New rules for charity transactions

The Charities Act 2022 received Royal Assent on 24 February 2022. It promised to simplify and modernise the regulation of charities in England and Wales. It has been implemented in phases and on 7 March 2024 the long-awaited changes to the charity land regime came into force. Most transactions involving charity land are now subject to the new rules. So, what are they and how might they impact you?

A welcome new exception to the rules

Since 7 March 2024, a new exception to the general restrictions on disposing of or mortgaging charity land applies. Liquidators, provisional liquidators, receivers, mortgagees and administrators are no longer subject to the restrictions on disposing and/or mortgaging charity land.

These professionals may dispose of or mortgage charity land without either an order of the Court or Charity Commission, or having to comply with the relevant provisions of the Charities Act 2011. This change reflects the fact that these individuals are already subject to professional obligations and duties to seek the best terms.

Changes to required statements and certificates

The information that must be included in the statements and certificates for both charity land disposals and mortgages has changed. For transactions with an effective date on or after 7 March 2024, the charity trustees no longer need to certify, in their personal capacity, that they/the charity has complied with the relevant restrictions. Instead, all instruments relating to the transaction (e.g. contract, charge, conveyance, lease, etc) must contain a statement that there is power under the trusts of the charity to effect the disposition/mortgage and that the restrictions have been complied with.

While there is little substantive effect on how these new provisions operate, the change ensures consistency at each stage of the transaction and simplifies the execution of documents. The person responsible for providing the statement is the same person responsible for executing the document. In the case of an incorporated charity, this means documents no longer need to be executed separately by the charity, as the party to the transaction, and by the charity trustees in their personal capacity, to provide the certificate.

However, the previous statements and certificates continue to apply to dispositions/mortgages of charity land which are made pursuant to a contract/agreement which is dated before 7 March 2024. Please be mindful of this when dealing with complex or protracted transactions, for example a sale pursuant to an option agreement or a new mortgage connected to an existing facility.