reduced rent for a certain period, then ultimately the charity is agreeing to waive the claim it has against the tenant for full payment of the rent. In order to agree to such a proposal, the charity should check whether it has an express power in its governing document to “compromise or settle” claims or, in the absence of an express power, confirm that it is content to rely on the power under section 15(f) Trustee Act 1925 to “compromise, compound, abandon, submit to arbitration, or otherwise settle any debt, account, claim or thing whatever relating to the … trust”. In exercising the power to “compromise or settle” claims, the trustees must remember to exercise their statutory duty of care, to act as is reasonable in the circumstances.

To protect the charity and ensure that the trustees can justify the decisions they are making, we strongly recommend that the reasons for agreeing to any changes in rent payments are documented in writing and include the trustees’ reasoning.   

We are experienced in advising charities on these sorts of matters, so please do not hesitate to contact us to talk things through.

The law and practice referred to in this article or webinar has been paraphrased or summarised. It might not be up-to-date with changes in the law and we do not guarantee the accuracy of any information provided at the time of reading. It should not be construed or relied upon as legal advice in relation to a specific set of circumstances.

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