Charity Property Law: A Trustees' Guide to Asset Management | LegalDocuments.co.uk

Overview

Charity property law is the body of rules that governs how registered charities and other non-profit bodies acquire, hold, dispose of, and charge land. It sits at the intersection of general property law, trust law, and charity-specific statute, and it exists because charity land is not the trustees' personal asset, it is held for the public benefit purposes set out in the charity's governing document.

For most charities in England and Wales, the key statute is the Charities Act 2011 (as amended by the Charities Act 2022, which introduced a number of reforms to simplify land transactions). The Act imposes particular procedural requirements on what it calls 'disposals' of charity land, which include sales, leases over a certain length, and grants of other interests.

Separate rules apply where a charity wants to take out a mortgage or other secured borrowing. This guide is an overview for trustees considering a property transaction. It is general information, not guidance on any particular property or charity. Every transaction turns on its own facts, the type of charity, the wording of the governing document, how the land is held, and who the proposed buyer or tenant is.

Key steps

1. Confirm the charity actually owns the property and has power to deal with it. Start by checking the title at HM Land Registry and reading the governing document (trust deed, constitution, articles of association or Royal Charter). You need to be clear who the legal owners are, often a custodian trustee, holding trustees, or the Official Custodian, and whether the governing document places any restrictions on disposing of, charging, or changing the use of the land. This is the foundation of every later decision.
2. Decide whether the transaction is genuinely in the charity's best interests. Trustees owe fiduciary duties to act in the interests of the charity and to further its purposes. That means considering why the transaction is happening, what alternatives exist, what the land is currently used for, and whether the proceeds or terms will advance the charity's objects. Minute the discussion properly: a clear written record of the reasoning is your best protection if the decision is later questioned.
3. Follow the Charities Act 2011 requirements for the type of transaction. For most unconditional sales and for leases over seven years to parties who are not 'connected persons', trustees must normally obtain and consider a written report from a designated adviser (typically a qualified surveyor), advertise the property as recommended, and be satisfied the terms are the best that can reasonably be obtained. Shorter leases and some other disposals follow a lighter-touch procedure, but the duty to act prudently still applies.
4. Take special care with 'connected persons' and designated land. Disposals to a trustee, an employee, or another connected person generally require prior authorisation from the Charity Commission or the court. If the land is held on 'special trusts' for a particular purpose, for example a parcel gifted for use as a recreation ground, extra requirements apply, and you may need to give public notice of a proposed disposal and consider any representations received before proceeding.
5. Deal with mortgages, certificates, and completion properly. If borrowing is secured on charity land, trustees must first obtain written advice on whether the loan is necessary, the terms are reasonable, and the charity can repay it. On any disposal or mortgage, the correct statutory certificates must be included in the contract and transfer or charge, confirming the procedural requirements have been met. Without the right wording, the Land Registry will raise requisitions and completion can be delayed.

Common questions