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Monthly Archives: March 2018

Technical Issues in Charity Law | Part Two

In Part One, we covered a number of technical charity law issues examined in the Law Commission Report of 14 September 2017. This note deals with further issues dealt with in that Report.

Making Regulation of Charity Land Transactions Less of a Burden

When a charity sells, lets, or mortgages its land, it is subject to restrictions and requirements (as explained in our Guidance Note: Charity Property Transactions). Compliance with these can give rise to substantial professional costs and can cause delays to charity land transactions.

The Report recommends that the current position, whereby trustees have a duty to obtain and consider advice before entering into certain land transactions, should remain. However, it notes that there is strong support for trustees to be able to have more flexibility in how they obtain advice about any particular transaction so that the advice is tailored to that transaction. It also emphasises the importance of guiding trustees to the right category of adviser and the desirability of them obtaining advice from a property professional.

The Report proposes modifying the existing advice requirements as follows. Where, currently, charities can only obtain advice from a member of the Royal Institution of Chartered Surveyors, the Report proposes that the category of advisers who may give advice should include members of the Central Association of Agricultural Valuers and fellows of the National Association of Estate Agents, all of whom have professional qualifications, are bound by professional conduct rules, and carry indemnity insurance. The Report proposes that such a property professional should be permitted to advise when the transaction is within their expertise, and that, to enable a charity to save costs, an employee or officer of the charity who is such a property professional should be permitted to advise.

Further, the Report recommends simplification and rationalization of what an adviser currently has to set out in a report in order that in future there is not only more flexibility but also receipt of advice that is more pertinent to the charity’s needs for any particular transaction.

The Report also proposes changes to the “certification” regime. Currently, if trustees dispose of charity land but fail to comply with the advice requirements, purchasers are protected if the trustees provide a certificate in the “completion” document stating that they have complied with the requirements. The Report recommends that the certificate should also be effective if is contained in a contract so that the purchaser is protected from the point of “exchange of contracts”. The Report also proposes that trustees should have power to let the charity officer delegated to sign the contract or completion document to also give the certificate. These changes should help avoid additional transaction costs for purchasers and make purchasers more willing to enter into land transactions with charities.

Other proposals include removal of the need to give public notice of disposals of “designated land”, relaxation of some of the requirements to obtain Charity Commission consent where the charity’s transaction is with certain “connected persons”, and changes to the Charity Commission’s guidance for charities acquiring land.

Improving the Position where there is a Permanent Endowment

The Report proposes not only making clearer the definition in the Charities Act of “permanent endowment” (i.e. property belonging to a charity that cannot be spent), but also making it consistent and more in line with the sector’s understanding of the term. It also proposes reform to the ways in which a charity may use its permanent endowment.

Allowing More Payments to Trustees

The Report recommends a new power for a charity to pay for a supply of goods to it by one of its trustees. This would be equivalent to the existing power to do so where a trustee supplies services.

Streamlining Incorporation and Merger

The Report identifies some problems arising from the law governing the merger and incorporation of charities, in particular in relation to transfer of property and gifts by will to charities that have merged. It proposes changes to the law to remove these problems.

Changes to Charity Commission Powers

The Report suggests changes to the Charity Commission’s powers so that it can, wherever appropriate, refuse to register a charity or refuse to register a change of name by a registered charity because of unacceptability of its name, or require a charity to change its legal or “working” name. At present its powers in these situations are unsatisfactory.

The Report also recommends that there should be power for the Charity Commission to confirm the appointment or election of a trustee where there is uncertainty as to whether a particular person was properly appointed or elected.

Procedural Changes in Legal Proceedings in the Charity Tribunal and the Courts

The Report makes recommendations for changes in relation to:

  • 1) authorisation to pursue “charity proceedings”;
  • 2) costs protection in the Charity Tribunal;
  • 3) suspending decisions pending a challenge; and
  • 4) the procedure for references to the Tribunal.

