At your disposal

In addition to statutory obligations (see the previous article on property law for charities, 'Well disposed', Solicitors Journal 153/34, 15 September 2009), charities have specific obligations in respect of excepted disposals, specie or 'designated' property, and section 31 statements and certificates.

Excepted disposals are where the charity need not comply with section 36 of the Charities Act 1993 (listed in sections 36(9) and (10)). They include cases where general or special authority is expressly given by scheme or statute; where the disposition is made to another charity either as a gift or for less than the best price obtainable; or where the disposition is the grant of a lease at a reduced rent to a beneficiary of the charity for a charitable purpose of the charity (see the full list at solicitorsjournal/charities).

An order of either the Charity Commission or the court will be required where, for whatever reason, the requirements of section 36 cannot be (or have not been) complied with; or where the disposal is to a connected person (see schedule 5 to the Charities Act 1993); or where there is a conflict of interest.

Specie or 'designated' property

Specie property (called 'designated land' by the Charity Commission) is land that is required, by the charity's governing document, to be used for a specific purpose of the charity. While not common, it is not unusual to come across specie property (almshouses are often specie property), and there are particular provisions to be complied with when dealing with it. Particular attention should be paid to whether or not there is a power of disposal in relation to specie land.

If the charity is not intending to replace the specie land, it is unlikely it can continue using the existing purposes and it may need to go to the Charity Commission for a scheme to provide new purposes.

In all cases where specie property is being disposed of and not replaced, the charity must (as well as complying with section 36(3) or (5) as applicable) give public notice of the disposal inviting representations (unless, and this would be rare, the Charity Commission waives the requirement at the charity's request, or section 36(7) applies i.e. the disposal planned is a lease of less than two years or the land is to be replaced and held on the same trusts as the original land). The notice period must be for at least one month and the charity must consider any representations received. The type and location of the notice will depend on the size and type of both the property and the charity but the minimum requirement would probably be a notice at the property and another in the local newspaper.

Section 37 statements and certificates

Section 37 sets out those statements and/or certificates to be included in the contract and/or instrument effecting the disposal. The Land Registry Practice Guide 14 (LRPG14) is extremely useful. Remember it is the duty of the charity trustees or their solicitor to ensure the statements required under section 37 are included and are in the correct from.

Section 37(1) applies to all charities (including exempt charities). It requires that any contract for a disposition of land held by or in trust for a charity and any instrument effecting a disposal of land must contain a statement setting out:

• that the land is held by or in trust for a charity;
• whether the charity is exempt and whether the disposal is one falling within section 36(9)(a), (b) or (c) (i.e. whether it is excepted from the requirements of section 36); and
• if the charity is not an exempt charity and the disposal is not excepted from the section 36 requirements, that the restrictions on disposition imposed by section 36 apply to the land.

The statement in the instrument effecting the disposal must follow the exact wording as set out in rule 180 of the Land Registration Rules 2003 (the wording is reproduced in LRPG14). There is no set wording for the statement to be included in the contract but in practice the same wording is generally used in both the contract and the instrument effecting the disposal.

Section 37(2) sets out that where land held by or in trust for a charity is disposed of, the instrument effecting the disposal must include a certificate by the charity trustees that either an order of the court or the Charity Commission has been obtained; or that they have the power to dispose of the land and that they have complied with section 36(3) or (5) as applicable. The wording of the certificates is set out in LRPG14.

Even where a corporate charity owns the land, it is the charity trustees as individuals who must give the section 37(2) certificate '“ not the corporate body. In the case of a charitable company, therefore, it will be the company directors who will give the certificate since they are the trustees (being the persons having the general control and management of the administration of the charity '“ section 97 of the Charities Act 1993). The section 37(2) certificate will mean that the directors of the corporate charity will be parties to the instrument effecting the disposal as well as the corporate charity.

Having all of the individual trustees as parties to the instrument effecting the disposal is not always practical and a section 82(1) resolution can usually be passed by the trustees (whether they are directors of a corporate charity or trustees of an unincorporated charity) authorising two of their number to give the certificates on all of the trustees' behalves.

How can buyers purchasing property from charities protect themselves? Read Jane Lonergan's comments