Sales of Charity Land – The Law has Changed

21 June 2023

The property parts of the Charities Act 2022 quietly came into effect on 14 June 2023.  Or rather, most of them did.  This is the most significant change to the law relating to sales of land held on behalf of charities for more than 30 years, so the lack of any real publicity is surprising.  That's the way the Act is implemented, not with a bang but a whimper. 

Section 17, and sections 19 to 22, of the 2022 Act came into effect on 14 June.  However, in a major extension to the timescale, sections 18 and 23 of the 2022 Act are only expected to come into effect by the end of 2023.   

Section 17 of the 2022 Act confirms that the property sale provisions of the 2011 Act now only apply where land is held by or in trust for a single charity.  The legal requirements for a report etc do not apply to: multi-charity cases; cases where a charity is selling as executor and has not appropriated the land; or cases of mixed beneficiaries (where land is sold on behalf of both charitable and non-charitable beneficiaries). 

The requirements for the contents of a section 119 report have changed.  They are now dealt with in Statutory Instrument 467/2023.  Its full title is "The Charities (Dispositions of Land: Designated Advisers and Reports) Regulations 2023".  The slimmed-down list of matters to be covered by the section 119 report is now as follows:-

  • The value of the land;
  • Any steps needed to enhance the value of the land;
  • How to market the land;
  • Any other steps to ensure the best outcome for the charity;
  • Confirmation that the adviser has (a) relevant experience and (b) no conflict of interest.

The person preparing the section 119 report no longer has to be a qualified surveyor.  The report can now also be prepared by a suitably experienced and qualified estate agent or agricultural valuer. 

The legal requirement to advertise the land for sale is much reduced.  In practice, however, it is likely that most land sales will still be advertised, as this is the best way to ensure that the charity is getting best value. 

The wider legal duties on charities, in particular the duty to maximise assets, are unchanged.  Charities must still ensure that land which is sold on their behalf is sold for the best available return.  In some cases, charities may still choose to obtain a section 119 report, even where there is no strict legal requirement to do so, to ensure that they are achieving the best result on a sale, particularly in the current difficult market. 

The provisions relating to the statements and certificates which appear in the contract and transfer have not been implemented.  Section 23 of the 2022 Act, which contains these provisions, is expected to come into effect by the end of the year.

So, to draw together some of the points made above, multi-charity cases (cases where land has been appropriated or transferred to multiple charities) are completely outside the scope of the Act, and there is no need either for a section 119 report or for the statements in the sale documents confirming compliance.  However, in single charity cases, the statements and certificates will still need to be included, in exactly the same way as has been the case up to now. 

We suggest the following by way of further reading and useful reference:-

  • The Charities Acts 2011 and 2022 (note that, as at 20 June, the official online version of the 2011 Act has not yet been updated to take these latest changes into account, so if you want to check the wording you need to have both the 2011 Act and the 2022 Act open in front of you);
  • Charity Commission booklet CC 28.  The updated version of this was released by the Commission on 14 June, and it does take account of the changes which have just come into effect;
  • Land Registry practice guidance PG14.  Frustratingly, this has not yet been updated (it was last updated in November 2022), and we presume that they are waiting until the rule changes relating to statements and certificates come into effect.  We are left wondering what the Land Registry and the Charity Commission have been doing in the 16 months since the Charities Act 2022 received Royal Assent – clearly, they were not working together on updating the Land Registry guidance;
  • Statutory Instrument 467 of 2023, which confirms the points to be dealt with in section 119 reports; and
  • The useful official "explanatory notes" to the Charities Act 2022.  These are available online.  If you are ever unsure of the effect or implications of a particular part of the Act, they are always a good starting point. 

It will take a while for both the charity sector and the legal profession to get used to the new provisions, and some uncertainty and confusion seem inevitable over the next few months.

A final footnote regarding sales by auction.  If a charity sells land to a "connected person" (i.e. someone associated with the charity – the precise definition is contained in section 118 of the 2011 Act), such sales must always be authorised by an Order of the Charity Commission.  The newly updated CC 28 states that, where property is sold by auction, the contract must provide that completion of a sale to a connected person is conditional on obtaining a formal Order from the Commission to approve the sale. 

We will provide an update on all matters to do with property sales by charities at our annual seminar in the autumn.

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