Many trustees of charities when asked who owns their charity’s land will reply by saying “the Charity”. However this can be a misleadingly simple response as the means by which charities own property do vary.
With an unincorporated charity (where the charity does not in itself have a separate legal status) the owners of the charity property are the trustees, or should be. The trustees hold the assets of the charity upon the terms of the charitable trust for their charity to use the land or apply the income in accordance with the relevant trust deed, constitution or Charity Commission order but most of the time the legal ownership is with the trustees.
There are some exceptions to this when, for example, the legal title to a property is vested in a nominee trustee, for example the Official Custodian for Charities or another custodian trustee as is commonly encountered with certain religious charities. However many charities, even some relatively large and wealthy charities still have their assets held collectively in the names of individual trustees.
Where a charity has a separate legal status as an incorporated charity then the charity entity, whether it be a company limited by guarantee, a statutory corporation or a Charitable Incorporated Organisation will itself hold the assets of the charity in its name. Management of the charity’s property and affairs remains with the trustees but the legal title sits with the incorporated body.
One of the key advantages of a charity being incorporated is that there is no need to monitor and update from time to time the Land Registry records of property ownership of the charity to reflect changes in the composition of the trustees.
Problems with land ownership for unincorporated charities
A trustee’s status may come to an end as a result of death, loss of mental capacity, bankruptcy, expulsion, retirement, expiry of a fixed term or loss of position qualifying them to be an ex-officio trustee, depending on the nature of the circumstances and the terms of the charitable trusts and applicable statutory regulations. Likewise new charity trustees can be appointed by a decision of the trustees or simply become trustees as a result of their status (an ex-officio role) eg if one of the trustees is required to be the local vicar or a representative of a local council.
Where a charity is unincorporated it is often easy to fail to keep up to date the records of the trusteeship so as to ensure that the public records (held by the Land Registry) of ownership of the charity’s property reflect the current trusteeship of the charity.
Simply recording a change of trustees in the minutes of trustees meetings is not enough. Nor is updating the records at the Charity Commission.
Unfortunately we have seen too many cases recently where Land Registry records of ownership have been overlooked when trustees have died or retired and when new trustees are appointed. In one extreme case all but one of six registered charity trustees had died or ceased to be involved with the management of the charity and in another even more awkward case, none of the registered owners of the property were still in office.
What does it mean for charities if land registry records are out of date?
There are problems for a charity should it need to deal in any way with its property, with both increased cost and delay likely. The time and expense involved in retrospectively updating records of trusteeship at the Land Registry can be significant and may prejudice transactions by the charity, whether this is the sale or lease of a property or obtaining a mortgage. Income may be lost or much needed capital receipts may be delayed. The longer it goes on the messier it gets.
Similarly this can cause difficulties in dealing with the statutory processes to incorporate the charity where the charity’s assets have to be vested in the new Charitable Incorporated Organisation.
Charity trustees have obligations to ensure that charity property (as with all other assets) is maintained under their control. Allowing Land Registry records to become out of date may in extreme cases be considered a breach of trustees’ duties and may give rise to personal liability for losses suffered by the charity.
Practical steps to keep up to date with changes of trustees
Obtain a copy of the death certificate of a trustee who dies
Follow carefully the procedures for recording the documenting the retirement of trustees set out in the Charity’s trust deed or Scheme or other constitutional documents.
If a trustee is to be removed from office for misconduct, insolvency or failing to fulfil their duties, again ensure the proper process is adhered to.
Minutes of trustees meetings should properly record all changes both incoming and departed/departing trustees with reference being made to the appropriate powers under the Charity’ constitution or trust deed.
In all of the above cases, ensure that the relevant documents are lodged at the Land Registry – legal advice may be needed. This may take the form of a standard Land Registry TR1 or a Deed of Retirement/Appointment or a Memorandum under section 334 of the Charities Act 2011.
Periodically review whether the Land Registry records are up to date, for example by adding such a review as a task when making the usual annual returns to the Charity Commission.
Land registry process
The Land Registry will not treat a transfer of registered land upon appointment or retirement of a trustee as a “disposition” and therefore no special procedures are needed to address the standard restrictions which are imposed on registered titles of charity land requiring compliance with the relevant provisions of the Charities Act 2011 (or other regulating statute) dealing with transfers of land. So, for example, no surveyor’s valuation is needed.
Where charity land is not registered at the Land Registry then a change of trusteeship will trigger an obligation to register the title. As the number of areas of unregistered land reduces over time, first registration of previously unregistered land is an increasingly specialist area of conveyancing practice so legal advisers need to be chosen carefully.
Register your charity land if not done already
It is recommended as good practice for charity trustees to register title to their property voluntarily in any event. Registration carries with it a State guarantee of ownership, boundaries and rights over property can be clarified, there is significantly more protection against squatters’ claims and additional measures can be taken to be alerted to potential property fraud.
The overall message is for trustees and others to whom the task of administration is delegated, whether it be a Clerk to the Trustees, Committee Secretary or a reluctant volunteer from the committee is to remain vigilant and ensure that the formalities of Land Registry processes are properly followed and dealt with promptly whenever a change of trustee occurs.
If in doubt take legal advice early as it will certainly cost more to sort it out later.
Consistent with our policy when giving comment and advice on a non-specific basis, we cannot assume legal responsibility for the accuracy of any particular statement. In the case of specific problems we recommend that professional advice be sought.
If you have any questions relating to this article or for further information on the procedure tor dealing with the changes of trustees at the Land Registry, please contact Derek Ching on [email protected]