Those dealing with charity land will not be surprised that the topic of regulation of disposals of land split consultees to the 2017 Law Commission report “Technical Issues in Charity Law”. The Government’s response to the Law Commission is set out in the recently published Charities Bill 2021.
The Commission’s recommendations accepted by the Government will:
- Enable Charities to have access to a much wider pool of professional advisors on land disposal, and to more straightforward rules on what advice they must receive, which could save them time and money when selling land;
- Avoid the need for Charity Commission consent for short term residential tenancies for employees of the charity and its agents, such as wardens. However, disposals to wholly owned subsidiaries still require consent;
Under the current regime, when disposing of freeholds or leases of over 7 years, Charity Commission consent is required unless the statutory procedure under the Sections 117 to 119 of the Charities Act 2011 is followed. This procedure, currently, involves obtaining a written report from a RICS surveyor, which complies with the Charities (Qualified Surveyors’ Reports) Regulations 1992 the form of which has been criticised.
It is proposed that the range of specialist advisers who can provide advice in relation to land transactions should be expanded to give charity trustees more flexibility to determine an adviser that is best placed to provide advice in relation to a transaction, recognising that different transactions should have tailored treatment.
The category of designated advisers will now also include:
- fellows of the National Association of Estate Agents and fellows of the Central Association of Agricultural Valuers; and
- qualified charity trustees, officers and employees.
The reform means that trustees and employees are now permitted to provide advice – as they can for mortgages. However, are the advantages of obtaining advice from trustee and employees simply illusory?
The National Trust is quoted as saying the current regime, of obtaining third party advice, is “an expensive box ticking exercise”. However, will it be necessarily appropriate to take advice from trustees or employees?
The Consultation touches upon the issue of insurance against incorrect advice. Given the current state of the insurance market now, the availability of insurance is even more of a live issue than in 2017.
Charities cannot expect that their general insurance policies will include cover for trustees who gives advice in their capacity as an RICS advisor or, more likely, for an RICS surveyor who is an employee. Charities will need to explore the availability of such insurance cover with their insurance broker should they have thoughts of going down this route. The good news is that the insurance market is a nimble and entrepreneurial market, readily looking to supply insurance solutions to risk; the bad news is that ultimately current risk appetite of insurers will determine that interest or not.
The Law Commission stated that these considerations should be explained in the Charity Commission’s guidance on selecting designated advisers. Some charities may not have the “luxury of time” to await the guidance. In which case they may prefer to check or receive contractual assurances about the professional indemnity cover limits of their third party surveyors
The advisers will be required to self-certify that they: (i) have the appropriate expertise and experience to provide the advice that is required; (ii) do not have any interest that conflicts, or would appear to conflict, with that of the charity.
For further information on this issue, please call the partner with whom you normally deal with or Stephen Netherway or Andrew Crawford.