Skip to content

Laying the groundwork

Insight

aerial view of land

For many charities, real estate will be among their most valuable and complex assets; consequently, disposing of land will frequently be among the most significant decisions charity trustees will make and one that should be considered with care.

The statutory regime that governs disposals of charity land by registered charities, now enshrined in Part 7 of the Charities Act 2011,[1] has evolved significantly over the years. Where once charities might have been required to seek authorisation from the Charity Commission for England and Wales (the Commission) or the court, the modern regime is lighter touch. It aims to protect charity assets from imprudent, reckless or dishonest decisions of charity trustees by requiring them to take prescribed steps to ensure that disposals of charity land are made on the best terms reasonably obtainable. Reforms introduced by the Charities Act 2022[2] (the Act) have further streamlined the regime, with a view to both making it less burdensome and addressing some of the practical difficulties charities previously encountered in seeking to comply.

This article focuses on the statutory regime; however, it is important to note that this is not the only, or indeed the first, thing charity trustees should have in mind when considering a disposal. Equally important is the need to understand (if necessary, by conducting appropriate due diligence) how and by whom property is held, what powers are available in relation to it and whether any trusts or other restrictions may apply.

What is charity land?

This sounds like a simple question, but the position can be complicated where land is held by, or in trust for, multiple beneficiaries including charities and non-charities.

Changes introduced by the Act clarify that, for the purposes of Part 7, land is held by or in trust for a charity only if the whole of the land being disposed of is held either:

  • by the charity solely for its own benefit and not as nominee or in trust for another person; or
  • in trust solely for the charity.

Part 7 no longer applies where, for example:

  • the land being disposed of is left, and has been appropriated or assented, to multiple beneficiaries under a will, one or more of which is a charity; or
  • a charity is one of several beneficial joint tenants or tenants-in-common of land and the trustee
    of the land is disposing of the entirety of it.

What counts as a disposal?

This is another ostensibly simple question that does not always have a simple answer. What counts as a ‘disposal’ is not defined in statute and is not always straightforward. Although, clearly, it will cover a sale or transfer of freehold land, or granting, assigning or surrendering a lease, it also includes less obvious transactions such as granting or releasing an easement (eg, a right of way), or granting an option or pre-emption right (eg as part of a proposed development). In some cases, particularly where a more complex scheme is proposed, it may not be immediately apparent that a disposal is involved.

Transactions excluded from rules

Certain types of disposal are specifically excluded from the Part 7 regime, including:

  • Any disposal by a charity that is exempt from the requirement to register with the Commission, or that is specifically or generally authorised by an Act of Parliament or scheme.
  • Certain leases to beneficiaries for less than best rent.
  • As a result of reforms under the Act, liquidators need no longer comply with the Part 7 requirements.

A specific exception for the colleges and halls of Cambridge, Durham and Oxford Universities, as well as Eton College and Winchester College, comes to an end on 19 May 2025.

A notable exception concerns disposals of land by one charity to another for less than best price – for example, where a discount is offered because the buyer intends to use the property for shared charitable purposes. This exception has been narrowed so that any disposal to another charity which satisfies the broad statutory definition of ‘social investment’ will now fall within Part 7.[3] This means that only disposals of land by one charity to another that are solely in furtherance of the purposes of the transferring charity and involve no element of financial return continue to be excluded. Where there is a financial return, the disposal will fall within Part 7, as will charity-to-charity disposals on commercial terms.

What the Part 7 regime now requires

The default rule remains that charity trustees cannot proceed with a land disposal unless they are authorised to do so by an order of the Commission or court or have complied with the requirements of Part 7. Compliance with Part 7 now requires charity trustees to have:

  • obtained and considered a written report from a ‘designated adviser’ on the proposed disposition; and
  • decided that they are satisfied, having considered the report, that the terms are the best that
    can reasonably be obtained for the charity.

