Holding the keys

In the current economic climate many practice areas are 'a little quieter' and, after several hectic years, property practitioners have been the hardest hit. Many businesses and individuals are reluctant (or, frankly, unable) to take on the commitment involved in acquiring land. While the third sector is not immune to the economic downturn, charities do appear to be in the lucky position of being able to take advantage of lower prices and increased landlord flexibility as they continue to acquire land.

Competition for the reduced amount of work out there means practitioners are perhaps taking on work in areas where they are less than completely fluent '“ some are almost entirely unfamiliar with the specifics involved in acting for a charity client in a property transaction.

Power to acquire

The starting point is to ascertain that your charity has the power to make the acquisition. The governing document may contain an express power. If the charity is a company limited by guarantee there will usually be an appropriate power in the memorandum of association. In the case of an unincorporated charity (for example, a trust), if there is no express power in the trust deed then the trustees would usually be able to rely upon the statutory powers contained in the Trustee Act 2000. These include the power to acquire freehold or leasehold land in the UK as an investment, for occupation by a beneficiary, or for any other reason.

When acquiring land a trustee has a duty to exercise such care and skill as is reasonable in the circumstances having regard to any special knowledge or experience he has (or holds himself out as having) and, if he acts as a trustee in the course of a business or profession, to any special knowledge or experience that it is reasonable to expect of such a person.

To discharge that duty of care trustees should generally consider several points, including ensuring that the land is suitable for the charity's purposes and that it is not subject to any restrictions; that the purchase price is a fair one (usually trustees would seek a surveyor's report); and that the charity can afford the purchase. Where the charity is acquiring land as an investment then the trustees will usually need to take proper advice on the suitability of the land as an investment.

Who will be making the acquisition? Is it a corporate body? Are there individual trustees? Will the land be held in the name of a nominee? Some charities, particularly the larger national household name charities, have very sophisticated trading structures and it is important to ascertain which organisation will actually acquire the land. Furthermore, at this juncture, it is often worth reminding charities that, notwithstanding the form of the charity, the duties imposed by the Charities Act 1993 fall on the charity trustees (being 'the persons having the general control and management of the administration of a charity') not the charity itself.

Practical matters

There are several practical administrative matters to look at. For example, your charity might have a very large number of trustees; section 82 of the Charities Act 1993 allows the body of trustees to confer on at least two trustees a general or limited authority to execute deeds on behalf of all of the trustees. In the case of an unincorporated charity, this will save you having to obtain the signature of every single trustee to your deed (always assuming all those trustees are in the country). Remember, however, section 82 is distinct from delegating the actual decision-making power to acquire land '“ such powers to delegate would usually derive from either the governing document or the Trustee Act 2000.

Section 37(5) of the Charities Act 1993 deals with acquisitions of land by charities. It applies to both exempt and non-exempt charities and sets out that any transfer or lease (or contract for transfer or lease etc.) to a charity must contain a statement relevant to that charity. The Land Registration (Charities) Rules 1993 (SI 1991/1704) prescribe the statements to be contained in the deed where the land is already registered, or the disposition will trigger first registration; while there are no prescribed statements for contracts or other deeds that do not trigger registration, it is probably simplest and safest to use the same form of statement.

You should also consider the seller from whom the charity is acquiring the land. Is it from a 'connected person'? If so, you will need an order from the Charity Commission to avoid the risk that the purchase might subsequently be set aside because of a conflict of interest. Is the charity acquiring from another charity? It is a common mistake to assume charity-to-charity transactions are automatically exempt from the requirements of section 36 of the Charities Act 1993. Section 36(9)(b) does allow charities to make gifts or disposals at an under value to other charities where the disposal is authorised under the trust of the disposing charity. However, where your charity is acquiring from another charity with different objects, there should be full compliance with section 36.

This is vital to a purchaser since failure to comply with section 36 will mean that the disposal is void or voidable. Sections 37(3) and (4) afford some protection to purchasers, but the burden of proof required to show that a purchaser for money or money's worth acted in good faith is extremely high (see Bayoumi v Women's Total Abstinence Educational Union Ltd [2004] Ch 46). Indeed, it will probably only assist where a purchaser could not reasonably have known the land was held by a charity. You cannot rely upon a section 36 surveyor's report obtained after the event '“ the only way to retrospectively cure the defect is for the disposing charity to get an order from the Charity Commission.