Charities & not-for-profit

Selling charity land: the do’s and don’ts
16 October, 2017

When it comes to selling land, with property likely to be the most valuable asset on the books for most charities, trustees are under specific obligations to ensure that any disposal is in the charity’s best interests and that property transactions are properly managed.

 

Earlier this year a Charity Commission (CC) inquiry report into the sale of charity land by the trustees of The Spiritualist Association of Great Britain criticised trustees for failing to act in the charity’s best interests.  Nicola Paffard from Cripps Charities Team discusses the case and the report’s findings here.

 

Meanwhile, what can you do to ensure compliance with statutory requirements when selling or leasing land?

 

  • DO think carefully about the reasons for wanting to sell the charity land.  Trustees must be satisfied that any disposal is in the best interests of the charity.

 

  • DO carefully read the CC’s comprehensive guidance note which fully explains the processes that charities must follow when disposing of land.  Among other things, you may be required to:

 

  • Obtain an order from the Charity Commission or from a court allowing you to proceed with the sale;

 

  • Obtain a statutory form of report from a suitably qualified surveyor confirming that the terms of the sale are the best reasonably available in the market;

 

  • Advertise or market the property for sale/lease in accordance with your surveyor’s recommendations.

 

  • DON’T enter into any binding legal document without obtaining legal advice and/or advice from an appropriate surveyor in accordance with CC guidelines.  This includes option agreements where charities agree to sell property at a later date, and lock out agreements where you agree not to deal with other potential buyers for a set period of time.

 

  • DO take time to check and assess the buyer, the offer and the motivations behind it.  As charity trustees you have a duty to ensure that the charity’s best interests are served.  Most transactions will be straightforward, but if something seems too good to be true, it’s usually because it is.  Your advisors will know what is unusual in the market place, and whether any alarm bells should be ringing.

 

  • DON’T solely rely on advisors who have a strong involvement with the other party in the transaction.  Advisors who receive payment from both parties in a transaction (in one form or another) can be useful in brokering a deal, but it is vital that charity trustees also receive independent advice.  Often as part of a charity sale, the buyer pays the fees of the selling charity’s professional advisors, but your advisory team must understand that they act for you alone, and that the interests of the charity are paramount.

 

  • DO choose your advisors carefully – you should always appoint surveyors and solicitors who, like Cripps, have a strong record of expertise in both charity and property law, to help you navigate the transaction and ensure that the steps you take are fully compliant with your duties.

 

Two people shaking hands

 

For advice on your charity property transaction, please contact Nicola Paffard or Rebecca Crosdil who will be happy to talk through your requirements.


The new Charity Governance Code and why it’s important
6 October, 2017

 

“Apply or Explain”

 

The new Charity Governance Code (the Code) was published in July this year. It has been described as “Essential reading for all trustees” by the Charity Commission who have withdrawn its publication Hallmarks of an Effective Charity (CC10) to encourage charities to use the Code.

 

The contents of the Code should be considered in the context of the negative press coverage received by some charities over the past few years which has to some extent tarnished the whole sector. Research carried out by the Charity Commission in 2016 showed that public trust and confidence in charities has fallen and many of the recommendations set out in the Code are aimed at restoring that confidence.

 

So what does the Code comprise?

 

The Code is made up of seven principles: organisational purpose; leadership; integrity, decision-making, risk and control; board effectiveness; diversity; and openness and accountability.

 

 

Each principle is described together with the rationale behind the principle, key outcomes and examples of recommended practice.

 

Nothing in the Code is a legal or regulatory requirement. However, an ‘apply or explain’ approach is encouraged so that charities engage with what is expected of them and are transparent when for whatever reason they decide not to follow the Code.

 

There are two versions of the Code. One is aimed at larger charities which typically would have income over £1m a year and externally audited accounts. Charities with income less than £1m would generally use the version for smaller charities. Some charities may be governed by sector specific codes and these will sometimes take precedence over the Code.

