In March 2017 the Charity Commission published a report on its findings following an inquiry into a charity that had disposed of leasehold property to a company for £6,000,000. The company immediately resold the property for £21,000,000 being a significantly higher sum than it had purchased the property for from the disposing charity. This will be of particular concern for Managing Trustees in making sure that they seek appropriate professional advice at the outset and during a proposed sale of Methodist property.
In this inquiry the Charity Commission found that that the charity trustees had failed to demonstrate that the steps taken by the charity and their decision making was in the best interests of the charity. In particular the charity trustees had failed to comply with Sections 117-122 of the Charities Act 2011 which amounted to fundamental and serious mismanagement. The charity trustees had also failed to conduct proper due diligence, get specialist and independent advice on how to obtain the best price (including the imposition of overage) and procure, follow, or take account of appropriate specialist advice. When selling the property the charity trustees did not initially instruct solicitors who were charity law specialists and they instructed a surveyor who not only prepared two reports that did not comply with the Charities (Qualified Surveyor’s Reports) Regulations 1992, but also did not have the appropriate qualifications.
Whilst there were mitigating factors as to why further regulatory action in the case was not appropriate, it is important for charity trustees to instruct suitable professionals to assist with the complexities of disposing of valuable charity assets. As we know selling a charity’s assets can, in some instances, generate very significant amounts of money which can then be used to further the charity’s purposes. Managing Trustees as charity trustees must ensure that they have properly assessed the risk to the charity and before entering into transactions with third parties, they need to undertake such due diligence as may be appropriate. Failing to do so or where assurances cannot be obtained, it must be seriously questioned as to whether the charity trustees should proceed.
For details of the full inquiry please visit the Charity Commission website.
You can also read the press release on the case.
Managing Trustees who are considering disposing of Methodist property will also find useful guidance on the TMCP website, including information on the statutory requirements of the Charities Act 2011 and when to instruct a legal adviser.
If you have any queries on the legal requirements and/or steps that Managing Trustees must adhere to when disposing of charitable property then you can also contact TMCP Legal and a member of our legal team will be happy to assist you.