The Charities Act 2022 – what housing associations need to know
The Charities Act 2022 received Royal Assent on 24 February 2022 . It introduces the most significant changes in charity law since the Charities Act 2006.
The changes have been a long time coming, with the genesis being Lord Hodgson's review of charity law carried out in 2012 followed by the Law Commission's review of technical issues in charity law, published in 2017. The Law Commission made 43 recommendations to the Government for change and 36 of them have been accepted and carried forward into the Charities Act 2022.
The changes will not take effect immediately however, and will require further secondary legislation before they become effective. This will happen in stages over the next 12 to 18 months. Nevertheless, it is important to be aware of these changes before they take effect.
The overall intention of the Charities Act 2022 is to simplify charity law and make charity law more streamlined and easier to navigate for charities.
For RPs established as registered charities these changes are going to have direct relevance. For RPs structured as exempt charities, they may act as corporate trustee of smaller charities or hold permanent endowment assets on trust and the new law will be relevant to those arrangements.
For RPs, some of the most notable changes are going to be:
- Changes to the requirements relating to disposals by charities which allow more people to provide the necessary advice and for the format of that advice to be more streamlined. Also, changes to the rules on disposals to connected persons, so that fewer transactions should require Charity Commission consent.
- Trust corporation status to be automatically conferred on corporate trustees however they are appointed.
- Further relaxation of the rules around permanent endowment, allowing corporate charities to make use of a statutory power to release funds from the restriction.
For RPs that are registered charities, the Charities Act disposals process can be unnecessarily prescriptive and costly to follow. In fact, we have converted a number of registered charity RP clients to an exempt charity structure specifically to avoid having to follow the Charities Act disposals process. It will therefore be welcome news that there is some simplification to the process.
The Charities Act 2022 replaces the definition of "Qualified Surveyor" with "Designated Adviser". The amended definition is widened to include fellows of the National association of Estate Agents and fellows of the Central Association of Agricultural Valuers. In simple terms this allows a broader range of people to provide the required Charities Act advice to an RP.
Additionally, the Charities Act 2022 now allows board members, officers and employees who are appropriately qualified to provide that advice. They can do so in the court of their employment with the charity, therefore removing the need to obtain external advice.
The Charities Act 2022 removes the requirement to have to follow a surveyor's advice on advertising, providing more flexibility to the board which may be helpful in specific circumstances.
These changes together should streamline the disposals process and reduce cost for registered charity RPs in complying.
The Charities Act 2022 now also provides that a disposal of a short, fixed term or periodic tenancy to an employee to use as their home is not considered a disposal to a connected person. This should be helpful for RPs, since previously granting a tenancy to an employee required the specific consent of the Charity Commission.
It is though worth noting that disposals to a wholly owned trading subsidiary are still considered a disposal to a connected person. So, Charity Commission consent would still be required for intragroup disposals of land.
Trust corporation status
In order for a sole corporate trustee of a charity to be able to deal with land and appropriately discharge its responsibilities it must have trust corporation status. Until now, trust corporation status would generally only be conferred where the sole corporate trustee had been appointed by the Charity Commission.
The Charities Act 2022 has the effect of conferring trust corporation status on any sole corporate trustee which is itself a charity irrespective of how that trustee was appointed. It further states that the sole corporate trustee will have trust corporation status even if it was appointed prior to this amendment coming into force, although it will not be treated as having trust corporation status retrospectively. In other words, a sole corporate trustee does not need to be reappointed in order to obtain trust corporation status but there is no retrospective conferral.
So, all charitable RPs acting as sole corporate trustee will benefit from trust corporation status going forward.
The Charities Act 2022 now provides a statutory power to release permanent endowment to all corporate charities where the market value of the endowment fund is £25,000 or less. This allows any charitable RP with permanent endowment of £25,000 to remove that restriction without Charity Commission consent.
The Charities Act 2022 also includes a new power for a charity to borrow money out of permanent endowment without needing to obtain an order of the Charity Commission. Up to 25% may be borrowed from the permanent endowment, and it must be repaid within 20 years. The Government states that this may be a helpful alternative where a charity does not necessarily want to completely remove a permanent endowment restriction.
For more detail on the changes being introduced, please refer to our Essential Guide to the Charities Act 2022 which we have published to help everyone get to grips with the new law.