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Changes to Charities Act 2022 welcome but opportunities missed

August 30, 2023
Charities Act 2022
On 14 June 2023, the Charities Act 2022 came into effect, updating the Charities Act 2011 which contains all the statutory powers and obligations that charities have to comply with.

Included in the changes were updates to Section 119 of the Act, which deals with the statutory requirements of charities in relation to the sale of property assets.

But what has changed and how will this affect charities large and small? Senior Surveyor, Andrew Soane, explains.

What is Section 119?

Section 119 of the Charities Act 2011 covered charity obligations in relation to the sale of property, including freehold and leasehold assets over seven years.

It also addressed property rights such as easements and rights of way or wayleaves which can include granting permission for utility companies to install fibre optic broadband across a charity’s land, for example.

Ahead of selling a property asset, under Section 119, charities were required to obtain a written report similar to a Red Book Valuation of the proposed disposal. Previously, this had to be done by a Royal Institution of Chartered Surveyors (RICS) Registered Valuer.

The property also had to be advertised in accordance with the surveyor’s report, which would be written in line with The Charities (Qualified Surveyors Reports) Regulations 1992. There was also a requirement to report on specific things about a property which had no bearing on its actual disposal.

In short, the process was intensive and costly for charities which is why changes to Section 119 have been made under the Charities Act 2022 to modernise it.

The aim of the changes was to simplify the process of selling property and bestow more powers upon trustees of charitable organisations. This in turn would allow them to deal with more of the process themselves and enable them to rely on the best adviser for their properties.

However, whilst the changes are welcome, the benefits for smaller charities are questionable. So, what has changed and how might it affect your registered charity?

“In short, the process was intensive and costly for charities which is why changes to Section 119 have been made under the Charities Act 2022 to modernise it.

Andrew Soane, Senior Surveyor, Vail Williams LLP.

New Section 119 Report Requirements

The contents required in the Section 119 valuation report have been simplified and now cover five core points.

  1. The value of the relevant land.
  2. Any steps which could be taken to enhance that value.
  3. Whether and, if so, how the relevant land should be marketed.
  4. Anything else which could be done to ensure that the terms on which the disposition is made are the best that can reasonably be obtained for the charity.
  5. Any other matters which the adviser believes should be drawn to the attention of the charity trustees.
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These changes do a great deal to simplify and modernise reporting requirements and should mean that the type and nature of the advice charities receive, is more akin with how other organisations would receive such advice.

It will also ensure that charities are well aware of what steps they could make to improve the potential success of their property disposal.  These changes do a great deal to simplify and modernise reporting requirements and should mean that the type and nature of the advice charities receive, is more akin with how other organisations would receive such advice.

It will also ensure that charities are well aware of what steps they could make to improve the potential success of their property disposal.

Greater flexibility in adviser requirements

As part of the changes, the definition of the designated adviser required to undertake a Section 119 report has also been widened to include:

  • A fellow of the Central Association for Agricultural Valuers (CAAV).
  • A fellow of the National Association of Estate Agents (NAEA Propertymark).

Opening this up to other organisations should improve the level of competition within the market and ensure charities can seek advice from the adviser best placed to deliver it.

The adviser still has to have the appropriate ability and experience but, significantly, they can now also be a trustee, officer or employee of the charity, provided there is no conflict of interest.

This does offer greater flexibility for charities to deal with property disposals themselves but will only really benefit larger charities who are more likely to have such expertise in-house.

However, for smaller charities, or those with property of low or negligible value, there has been a missed opportunity to improve the property disposal process.

Whilst the changes to the Charities Act 2022 are welcome, they do not support smaller charities to act quickly and prudently amid changing market conditions.

For example, one small charity who recently wanted to grant a wayleave for a fee of around £150, had to obtain a Section 119 report at a cost significantly higher than the fee for the wayleave, because it met the requirements of Section 119 of the Charities Act 2022.

Circumstances like this can have a significant knock-on effect that may not be obvious to a charity, so it is important for them to have professional representation.

However, the requirements of the legislation mean that it is difficult to provide this in a cost-effective manner, which is both pragmatic and proportional.

We would like to see this be addressed by Government, at a time of high inflation and low charitable funding.

It is more important than ever for charities to be able to manage their property assets effectively, to release capital or consolidate their position. As such, charities need to understand the requirements of them under Section 119, because if they don’t, it could result in property transactions falling through.

For help and support with your statutory requirements under Section 119 of the Charities Act 2022, Vail Williams’ property valuation experts can help.