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Charities are reminded of the pitfalls in selling charity land

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The Charity Commission has publicly reported its concerns in relation to the sale of charity property and concluded that the trustees of the Spiritualist Association of Great Britain were responsible for serious mismanagement in the way they disposed of certain charity property (with property being sold on for £21million by its new owners shortly after the charity had disposed of it for £6million).

The report criticised the failure by the trustees to obtain a report from a surveyor who was suitably qualified as required under charity law for a disposal of this type.  It found that the trustees failed to seek independent specialist advice about how to ensure the charity would benefit from a possible post-sale increase in the value of the property if a change in the use of the property and/or enfranchisement was secured.

It highlighted that the charity should have known that a commercial company would only purchase the property if it had good reason to believe it would secure enfranchisement or successfully negotiate a change of use. The inquiry also concluded that the trustees failed to conduct proper due diligence into the buyer of the property (a shell company with no assets) and failed to take proper account of concerns raised by the charity’s solicitor before the sale was completed.

The regulatory criticism stands despite the fact that there was a financial imperative to dispose of the property, there being only one purchaser and the fact that a retrospective valuation of the property subsequently obtained by the charity supported the sale price (although this was considered to be a mitigating factor and may have contributed to why no further regulatory action was taken).

Harvey Grenville, Head of Investigations and Enforcement, reminded all charities that disposing of charity land can involve complex arrangements, which charities need to be careful about and obtain proper professional advice on, including trying to get the best deal for the charity and complying with the specific legal requirements that apply in charity law when selling or leasing charity land or property.

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