Well disposed

There may be very good reasons for a charity to dispose of land '“ perhaps to release cash for other projects or to relocate premises. But whatever the reason, the charity trustees, being 'the persons having the general control and management of the administration of a charity' under section 97 of the Charities Act 1993, will want to be completely satisfied that any disposal is properly managed, is in the charity's best interests and that the best price obtainable in the circumstances has been achieved.

In this context, a disposal takes place when charity land is conveyed, transferred, leased or otherwise disposed of. The words 'or otherwise disposed of' makes the definition very wide and includes, for example, grants of easements, wayleaves, etc. It does not include licences.

The disposal itself does not take place until the point of transfer or completion of the transaction but beware, many statutory obligations must be complied with before entering into a contract for disposal '“ indeed, in certain cases, the contract (as well as the instrument effecting the disposal), must contain statements setting out that various statutory provisions have been complied with.

Power of disposal

The first point to consider is whether the charity has the power to dispose of land. An express power might be contained in the governing document, e.g. a trust deed or the memorandum and articles (in the case of a charitable company).

Alternatively, the trustees may be able to rely on section 6 of the Trusts of Land and Appointment of Trustees Act 1996 (often referred to as 'the statutory power'). This can only be relied upon where: the land is held on trust; the power of disposal is exercised compatibly with the trust; and the trustees comply with the standard of care set out in the Trustee Act 2000. In certain limited circumstances, there may be other statutory power.

If there are no such powers the charity may need a scheme, order or consent from the Charity Commission to confer the necessary powers.

Follow the procedure

Section 36 of the Charities Act 1993 is the main statutory provision dealing with disposals of land by charities. Its effect is twofold:

• as long as the procedures set out in section 36 are followed, charities may make disposals without, in most cases, having to apply to the Charity Commission for an order; and
• where the charity trustees have given the correct certificates and/or statements, section 37(3) provides an absolute protection to anyone who acquires the land for money or money's worth.

Section 36(3) sets out the procedures the charity trustees must follow before entering into a contract for disposal (other than the grant of a lease of less than seven years).

They are:

• to obtain and consider a written report on the proposed disposition from a qualified surveyor instructed by and acting exclusively for the charity;
• to advertise the proposed disposition for such period and in such manner as the surveyor advises in his report (save where the surveyor advises not to advertise); and
• to decide that they are satisfied, having considered the surveyor's report (usually referred to as a 'section 36 report'), that the terms of the proposed disposition are the best that can be reasonably obtained in the circumstances.

For the purposes of section 36(3) a person is a qualified surveyor if he (or she):

• is a fellow or professional associate of either the Royal Institute of Chartered Surveyors or the Incorporated Society of Valuers and Auctioneers; and
• is reasonably believed by the charity trustees to have ability in, and experience of, valuing land of that type and in the area in question.

The section 36 report must meet the requirements of the Charities (Qualified Surveyors' Reports) Regulations 1991 (SI 1992/2980) and should include:

• a full description of the land (including dimensions and measurements);
• details of how the land is held '“ if leasehold, details of the lease;
• some title matters '“ e.g. onerous restrictive covenants;
• advice as to whether to carry out repairs and/or alterations before disposal;
• advice as to whether or not dividing the land would increase its value;
• the surveyor's opinion on the value of the land;
• advice on how best to sell the land;
• advice on the timing of the disposal (e.g. because of market conditions); and
• any other matters the surveyor believes should be drawn to the charity trustees' attention.

This list is not exhaustive '“ much will depend on the particular circumstances of the disposal.

Be aware that failure to comply with section 36(3) (or, indeed section 36(5) '“ see below) before entering into a contract to effect a disposition will mean the charity must get an order from the Charity Commission before it can complete.

Short leases

Leases of less than seven years (sometimes referred to as 'short-term disposals' by the Charity Commission) are regarded as being a lower risk to the charity and the section 36 requirements are commensurately less onerous. They are governed by section 36(5). Before entering into a contract for a short-term disposal the charity trustees must:

• obtain and consider advice on the proposed disposition from a person who is reasonably believed to have the ability and experience to provide the trustees with competent advice on the disposition; and
• decide that, having considered the advice received, they are satisfied that the terms of the disposition are the best that could reasonably be achieved for the charity.

For obvious reasons, it is important to ensure that security of tenure has been excluded if the charity trustees wish to rely on section 36(5).