Charity Services Unit – Case Studies

To illustrate the nature of the issues that arise during the consideration of applications by the Charities Regulator’s Charity Services Committee, we have created a series of anonymised case studies based on applications submitted to the Charities Regulator.??

The Charity Services Committee is a subcommittee of the Board of the Charities Regulatory Authority (“the Charities Regulator”). It was established to assist the Board in carrying out the functions previously vested in the Commissioners of Charitable Donations and Bequests. These include authorising the disposal of charity property, appointing new trustees in certain circumstances and vesting charity property in trustees and framing of Schemes of Incorporation and Cy-Près Schemes.

We will be publishing a series of case studies on the Charity Services Unit Page of our website.?

Case Study – Sale of Charity Property with Development Land Potential – s34, Charities Act 1961

A religious charity with a large property in an urban area with scope for development of residential dwellings submitted an application to the Charities Regulatory Authority (“The Charities Regulator”) for authorisation of sale for full market value of the property. Payment for the property was partially cash, partially restoration works to the property (still in use by the charity) and partially contingent on the price per unit that would ultimately be achieved by the developer when selling the houses.

?A number of years after the charity agreed the terms of sale with the developer, subject to planning and regulatory approval, it submitted its application for authorisation to the Charities Regulator. The valuation report submitted made it apparent that the property was not marketed for sale on the open market making it very difficult to ascertain if full open market value (“OMV”) was being obtained for the charity property. An opinion on OMV will always be more accurate if the market has been tested.

?Another issue was that while the valuation report was comprehensive, it was addressed to the developer’s lenders. This was not acceptable to the Charities Regulator as the purpose of the valuation report is to establish from the charity’s perspective that it is getting full OMV for its charity property. The valuation report should always be prepared for the benefit of the charity and on its instruction.

?Additional assurances and documentation were sought and obtained from the charity, including an independent valuation report from a different auctioneer, before the Board of the Charities Regulator granted authorisation of sale of the property.

Top tips

• Charities should engage the services of an auctioneer prior to making a decision to sell charity property. Auctioneers can provide advice on the options for marketing and maximising the value that can be achieved from a sale. Charities should not agree a price for the sale of charity property before seeking professional advice from an independent auctioneer.
• The Charities Regulator follows a robust process when authorising the sale of charity property, taking into account numerous matters including the best interests of the charity and the Regulator’s role in enhancing public trust and confidence in the sector. We take a pragmatic approach and support charities by guiding them on the governance standards that are expected to be applied in making decisions to sell charity property; and the supporting documentation that will ultimately support those decisions.
• The Charities Regulator provides services to charities pursuant to the Charities Acts 1961 and1973, including the authorisation of sale of charity property, at its discretion. All applications initiate a legal process. They must be reviewed by the Authority through its sub-committee, the Charity Services Committee (the “CSC”). The CSC makes recommendations to grant or refuse an authorisation to the Board of the Charities Regulator which makes the decision in each case.
• Charities must be up to date with their statutory obligations including filing their annual reports with the Charities Regulator and must ensure that all details relating to their charity are up-to-date on the Register of Charities before submitting an application to the Charities Regulator under the Charities Acts 1961 and 1973.