A recent Charity Commission investigation provides a helpful reminder to Managing Trustees about the importance of fulfilling charity law requirements when they sell, lease of otherwise dispose of property. The case highlights that not only do Managing Trustees need to fulfil the specific requirements set out in the Charities Act 2011, but they need to be able to demonstrate that the decision has been reached in accordance with the general duties placed on charity trustees.
On 5 September 2018, the Charity Commission published a case report following their investigation into the behaviour of the trustees of the charity Imamia Mission London (UK). The charity had run a Mosque and Community Centre in Newham, East London since 1985 which the charity wanted to sell in order to relocate.
The investigation by the Charity Commission was carried out following a demonstration by protestors and the submission of a petition objecting to the trustees’ decision to sell the charity's premises and relocate to Ilford four miles away. The Charity Commission found the trustees had failed to properly consult the community regarding their decision. The case report can be viewed via the link below:
Charity Case Report - Imamia Mission London UK
The Key Facts
- Concerns were raised with regard to the charity’s membership and election procedures and it was alleged that there had been financial irregularity with the sale of the property. However, no evidence was found to substantiate any claim of misconduct in relation to the financial element of the disposal and it was also found that the trustees had acted in accordance with the Charities Act 2011. There was no conflict of interest found and although extremely unpopular, the decision to sell the property did not fall beyond the range of decisions a trustee body could reasonably make.
|Please note that this article has been amended since it was originally published on 14th January 2019, to insert the word 'no'.|
- However, the Charity Commission was worried about the way the trustees had made their decision to sell the property; the principles of trustee decision making require trustees to consider all the relevant factors. The Charity Commission considered that the views of the charity’s members and its beneficiaries was a relevant factor which was not adequately considered by the trustees. As a result of their lack of planning, the trustees could not prepare an accurate assessment and action plan to mitigate the risks arising from public opposition to their decision, including potential litigation and damage to the charity’s reputation.
- The Charity Commission said; ‘the trustees had clearly failed to properly communicate and consult with members of the charity or its beneficiaries about the relocation given the significant 4 mile distance to the new property. It was expected the trustees would consider the impact on members and beneficiaries and properly prepare them. Attempts to inform the community, such as notices after Friday Prayers, were insufficient, thereby exposing the charity to the possibility of reputational damage.’
- The Charity Commission issued the trustees with formal regulatory advice under section 15(2) of the Charities Act 2011. This takes the form of an 'action plan' which is aimed at minimising further disruption and addresses the community’s concerns. The relocation was able to proceed but was under careful scrutiny from the Charity Commission, which stated that further failure to comply with trustee duties may result in more serious regulatory action.
Whilst the charity trustees in this case had complied with the charity law aspects of the disposal of the land they should have also ensured their decision making process would bear scrutiny. Even in trying to do the right thing for the charity their actions resulted in unwanted publicity and potential damage to the charity’s reputation.
What this means for the Managing Trustees
This investigation illustrates that the Charity Commission does investigate matters when concerns are raised by the public and the importance of Managing Trustees being able to show that they have fulfilled the Charities Act 2011 requirements. It also explains what the Charity Commission expects to see from charity trustees generally in terms of their decision making. In particular, Managing Trustees need to be able to demonstrate that they have considered all the relevant factors and sufficiently and effectively consult with members of the managing trustee body and beneficiaries. Beneficiaries would include the local community as well as the wider Church family. Managing Trustees need to show that they have considered the risks and addressed the same before making a final decision.
There have recently been a number of cases where third parties have contacted TMCP ‘claiming’ that Managing Trustees are not fulfilling their duties as charity trustees. It is important to be aware that whilst there are people in the community that may have a genuine concern there are also those that may have different motives, such as a rival developer or someone who lost out on the purchase of a property. In these recent matters Managing Trustees were able to show that they had been fulfilling the charity law and Methodist law and policy requirements and their wider duties as charity trustees.
What these recent matters did highlight is how, more than ever, it is vital that Managing Trustees can demonstrate fully and clearly all the steps they have taken when reaching a decision. The Report by the Charity Commission shows there is more to trustee duties than complying with legislation. Managing Trustees will benefit from ensuring there is a clear paper trail showing evidence of any meetings and consultations that have taken place, with a clear record detailing factors that have influenced any decisions the Managing Trustees make.
It is also important to note that in instances such as these, charity trustees could potentially find themselves personally responsible for any loss suffered by the charity as a result of poor decision making.
If Managing Trustees have any queries relating to a sale or other property transaction and the requirements under charity law and Methodist law and policy, then please do not hesitate to contact TMCP Legal.
If Managing Trustees have any queries or concerns in relation to their responsibilities as charity trustees generally please contact the Conference Office.
The Managing Trustees will also find detailed guidance on making significant or strategic decisions, such as the disposal of property on the Charity Commission’s website. Please refer to the Charity Commission guidance via the link below:
The key principles set out in the Charity Commission guidance when making decisions are to:
- act within your powers
- act in good faith and only in the interests of the charity
- make sure you are sufficiently informed
- take account of all relevant factors
- ignore any irrelevant factors
- manage conflicts of interest
- make decisions that a reasonable trustee body could make
It is vital that the Managing Trustees follow these principles when making decisions, such as the sale, lease or other disposal of property.