Procedures

Charities Act procedures property held for specific purposes

Charities Act procedures property held for specific purposes

Where a charity holds property that is held for a specific purpose or to be used as such for the purposes of the charity,  and the charity intends to dispose of it commercially then there is a statutory public notice procedure under section 121 of the Charities Act 2011.

  • This provision can apply in a number of circumstances for example: where the property is subject to a restriction on use which means that it cannot be disposed of without Charity Commission consent; or where there is a stipulation relating to use of the property but Charity Commission consent is not required for disposal. (whether or not there is an obligation to use the proceeds of sale to purchase a replacement property or for the proceeds of sale to be used for similar objectives).
  • Generally, these provisions  will only apply to trust rather than corporate property.  However, it does also probably apply in the occasional situation where a corporate charity’s objects require it to use a particular property for a particular purpose.  This might arise in the case of a charity established to hold and manage heritage assets, or an open space held on charitable trusts.
  • The exceptions to this requirement are: where the operation of the section is excluded by section 117(3) of the Charities Act 2011;  where the disposition is a lease for two years or less without a premium; or where replacement property will be acquired subject to the same restrictions. Section 117(3) relates to certain dispositions to other charities, leases to beneficiaries, dispositions with statutory authority etc. (See below for further details).
  • Under section 121 of the Charities Act 2011, prior to entering into a binding obligation for the disposal, the charity trustees must: give public notice of the proposed disposal for at least a month; invite representations; and take those representations into consideration before proceeding.
  • No requirements are specified in relation to how public notice should be given.  Common sense dictates that notice should be given in such a way as it might come to the attention of an interested party.
  • As such,  it might be sufficient  for a local charity to give notice in a local newspaper.  However, if the property was gifted by will, the family of the donor might potentially be interested and notice in a national newspaper might be considered appropriate.  In the case of an organisation with a membership, the members should be notified, and if the organisation has an in-house publication, it would be appropriate to include notice in that as well.
  • Trustees should consider any representations as required by the statute and as a matter of good practice should minute their deliberations and send an acknowledgement prior  to those making representations.
  • There is however no requirement to do anything as a consequence of the procedure apart from  consider the representations.  If trustees were to change their disposal strategy as a  result of representations made,  this may be an indication that they had not discharged their duties of strategic management of the charity in the first place.
  • These statutory provisions are separate from anything that may be required with regard to disposal of the property in the charity’s constitution, or specifications regarding the application of the proceeds of sale.