Charity law overhaul: the latest changes that affect charity land, constitutions, trustees and mergers

The rules and regulations affecting UK charities have been unwieldy and burdensome for some time. Recent changes brought about by the Charities Act 2022 aim to add clarity, reduce bureaucracy and give charities more flexibility, saving time and money. These changes affect charities in England and Wales. 

The most recent changes to come into force, known as the ‘third tranche’, affect charity land, charity constitutions, the appointment and renumeration of trustees and charity mergers. 

As charities welcome the opportunity for improved efficiency, lawyers will need to adapt to the consequential changes to advice and legal drafting. Non-charities need to be aware of the changes if they are dealing with charity land. 

This article highlights how the ‘third tranche’ will affect charity land, constitutions, trustees and mergers.

Changes to charity land rules

There are several changes to rules around charity land, which aim to reduce administration time and cost whilst providing greater flexibility to charity trustees: 

• The Charities Act 2011 restricts certain dealings in land by charities without an order of the court or the Charities Commission, subject to a number of exemptions. These exemptions have now been extended to include dispositions by liquidators, receivers, mortgagees and administrators, since the nature of these roles is to obtain the best price for the charity in any event.
• The rules relating to charity-to-charity disposals of land have been clarified.
• There are changes to the statements and certificates required for charity land disposals or mortgages, including:
  • Streamlining the rules of both surveyors’ and designated advisers’ reports.
  • Widening the group of professionals that charity trustees may consult on a disposition.
  • Introducing new statements in the instrument affecting the disposition or mortgage.

Crucially, charities that dispose of land must include in the contract, not just the transfer, a statement confirming that restrictions against the disposition of charity land and statutory provisions have been complied with. 

Constitutions, trustees and mergers

Other changes brought about by this tranche will impact more directly on charities themselves: 

• Changes to the governance of charity constitution will provide greater powers and flexibility for trustees, whilst reducing administrative burdens.
• The Charity Commission will have greater powers over charity trustees, including the ability to ratify defective trustee appointments and to order a charity to pay a trustee who has carried out work for the charity.
• Clarity has been provided for gifts to a charity following a merger, in order to prevent legacy gifts failing and falling into the residuary estate, where a charity has merged before the date of gift.

Previous reforms introduced by the Charities Act 2022 also provided increased powers for charity trustees and simplified some technicalities, whilst reserving the power of significant decisions to the Charity Commission. The final few changes, relating to ex-gratia payments, are expected to come into force later this year.

For further information please contact Ben Tarrant or John Toth.