Parties to a lease
Where an organisation has corporate status it has a legal personality. This means that the charity can enter into contracts, including tenancies, in its own name. The commonest forms of corporate organisations are registered companies, community and benefit societies, and charitable incorporated organisations. Unincorporated organisations include unincorporated associations and charitable trusts.
- Corporate organisations are strategically managed by a board of management (consisting of directors, committee members or trustees for registered companies, community benefit societies and charitable incorporated organisations respectively). [Constitutional and organisational requirements]
- The individuals making up these boards of management will not be personally liable to third parties except in extreme and unusual circumstances usually involving some element of deliberate fraud or recklessness on their part. [Personal and limited liability]
- There are some formal requirements that must be included in leases to charitable corporations. It must be clear from the document that the charitable corporation is not only a charity but also the specific type of corporation.
- Where the organisation is not a corporation it cannot enter into legal obligations in its own name. Somebody with legal personality must contract in the name of the charity. The organisation’s constitution, if well-drafted, should set out how persons are to be appointed as holding trustees and authorised to hold property, including tenancies, on behalf of the charity.
- Usually the number of “holding trustees” appointed in this way will be specified. For the sake of convenience, this number will often be significantly less than the number of trustees who make up the management board or executive committee.
- An alternative is for the organisation’s property to be held in the all of the names of the management committee.
- An unincorporated charity’s property may instead be vested in the Official Custodian for Charities by applying for a Charity Commission order. The charity trustees can be a party to and sign documents in the name of the Official Custodian.
- In other circumstances leasehold property may be vested in another charity which is a registered company in trust for the tenant’s charity. These situations are however less common, and very uncommon in the case of short term tenancies.
- It is also possible for charity trustees to be incorporated under Part VII of the Charities Act 2011, in which case the lease can be granted in the name of the trustees together. However the charity itself remains unincorporated and there is no limited liability as there is with corporate organisations.