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The Charities Act 2022 is coming into force in stages. The latest set of provisions came into force on 14 June 2023. The changes are most relevant for charities that wish to dispose of land or spend a permanent endowment.

Disposing of charity land

Charities must comply with certain requirements before they sell, transfer, lease or otherwise dispose of land. The legal requirements have been simplified and charities given greater flexibility, in particular by:

• broadening the pool of professionals that can provide charities with advice on certain disposals. Previously restricted to RICS-qualified surveyors, the Act sets out a fuller list of “designated advisors” who may advise the charity, which includes any trustee, officer, or employee of a charity where they meet the relevant requirements;
• simplifying the advice that a charity is required to obtain prior to the disposal of land, making it easier for designated advisors to tailor their advice to the relevant transaction;
• allowing charity trustees greater discretion to decide whether to advertise a proposed disposal of charity land and;
• removing the requirement for charities to get Charity Commission consent to grant a residential lease to an employee for a fixed-term or short-term periodic tenancy.

Charities must still ensure that, despite the increased flexibility in the requirements, they obtain sufficiently detailed advice from an appropriately experienced advisor.

Spending permanent endowment

Permanent endowment is property held by a charity that must be retained as capital and cannot be spent as though it were income.

The new provisions amend the Charities Act to enable charities to:

• release restrictions on spending a permanent endowment without Charity Commission consent where the market value of the relevant fund totals £25,000 or less (an increase from £10,000);
• borrow up to 25% of the value of a permanent endowment fund, repayable within 20 years, without first securing Commission consent; and
• resolve that the permanent endowment may be used to make social investments, where the charity has opted in to the ‘total return’ regime and subject to future regulations made by the Charity Commission.

If a permanent endowment fund is larger than £25,000, a charity must seek Charity Commission consent to remove the restrictions on spending the capital of a permanent endowment. The time limit for the Charity Commission to respond to a request for consent has been reduced from three months to 60 days.

Further changes relating to permanent endowments are due to come into force later this year. We will provide a further update at that time.

Charity names

Under the existing provisions, the Charity Commission could direct a charity to change its name if it is offensive, misleading, or too similar to another charity’s name. In addition to this power, the Act has given the Commission the ability to:

• direct a charity to stop using a working name for the same reasons (a ‘working name’ being any name used to identify the charity and under which the charity carries out its activities);
• delay registration of a charity with an unsuitable name, and to delay the change of a charity’s name on the Register of Charities; and
• use its powers in relation to exempt charities.

Next stage of implementation

The final set of changes is due to be implemented by the end of 2023, but the exact date has not yet been announced.

This final stage is expected to cover topics such as charity constitutions, further aspects of charity land (including changes to requirements in property contracts and deeds), remuneration of charity trustees, and powers relating to the appointment of charity trustees.

How we can help

Our specialist charity lawyers can advise you across a range of issues, from setting up a charity, entering into a new lease or contracts, to advising on a merger or campaign. For more information, please contact Giverny McAndry. To speak with another member of the team, please contact us (020 3826 7510) or complete our online enquiry form.