Similar but less stringent requirements apply to leases which do not exceed seven years in duration. Changes to the rules mean that:

  • Charity trustees now have more choice as to whom they can obtain advice from. A ‘designated adviser’ now includes an estate agent or agricultural valuer,[4] as well as a fellow or professional associate of the Royal Institution of Chartered Surveyors (RICS).
  • Provided they are suitably qualified, a charity trustee or officer/employee of the charity can provide the ‘designated adviser report’ (DAR). However, caution is required if a charity relies on advice in such a report that is later found to be deficient, as recourse to external insurance may be limited. Care must also be taken to observe the strict rules regarding trustee benefits and conflicts of interest where they apply.
  • The prescribed content for a DAR now takes a broader approach than the previous,[5] more prescriptive requirements.
  • The author of the DAR must self-certify in it that they are competent to give the advice and not conflicted.
  • If the DAR advises advertising the disposition, charity trustees must consider the advice but are no longer required to follow it.
  • The unwieldly requirement for charity trustees to certify their compliance with the Part 7 rules has been jettisoned. There is now a more straightforward requirement to include a statement in both the instrument that affects, and any contract for, the disposition, to confirm either that the regime has been complied with or that the transaction falls outside it.

In making decisions regarding land disposals, charity trustees are advised to have regard to their general duties and adhere to principles of good decision making, including managing any associated conflicts of interest.

Some complexities remain

Despite the recent reforms, some aspects of the regime continue to require particular care, as follows.

Connected persons

A disposal of charity land to a connected person (which includes a charity trustee, employee, donor of land and persons connected to them, and also still includes any wholly owned subsidiary of the charity) must still be authorised by the Commission.

Residential leases

The grant of a residential lease to an employee for a term of under a year no longer requires the Commission’s consent, which will be helpful to charities such as schools which routinely lease property to staff. However, the personal tax consequences of such arrangements should be carefully considered.

Designated land

Additional procedural steps must still be followed where a charity wishes to dispose of land held for stipulated purposes (often called designated or specie land).

Timing of the DAR

The vexed question of the timing of advice has yet to be resolved. In more complex transactions, it is considered best practice to commission an initial report at an early stage on what is likely to be considered ‘best terms’, and a final report once detailed terms have been negotiated with a prospective purchaser.

The importance of getting it right

The rules include protections to ensure that acquisitions of charity land by purchasers in good faith will usually be valid even where charity trustees may have failed to comply with their statutory obligations. However, such failings may significantly complicate or delay a disposal if not addressed promptly and may ultimately require or result in regulatory intervention by the Commission.

Well-advised charity trustees will, therefore, take seriously their obligations under the regime and prioritise seeking appropriate professional support at an early stage.

[1] Charities Act 2011, Part 7.
[2] Charities Act 2022.
[3] That is, a relevant act of a charity carried out with a view to both directly further the charity's purposes and achieve a financial return for the charity, per s.292A of the Charities Act 2011.
[4] That is, a fellow of the Central Association of Agricultural Valuers or a member of Propertymark at fellow grade.
[5] Set out in the Charities (Dispositions of Land: Designated Advisers and Reports) Regulations 2023.

This content was originally published in STEP Journal: Issue 2, 2025, see here.

This publication is a general summary of the law. It should not replace legal advice tailored to your specific circumstances.

© Farrer & Co LLP, April 2025

Want to know more?

Contact us

About the authors

Laetitia Ransley lawyer photo

Laetitia Ransley

Partner

Laetitia specialises in advising charities, not-for-profits and philanthropists. She is experienced in working with a broad range of clients, from private individuals wishing to explore their philanthropic options, to long-established institutions wishing to effect significant constitutional, governance or structural change.

Laetitia specialises in advising charities, not-for-profits and philanthropists. She is experienced in working with a broad range of clients, from private individuals wishing to explore their philanthropic options, to long-established institutions wishing to effect significant constitutional, governance or structural change.

Email Laetitia +44 (0)20 3375 7152
Back to top