Changes to the Charities Act You Should Know About

What’s happening?

During this year’s Queen’s speech, it was announced that the Government would begin to update the Charities Act. The updates will be based on a series of recommendations made by the Law Commission in a report that was published three years ago. 

What are the updates?

There were 43 recommendations in total, covering lots of different aspects of charity law. But we’re most interested in those relating to property transactions.

How will property transactions be affected?

It is still not formally legislated, however, if the Law Commission’s recommendations are adopted later in the year, it looks likely that:

• Charities will no longer be obliged to consider the written advice of a Chartered Surveyor when disposing of an interest in land or property.
• The role of ‘designated adviser’ will be introduced. This could be a Surveyor, but it could also be someone reasonably believed by the charity to have the necessary skills and experience to value the land. A designated advisor can provide the advice required. 
• Charities will no longer be obliged to market the land or property, unless the designated advisor makes that recommendation. 
• A designated adviser could also be an employee of the charity, or a local estate agent for example. The only requirement is that they have the necessary valuation skill and experience. 

Why are the changes being made?

During the Law Commission’s review, some of the larger charities that make frequent land transactions suggested that the Surveyor’s report was unnecessary and too bureaucratic. For low value transactions, the cost of obtaining the report was out of all proportion to the value it added. 

For example, obtaining a report for £1,000 did not make sense if the land was only worth £7,000. 

Other respondents felt there was inconsistency amongst how Surveyors produced the reports. 

What does TSP think about this?

We agree that the requirement for a qualified Surveyor’s report was sometimes unnecessary. We ourselves have written reports relating to lease surrenders (technically a ‘disposal’ or sale) and assignments, that really were not necessary.  They were low value transactions, represented a very low risk to the charity, and were simply viewed as box ticking exercises to comply with the Act. The fact that these are no longer required is a good thing. 

The proposed changes do however introduce a new risk. For charities that do not make frequent land transactions, poor advice could result in a significant loss. 

Organisations with few assets should still get the advice of an independent external advisor. The risk is that someone employed by the charity (for example a Trustee or senior manager) may feel qualified to advise. However, without access to the most recent transactional evidence, or awareness of market trends, it is difficult to do so with a high degree of accuracy. This is understandable. It is not easy to run a charity portfolio while also retaining a working knowledge of local markets. 

Equally a local estate agent may not be truly independent, or have an awareness of the charities objectives and best interests. 

For this reason, we still think it is sensible to get a report from a Surveyor for high value transactions. 

You would say that, you’re a Surveyor!

That’s true, but we don’t want to see charities lose out through poor advice or outright fraud, which now seems more plausible than it was previously. 

You don’t have to use TSP, any good Surveyor will do!

If you have any questions about this you can always contact us. 

Do I still need a Surveyor’s report if the law is changing?

Yes, until the Charities Act is formally updated, a qualified Surveyor’s report is still required.