The Charities Act 2022 (the “Act”), which became law in February last year, introduces a wide range of reforms which are set to make drastic changes to the operation of charities in England and Wales. In this article we explore some of the biggest changes, with a particular focus on land powers, and outline how charities may be affected. In particular, these changes will likely be of interest to Local Authorities who are sole trustees of charities or trust land within their administrative area.
Which provisions in the Act are currently in force?
With a balance between enacting the provisions as quickly as possible and charities having sufficient time to prepare in mind, the Government indicated there would be three phases to the provisions in the Act coming into law. Phase one has already taken place, and in October 2022 provisions were brought into force which included the following:
- Royal Charter or Act of Parliament Charities– Charities regulated by Royal Charter have been granted new powers to amend any provision in their Charter (provided the Privy Council consents) without having to petition for a Supplemental Charter. Similarly, Act of Parliament charities can now amend their schemes (utilising the “section 73 power” from the Charities Act 2011) using the lighter-touch negative parliamentary procedure.
- Power to the Court and Charity Commission to make Schemes– The Act confirms that the Charity Commission and Court have the power to make Schemes for charitable companies, CIOs or any other charities.
- Remuneration to Charity Trustees providing goods or services to charities– The power for charities to pay a charity trustee (or persons connected to them) has been expanded. It now applies to the provision of goods generally (not just those connected to services) and applies in addition to any other power the charity may have to make these payments.
- Trust Corporation Status– Charities which are bodies corporate will automatically be given trust corporation status.
When will the remaining provisions come into force?
Phase two is expected to take place in Spring 2023 (although there are no clear dates on this yet), and will introduce changes including the following:
- Permanent endowments– The current statutory definition of permanent endowment (property which is intended to be held by the charity forever) will be reformulated. Amendments are intended to both improve clarity and allow charities more flexibility to use the permanent endowment.
- Charity Land– The new provisions will increase flexibility around the disposal of charity land, which is explored in more detail below.
- University and College Estates– The University and College Estates Act 1925 will be repealed, and universities and colleges which would be covered by it will be granted all the powers of an absolute owner (subject to the restrictions in Part 7 of the Charity Act 2011 (as amended) on disposing or mortgaging charity land).
The provisions in phase three are expected to come into force in Autumn 2023, and include the following:
- Charity Constitutions– The most significant change includes making it easier for an unincorporated charity to alter their purposes or change administrative provisions in their governing document if the alteration does not change the substance of the charitable purposes. Smaller unincorporated charities are also given the power to resolve to transfer all their property to another charity (if the unincorporated charity has an income of up to £10,000 without any designated land).
One area of the Act which would grant charities the power to make small ex gratia payments and to delegate the decision to make ex gratia payments in accordance with the charity’s governance structure is under further consideration and has not yet been given a date for implementation.
Disposal of charity land under the Act
One of the areas of the Act which will be of much interest to charities will be the provisions on disposing of charity land.
Restrictions on disposal
The Act creates a new section 117(1A) of the Charities Act 2011, which limits the general restriction on disposing of charity land to apply only where the whole of the land is being held either:
- By a charity solely for its own benefit and not as nominee or in trust for another person; or
- In trust solely for that charity.
This means the exclusions will not apply if a charity is one of several beneficial joint tenants, several tenants in common of the land, it has been left to several beneficiaries under a will, or the trustee of the land holds it on trust for a number of beneficiaries, one or more of which is a charity.
The Act will also delete the current requirement for the disposition to be authorised by the trusts of the charity (though the explanatory notes make clear that this will not allow a charity to make a disposition which is not permitted by its governing document.)
Charities will also be able to grant a residential lease to a Charity employee for short periodic or fixed term tenancies without needing to seek the approval of the Commission.
Obtaining Advice and Advertising Disposals
The formalities regarding who can advise charity trustees on disposals of charity land will be expanded beyond RICS accredited surveyors to “designated advisers”, which could include suitably accredited estate agents and agricultural valuers. Qualified charity employees, officers and trustees will also be able to provide a report.
All designated advisers will have to certify they have appropriate expertise or experience to provide the advice and they do not have any conflicting interest or interest which would appear to conflict, which should be carefully considered if the designated adviser is a person connected to the charity.
The provisions will also simplify the requirements on what the report should contain in a move away from the current prescriptive regulations. Additionally, although charities will have to consider any advice on the form of advertising which is given by the designated adviser, they will no longer have to automatically advertise in this way.
Provision of information in certain instruments
The Act also clarifies provisions relating information which must be included in contracts for disposition of charity land. Namely, a statement must confirm that either the charity has the power to sell under its trusts and that ss117-121 have been complied with, or that the disposition has been sanctioned by order of the court or the Commission.
The changes brought in by the Act touch a wide range of charity law, potentially increasing flexibility and reducing administrative burdens on charities. Significantly, it appears charities dealing with property will be able to do so in a more straightforward way, including by being able to make use of suitably qualified trustees, officers or employees when disposing of charity land.
While the requirements have been relaxed, it is important to remember they have not been removed entirely. Considerable thought should be given to matters such as whether the restrictions on disposal of land still apply, ensuring all required disposal formalities are complied with and what form any notices of disposals should take. Local authorities who are sole trustees of charities in their administrative area will likely benefit from the increased pool of advisors which can advise on potential disposals (especially given the prescriptive regulations that are currently in force).
Grappling with the governance and administration of such local authority sole trusteeships is commonplace and we are on hand to advise in appointed trustees in their obligations, duties and best practice when discharging these functions. We have extensive experience advising on charity land disposals, including those involving local authorities who discharge trustee obligations on behalf of the local authority appointed as sole trustee, and our public sector specialists are on hand to assist charities to understand their rights and obligations under the Charity Act 2022.
This article is for general awareness only and does not constitute legal or professional advice. The law may have changed since this page was first published. If you would like further advice and assistance in relation to any issue raised in this article, please contact us by telephone or email firstname.lastname@example.org