The new Charities Regulations 2023

As part of the phased implementation of the real estate aspects of the Charities Act 2022, the new Charities (Dispositions of Land: Designated Advisors and Reports) Regulations 2023 came into force on 14 June 2023 (the 'New Regulations').  

The New Regulations allow charities to obtain advice in relation to disposals of charity land from a wider class of professionals, giving them more choice when appointing a designated adviser for the purpose of section 119 of the Charities Act 2011.  They revoke the Charities (Qualified Surveyors’ Reports) Regulations 1992 (SI 1992/2980) (the '1992 Regulations') and replace the formerly prescriptive regime which established what a qualifying surveyor's report must contain for the purposes of s119 of the Charities Act 2011, with less prescriptive and more general categories of advice which must be included in a s119 report.

Prior to implementation of s19 and s20 of the Charities Act 2022, when disposing of charity land the trustees of the charity had to obtain advice from a surveyor who was a member of the Royal Institution of Chartered Surveyors.  Under the new regime, charity trustees may decide to obtain this advice from a wider category of “designated advisors” which includes fellows of both The National Association of Estate Agents (PropertyMark) and The Central Association of Agricultural Valuers as well as qualified charity trustees, officers and employees.

The New Regulations seek to redress some of the criticisms surrounding the inflexibility of the 1992 Regulations by being less prescriptive about the content of designated advisors' reports.  They set out a few broad categories of information that must be covered in such a report:

1. the value of the relevant land;
2. any steps which could be taken to enhance that value;
3. whether and, if so, how the relevant land should be marketed;
4. anything else which could be done to ensure that the terms on which the disposition is made are the best that can reasonably be obtained for the charity; and
5. any other matters which the adviser believes should be drawn to the attention of the charity trustees.

The New Regulations allow advisors to self-certify their competency to provide the advice requested by the charity in the report.  

Although the New Regulations are less prescriptive than the previous regime, the matters which the advisor is required to consider and report on are unlikely to be much different in practice than under the 1992 Regulations. Therefore, the scheme of advice covered by reports governed by the New Regulations is unlikely to look or feel vastly different to their predecessors governed by the 1992 Regulations. It could be argued that the job of the advisor is made more demanding under the less prescriptive New Regulations as the burden of having to report generally on anything that might enhance the value of the property or which should be drawn to the attention of the charity, could imply a duty to consider and report on aspects which they would have been required under the previous regime .  

Undeniably however, the New Regulations do allow the advisor to focus more on matters which are applicable to the property in question, and no longer require them to advise or report on matters which are less relevant to the proposed disposal, in order to satisfy the requirements of the 1992 Regulations.  This will no doubt be welcomed by the professionals involved and trustees alike.

 Whilst the New Regulations go some way to redressing some of the historic criticisms of the old regime, not all have been addressed.    One vagary not clarified by the New Regulations is whether the 'advisor' can be the same person or entity which was responsible for marketing the property or arranging the transaction.  These individuals will often have the best working knowledge of the proposed disposal, but might not be familiar with the requirements of the Charities Act 2011. This can be compensated for, to an extent, and we often provide a template report (which we have updated for the New Regulations).  However, this does not address the question as to whether these individuals are able to demonstrate sufficient impartiality in circumstances where they have been intimately involved with bringing a larger or more complex transaction to market.  

Presently, there are transitional arrangements under the Charities Act 2022 in place which provide that the 1992 Regulation will still apply to reports commissioned before 14 June 2023, in respect of disposals which will take place after this date.  For the time being therefore, the 1992 Regulations will remain relevant in limited circumstances, but it will be interesting to see how the process and content of reporting evolves under the new regime going forward.