If you are a charity trustee and you are considering purchasing property in your charity’s name, there are various requirements that you will need to consider or that will need to be dealt with before the purchase can take place.

Charity trustees have legal duties under the Charities (Protection and Social Investment) Act 2016 and the Trustees Act (2000) to ensure that the charity’s money is invested in a way which both achieves a financial return for the charity and directly furthers the charity’s purposes. Accordingly, when deciding whether to buy property in the charity’s name, the charity trustees should consider the following:

  1. whether they should obtain professional advice regarding the proposed investment (e.g. from a surveyor, an agent, a solicitor or tax adviser). If such advice is obtained, this needs to be carefully considered;

  2. whether it is in the interest of the charity to make the investment – the trustees need to be satisfied on this point;

  3. whether the property is suitable for the charity’s purposes and where the property is being acquired as an investment, the trustees are required to consider and periodically review the income or capital growth generated, management expenses, liabilities and relative liquidity of the property;

  4. the financial terms of the transaction and its affordability;

  5. the property’s VAT status (ie. whether VAT will need paying in addition to the purchase price which can occur in respect of a commercial property);

  6. whether the price is fair compared with similar properties on the market.

Once the above has been considered, this should be noted in the charity’s board minutes.

Other matters to be aware of are as follows:

      1. In order to protect the trustees, a limitation of liability clause should be added to the legal documentation on a purchase stating that liability of the trustees is limited solely to the assets of the charity and does not extend to any personal liability. A minimum of 2 trustees will need to sign the documentation and certain forms of execution are required, along with a “Prescribed Statement” that needs to be included in the Transfer Deed and which will impose obligations on the trustees on any future sale of the property (see point (d) below). The Land Registry will insert the statement onto the title deeds when they register the purchase so as to ensure that these obligations are indeed carried out on any future sale.

      2. The Charity is very likely to obtain full (or at least) partial relief from Stamp Duty Land Tax (SDLT). The relief is lost and SDLT becomes payable on the purchase however if, within 3 years of completion of the purchase, the charity continues to own the property but either (a) ceases to be a charity established solely for charitable purposes or (b) the property ceases to be used for charitable purposes or as an investment, the profits of which are applied solely for the purposes of the charity.

      3. The trustees will need an order from the Charity Commission to purchase the property if the property is being purchased from a trustee or ‘connected person’ to the charity. Connected persons include (but are not limited to) a child, parent, grandchild, grandparent, brother or sister of any trustee, an officer, agent or employee of the charity, the spouse or civil partner of any person listed above or a person carrying on business in partnership with any person listed above.

      4. When registering the purchase by the Charity at the Land Registry, if the Charity is a “non-exempt charity” (which most charities will be) the Land Registry will automatically enter what is known as a ‘restriction’ on the property’s title deeds warning future buyers that the property is owned by a charity and as such, that certain requirements will need to be met before the land can be sold by the charity in future. Accordingly, before any future sale of the property by the charity, the charity trustees will need to:

        1. obtain and consider a written report on the proposed sale from a qualified surveyor;

        2. advertise the sale for such period and in such manner as is advised in the surveyor’s report;

        3. decide whether the trustees are satisfied, having considered the surveyor’s report, that the terms on which the sale is to be made are the best that can be realistically obtained for the charity;

        4. as opposed to a sale, if the charity wanted to grant a lease of the property, other restrictions would apply and the trustees would need to take advice on these in due course if required.

The Land Registry will require evidence that the above requirements have been complied with before registering any future sale.

For advice as a charity trustee on the purchase of a property for your charity, please contact our commercial property team on 0845 287 0939, by email, or through the online chat below.