There is often confusion on how charity property should be registered at the Land Registry and who is the correct legal owner. There is the question of who should be registered, as the owner will depend on how the charity is set up. If the charity is a corporation (for example a company), then the corporation should be named as the legal owner. However, if the charity is not incorporated and property is owned by the trustees, then the individual trustees should be named as the legal owner. It is important to keep the register up to date with the names of the current trustees as they may change from time to time (see below).
Alternatively, if the charity has been incorporated under the Charities Act 2011, then the legal owner should be named as (the trustees of) the incorporated charity. Where the property is transferred to the Official Custodian for Charities, then they should be named as the legal owner (on behalf of the charity).
You should note that if you are a non-exempt charity, the Land Registry will enter a restriction on the title noting that the property is charity property and that it can only be disposed of in accordance with the requirements of the Charities Act 2011.
Should the trustees of an unincorporated charity not want to be named as the legal owners of the charity's property, they may be able nominate an individual, known as a 'holding trustee', to hold the property on the charity's behalf. Holding trustees are not the trustees of the charity - they cannot make decisions about the management of the charity or its property. They are an alternative to the property being held by the Official Custodian for Charities.
Holding trustees must act in accordance with the provisions of the charity's constitution (also known as the charity's governing document) and the lawful instructions of the charity trustees. However, problems may arise when the role of a holding trustee is misunderstood or the charity's constitution is drafted incorrectly or without guidance.
Some membership charities have constitutions which seek to give the holding trustees additional rights, such as the right to step in where disputes arise, or even to remove or replace the charity's trustees. Such provisions are particularly common in some faith charities. Unless carefully drafted they can cause uncertainty about the rights of holding trustees and exacerbate the problems they are intended to solve.
You should always ensure that your commercial property is registered in the correct names - it is also worth double-checking the situation every time a trustees joins or leaves, or there is some other major change within the charity, to satisfy yourself that it is up to date. Whether the property is held in the name of the charity trustees, the Official Custodian for Charities or some other entity, it must be registered at the Land Registry in the correct name(s). If the Land Registry title is outdated, there is a risk that any subsequent transaction will be delayed whilst this is rectified - you may even be in breach of your obligations to your lender.
A common example we see which can make matters much more tricky, is where we are dealing with an unincorporated charity and a property is held on trust by one or more former trustees. A trustee may have retired and moved abroad or may have died, but their name remains on the title - or they may have the benefit of a restriction which prevents the title from being updated without their consent. The current trustees often then face difficulties getting in touch or locating the former trustee or their personal representatives, or perhaps the former trustee left under a cloud and is unwilling to cooperate with the transaction. This then results in delays and increased costs, which has only been worsened by the impact of coronavirus (COVID-19) and the associated difficulties with obtaining signatures due to shielding and social distancing.
It's also important to recognise that some restrictions on the use of charitable land will not necessaily be reflectied in the land registry title and can be difficult to identify. This includes land held as permanent endowment, which was orgininaly meant to be held by a charity forever. A full consideration of the rules of permenant endowment are beyond the scope of this article.
If you're not sure in whose names your property is currently registered, we can quickly review the Land Registry title to let you know, and advise you on the next steps to take if it needs to be updated.
For specialised support with registering your charity's property, please contact Katie Hickman in our Charity Law team on 07557 528936, or complete the form below.