 

Much of the Code will also apply to other not-for-profit organisations that deliver a public or community benefit.

 

Key recommendations include:

 

  • An expectation that boards should review their own performance and that of individual trustees. For larger charities this should happen annually with an external evaluation every three years.

 

  • No trustee should serve for longer than nine years without being subject to a rigorous review.

 

  • The board should think carefully about diversity, how they recruit a range of skills and experience, and how to make trusteeship an attractive proposition.

 

  • A new emphasis on the role of the Chair and Vice Chair in promoting good governance.

 

  • Greater oversight of any subsidiaries and any agreements with third party providers such as for fundraising.

 

  • Publishing the process for setting the remuneration of senior staff.

 

  • An expectation that the board should consider merger where more than one charity is fulfilling the same purpose.

 

 

So what should trustees being doing now?

 

It goes without saying I’m sure, that every charity trustee should read the Code and then consider with their fellow trustees what actions they may need to take to comply. The Code is a long document (25 pages) but it is clearly set out and is in fact a very useful tool for charities who wish to review their governance.

 

It is acknowledged in the Code that some of its recommendations will be a stretch for some charities. However, this is deliberate and all charities are expected to aspire to reach the high standards set out in the Code.

 

The Code also recommends that trustees include a brief statement in their Annual report explaining their use of the Code. The Charity Commission suggests charities make a feature out of compliance by stating on their website that they have signed up to the Code which in turn may be helpful when applying for grants or seeking donations.

 

In summary, the Code is something to be welcomed by Charities, a road map if you like, to achieve its ambitions and aims.


Charities – are you up to speed with the Fundraising Preference Service?
21 September, 2017

Few will forget the distressing story of Olive Cooke, the 92 year old poppy seller who took her own life in part, perhaps, due to the pressure of countless fundraising requests from charities.

 

One of the responses to this and other similar stories, is the creation of the Fundraising Preference Service (FPS) by the Fundraising Regulator (FR). This went live on 6 July.

 

The FPS allows individuals to stop email, telephone, addressed post, and/or text messages from selected charities (a ‘stop’ request).

 

Only 3 charities can be identified in any online request although further charities can be selected by submitting new requests.

 

Individuals can still contact charities direct to stop communications and in fact the FR encourages this.

 

What do charities need to do to comply with the requirements of the FPS?

 

  1. Charities may wish to actively promote the FPS, on their website for example, to reassure donors that any unwelcome contact can be easily dealt with. The FR has created a number of resources to help with this.

 

  1. Charities spending more than £100 000 on fundraising will have been invited to enrol on the FPS. Smaller charities will only be set up on the FPS if/when they receive a ‘stop’ request from a member of the public. Any such request will be sent to the email address the charity has registered with the Charity Commission so it is important the charity checks that email address is up to date.

 

  1. Create a system for dealing with ‘stop’ requests. The charity must also maintain a list of all ‘stop’ requests and ensure the wishes are respected ongoing.

 

  1. Once a ‘stop’ request has been received, the charity is responsible for removing the person from the selected direct marketing communications within 28 days of the request. If the charity fails to comply and the individual receives another communication, the charity will be sent a reminder. If the individual continues to receive communications they can make a complaint to the FR who may take action. The individual can also ask the FR to send the charity a section 11 request to stop direct marketing communications under the Data Protection Act 1998 and if the charity fails to comply with that request, the court may order the charity to comply.

 

  1. The FPS does not apply to door-to – door fundraising, street fundraising or post where it is addressed to a ‘householder’. However, where a ‘stop’ notice is received, the charity may want to voluntarily limit any communications of this sort to avoid aggravating the individual in question and causing any reputational damage.

 

The FR website is helpful on the FPS. In particular this link covers a long list of FAQs.


Is your charity meeting its public benefit reporting requirement? Read our top five tips for achieving compliance
21 September, 2017

Providing a public benefit is at the heart of what it means to be a charity. Public benefit is about knowing what a charity’s purposes are, how those purposes are beneficial to the public and how the charity’s trustees will carry out those purposes for the benefit of the public.

