Ownership Of Charity Property

If you are purchasing land on behalf of a charity, you will need to take into account a number of considerations. The most common way that charities will own property is in the name of individual trustees where the charity is a trust, however, you may wish to explore other options available to you.

How can a charity property be owned?

A charity property may be owned in one of the following ways:

1. In the name of the individual trustees (where the charity is a trust);
2. In the name of a company where:
   1. The charity is a company;
   2. If the company is used to hold the charity’s property; or
   3. Because the charity is a Charitable Incorporated Organisation;
3. By the Official Custodian for Charities;
4. In the name, the charity has adopted.

What are the pros and cons of owning charity property in each of the above manners?

Trustees

Where the charity is a trust and has a number of trustees each trustee can be registered as a proprietor. A change in trustees will not automatically change the ownership of the register of title and an application would need to be made to the Land Registry to transfer each change.

Where this is the case, each time that there is a change in membership, or if the property portfolio is extensive, the trustees may incur significant administrative burden and expense as each trustee would need to sign each document.

In addition, where the trustees are not frequently updated at the Land Registry, they may find that they are unable to manage their properties effectively as the registered trustees will not be consistent with the current trustees and notices (for example, eviction notices) will not be served by the current landlord or tenant as the case may be. Where this is the case, each document would need to be served by the previous trustees who may be difficult to locate. In an extreme case, the property may be vested in a sole surviving trustee or the personal representatives of the sole surviving trustee and additional trustees would need to be appointed before any sale or mortgage can be completed.

Company

If a company holds the charity’s assets then the property will usually be held in the company’s name. Where the company holds property on trust, the company is likely to be the sole trustee and the same problem can occur as with a sole surviving trustee whereby additional trustees must be appointed in order to effect any sale or mortgage.

If a company is appointed as a trustee by the Charity Commission, the rules are slightly different and the company will be deemed as a trust corporation and it can give a valid receipt to any sale or mortgage proceeds.

Official Custodian for Charities

The Official Custodian for Charities (a member of the Charity Commission’s staff) is a statutory corporation. Title to a charity’s land can be vested in them by an order from the Charity Commission or the Court.

The Official Custodian’s function is to act as a custodian trustee. The power to deal with the land remains with the charity’s trustees who can execute any contract on behalf of the Official Custodian but the Official Custodian must be made a party to such a document in order to benefit from any covenants.

The Official Custodian will be registered as the proprietor at HM Land Registry.

Incorporated Charitable Company

Charity trustees can incorporate themselves as a corporate body in accordance with the terms of a certificate provided by the Charity Commission.

On incorporation, the charity’s current property will vest in the corporate body and any person who is holding property for the charity is under an obligation to transfer it to the corporate body. Any property vested in the Official Custodian will remain vested in them but the trustees can request a transfer.

Where the charity does become an incorporated company, an application should be made to HM Land Registry to reflect the charitable incorporation.

Next Steps

Although there are a number of options for charities when they consider how to own property, these are usually context-driven and often where there are only a small number of trustees who are able to effectively manage the trust, this will be the most straightforward option.

However, for larger charities, it may be worthwhile discussing the options available to avoid administrative issues in the future.