Following on from the article above, we continue our focus on the government’s response to the Law Commission’s recommendations by turning to consider property law aspects. The Government’s response shows that it accepts most of the Law Commission’s recommendations.
The recommendations & response:
- Designated advisers and advice
Selected highlights of the recommendations and response are:
- One of the proposals is to afford charity trustees more flexibility in how they obtain the requisite advice when charities sell property, enabling trustees to obtain “advice which is tailored to the transaction”. Currently, charities can only obtain advice from a member of the Royal Institute of Chartered Surveyors.
- The proposal extends the permitted advisers to include estate agents and agricultural valuers and also suggests that confirmation is given that, if they are suitably qualified, charity trustees, employees and officers of the charity may provide advice under sections 119(1)(a), 120(2)(a) and 124(2).
- The Government has accepted this recommendation.
- The recommendation also lists the advice that will be required and requires the advisor to provide a self-certification that they are appropriately qualified and do not have any conflicts with the charity.
- Again, the Government has accepted this and has also agreed that there should be no statutory requirement to advertise a disposition.
- Connected persons – Trading Subsidiaries/Employees
- Presently, there is a requirement to get Charity Commission consent when a charity is making a disposal of land to a “connected person”.
- The Report recommends varying this requirement such that, to take one example, a charity disposing of land to a wholly owned subsidiary, would no longer require Charity Commission consent (provided that the Charity Commission is notified of the disposal).
- However, the Government has rejected this and decided that wholly-owned subsidiaries should not be excluded from being a “connected person”. The Government is particularly wary of the risks of conflicts of interest between charities and their subsidiaries not being dealt with properly. The Charity Commission was known to be concerned about this given the history of problem cases.
- The Report also recommends excluding short residential tenancies to employees from the requirement to get Charity Commission consent.
- The Government has accepted this recommendation which we are sure many charities will welcome.
- Designated land
- When making a disposal of ‘designated land’ (land held under trusts which stipulate that the land is to be used for the purposes of the charity, for example recreation grounds, almshouses, school and village hall properties), there are various legal requirements regarding public notice of the proposed disposition.
- The Report proposed removing this requirement on the basis that general trustee duties are adequate in themselves.
- However, the Government has rejected this recommendation stating that the requirement is important as a means of enabling beneficiaries and stakeholders to be informed and allowing them to make representations before assets of this kind are disposed of.
- Stone King comment
The Law Commission and the Government are seeking to protect charity land in its support for charitable objects and to help trustees “do the right thing” in pursuit of that. This involves both requiring and enabling trustees to deal with charity land in a way which is proportionate and appropriate. This is to be welcomed.
At one stage in the (long and effective) consultation process it was feared that the proposed de-regulation of land transactions might risk charity land being approached with too light a touch, responding to understandable concerns by some large landholding charities (with highly competent in-house teams) that they were unnecessarily burdened by the costs of compliance. It seems to us difficult to frame law that works in an ideal fashion for such charities and the huge range of smaller and less “property savvy” charities, given the importance of land assets to many charities and the huge range of property types and transactions the law looks to cater for.
However, it seems that the recommendations, and the Government’s response, look to strike a good balance between protecting charity assets, maintaining the trust of the public and enabling charities to manage their land portfolios efficiently.
Having been closely involved in the consultations as consultee, Stone King will be making observations to DCMS both on their response and other observations we made on the Report, in hope to inform DCMS in its thinking about the proposed legislation.