 

Charity trustees have a legal responsibility to ‘have regard’ to guidance published by the Charity Commission (“the Commission”) on public benefit. Trustees of registered charities must state in their annual trustees’ report on how they have carried out their charity’s purposes for the public benefit.  

 

The public benefit reporting requirements are more stringent for trustees of larger registered charities with a gross income exceeding £500,000. However, trustees of smaller registered charities are also legally obliged to report on their charity’s public benefit.

 

In April this year, the Commission published the findings of its regular work to scrutinise charity accounts. The Commission analysed a random sample of 107 charity accounts and found that 58 of the charities (54%) reviewed did not meet the public benefit reporting requirement. Of the charities that did not meet the requirement, 13 did not describe the difference that their charity has made and 21 did not include a statement confirming that they had read the Commission’s guidance and complied with the public benefit requirements. 24 charities failed to do either of the above.

 

Complying with the public benefit reporting requirement is not difficult. Public benefit can be addressed throughout the trustees’ annual report rather than including a specific section. Our top five tips for achieving compliance are:

 

  1. Read the Commission’s public benefit guidance and have regard to it when making decisions and exercising any powers or duties to which the guidance is relevant. The Commission’s guidance is available online at: https://www.gov.uk/government/collections/charitable-purposes-and-public-benefit

 

  1. Include a statement in the trustees’ annual report confirming that the trustees have had due regard to the Commission’s guidance at all relevant times.

 

  1. Explain what your charity’s purposes are. This means explaining what the charity is there to achieve and its objectives.

 

  1. Explain how those purposes benefit the public, or a sufficient section of the public.

 

  1. Explain how those purposes have been achieved, for example explaining what action has been taken during the year to carry out those purposes. It is useful to include specific examples of activities undertaken and what they achieved.

 

If you would like advice on complying with the public benefit reporting requirement for your charity, please do get in contact.


Challenging testamentary legacies
21 September, 2017

For a large number of charities, testamentary legacies are an important, if not essential, source of income. According to the Charities Aid Foundation records for 2017, 37% of income for charities in England and Wales derives from legacies and averaged c£450,000 per charity.

 

Often however, where an individual decides to leave their assets to a charity dear to them, this will leave disappointed relatives wanting to challenge the Will or the level of financial provision they receive under it. 

 

Generally speaking, a challenge can be brought against the validity of a Will in relation to its format/execution, if there is evidence to show the deceased lacked capacity or if there is evidence to show that the deceased was unduly influenced by a third party.

 

In addition, spouses, close relatives, and those who were dependent on the deceased during their lifetime may be able to bring a claim under the Inheritance (Provision for Family and Dependants) Act 1975 if they have not received reasonable provision. The recent Illot v Mitson case received much press interest  after the Supreme Court overturned a Court of Appeal decision regarding the level of award to be made to an  estranged daughter. Unfortunately, the headlines were not entirely reflective of the decision, generally speaking these  incorrectly interpreted the implications of the case and the risks of future litigation (for more details on the media’s approach Myles McIntosh has published the following blog https://www.cripps.co.uk/will-disputes/daughter-cut-will-loses-legal-fight/

 

Often, when a charity receives the details of a potential claim, it will be in a difficult position. Aside from the general concerns any party to litigation has (such as the risks of losing, proportionality and costs), it will have to consider the potential for press interest and any consequent  risks to its reputation (particularly when social media can provide immediate publicity to any individual). Balancing maximising current income needs with future donations is  an issue common to most charities .

 

In this context , t is important for charities to seek clear legal advice from specialist solicitors before and during litigation so as to establish the best way forward. For example, early intervention can often  head off  a  claim or encourage an early resolution of it, thereby maximising the return whilst minimising cost and risk to the charity.

 

We have an experienced trust and estate dispute team at Cripps and if you would like a no obligations discussion with one of the team please contact me at constandinos.Sikkel@cripps.co.uk.