Top tips for charities acquiring land

We consider here some of the key factors for trustees to consider when they are acquiring land or property (whether freehold or leasehold) for a charity. 

• The trustees need to ensure that they have the power to acquire for the intended purposes. This should be considered before the acquisition process begins. Charities can (subject to the specific powers each charity has) acquire land for investment purposes (i.e. an income-producing investment), for carrying out the charity’s own purposes, or a mixture of both. 

• Does the acquisition fit with the charity’s strategic view?

• Valuation and “deal” advice should be obtained by the trustees. One key point to address will be satisfying themselves that the property is being acquired at a reasonable price and the charity is not overpaying. 

• The Charity Commission strongly recommends that trustees obtain a report from a “designated adviser”. Read their guidance here: Acquiring land - GOV.UK

• Funding will, naturally, be critical. The trustees will need to be satisfied that the charity can afford the acquisition. For example, if the charity is acquiring a lease they will need to ensure that the charity can afford the rent for the duration of the lease term. 

• If the charity is acquiring the land by means of a loan, which may then also involve a charge, there will be further separate matters to consider. 

• The trustees should obtain legal advice and undertake due diligence on the property. For example:

  • carrying out searches, for example to establish whether the property is connected to mains water and sewer services; 
  • checking that the property has the necessary planning permissions; and 
  • if the property being acquired is leasehold, the lease terms should be reviewed to confirm that they are reasonable. 
  • checking that the property can be used for its intended purpose and that there are no restrictions preventing its intended use; 

The above is a summary of some of the key points. There are, of course, other factors that trustees will need to consider on a case by case basis.

Please do get in touch if you would like to discuss any of the above in more detail.