Property considerations for Charities
Property transactions involving a charity require specialist advice. There are a number of restrictions within charity law, additional rules and procedures to follow when disposing of land, purchasing land or mortgaging land as a charity. It is important to get it right.
The legislation in this area is complex with different rules and procedures depending upon whether the charity is “exempt” or “non-exempt” and the type of transaction.
If a charity is involved in any of the following, specialist legal advice should be sought:
- A conveyance or transfer
- The grant or surrender of a lease
- The grant of a easement or right of way
- A mortgage or charge
Disposals of land by charities
A charity cannot dispose of land without an order made by the court or the Charity Commission unless the charity trustees follow specified procedures prior to exchange of contracts. Additional procedures apply if the land being disposed of is used for the purposes of the charity (often referred to as “designated land” or “specie land”).
However, if the disposal of land is to a connected party only the court or the Charities Commission can authorise the disposition.
There are exceptions to the above, such as dispositions of land by exempt charities and dispositions made between two charities.
There are also prescribed statements that must be included in the contract, transfer or other documents effecting the disposition which applies to both exempt and non-exempt charities.
Mortgages of land by charities
There are similar but separate procedural requirements and prescribed statements in regards to mortgages of land but these only apply to non-exempt charities.
A non-exempt charity cannot mortgage or charge land held by it without an order made by the court or the Charity Commission unless the charity trustees obtain and consider prior written advice on the mortgage.
These rules apply to a new mortgage as well as further advances under an existing mortgage.
For more insight into charity law in relation to property, please find our related
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