Your Experience

Will any of these proposed reforms be relevant to your charity? Do you think they will be beneficial for your charity or for other charities? As ever, we would like to hear from you.

April 2018 Legal Changes for Residential Landlords and Tenants

The Government is on a mission to drive up standards in the private rented housing sector. More new rules and regulations apply from April 2018 with the introduction of new Minimum Energy Efficiency Standards (MEES), Banning Orders and the Rogue Landlord Database.

Minimum Energy Efficiency Standards (MEES) – England and Wales

From 1 April 2018 it will be unlawful for a landlord to enter into a new letting (or extend or renew an existing letting) of a property with an F or G energy efficiency rating unless an exemption has been registered. From 1 April 2020, it will be unlawful to continue to let a residential property with an F or G-rating.

Landlords who let F or G-rated properties without having registered a valid exemption will be liable to financial penalties of up to £4,000 as well as “publication penalties”. A publication penalty means that the local authority will publish details of the landlord’s breach on a publicly accessible part of the National PRS Exemptions Register.

By now landlords should have taken steps to ensure that their properties are up to standard or, alternatively, have claimed an exemption. Detailed information can be found on the gov.uk website, here.

Banning Orders – England Only

Banning orders are to be introduced in England from 6 April 2018. They can be made against landlords, letting agents and property managers and will ban that person from letting property or engaging in letting agency or property management work for a period of at least 12 months.

Banning orders are intended to be used for landlords and agents who deliberately and persistently fail to comply with their legal obligations. Local authorities will be able to apply for a banning order against a person who has been convicted of one of the offences listed in The Housing and Planning Act 2016 (Banning Order Offences) Regulations 2018. The offences are, in summary:

  • ● Using violence to secure entry (Criminal Law Act 1977)
  • ● Eviction or harassment of occupiers (Protection from Eviction Act 1977)
  • ● Failure to comply with an improvement notice or prohibition order (Housing Act 2004)
  • ● Control or management of an unlicensed property under the HMO or selective licensing regimes (Housing Act 2004)
  • ● Fire safety offences (Regulatory Reform (Fire Safety) Order 2005)
  • ● Gas safety offences (Health and Safety at Work etc. Act 1974)
  • ● Landlord and agent offences under the Immigration Act 2014
  • ● Various serious criminal offences committed by a landlord or agent against or in collusion with the tenant of the landlord’s property or committed at the property

A landlord who breaches a banning order may face a prison sentence of up to six months or a fine. As an alternative, the local authority may impose a financial penalty of up to £30,000.

Database of Rogue Landlords – England Only

Also on 6 April, a database of rogue landlords and property agents will be established. This will be maintained by local housing authorities in England. Only central government and local authorities will be able to access the database.

Local authorities must add to the database the details of any landlord or agent against whom a banning order has been made. The entry will be maintained while the banning order is in force and must then be removed.

Local authorities may also add the details of any person who has been convicted of a banning order offence (even if a banning order has not been made) or who has at least twice within a period of 12 months received a financial penalty in respect of a banning order offence. Government guidance will be issued in relation to these discretionary entries in the database.

Advice for Landlords

The residential tenancy sector is subject to ever greater levels of regulation. Whilst some of the new provisions, such as banning orders, are designed to catch the worst “rogue” operators, even “good” landlords and agents need to make sure they don’t inadvertently fall foul of the law. Sensible steps to take are:

  • ● Keeping up to date with legislative changes
  • ● Engaging with the local authority on matters such as licensing and health & safety
  • ● Regularly reviewing your business: are there any issues with the properties, the tenants or your paperwork that need attention?
  • ● Networking with other landlords and agents
  • ● Taking professional advice from lawyers, surveyors, accountants and others as appropriate.

Minimum Energy Efficiency Standards (MEES) for Commercial Properties from April 2018

From 1 April 2018 it will be unlawful for a landlord in England or Wales to enter into a new letting (or extend or renew an existing letting) of a commercial property with an F or G energy efficiency rating unless an exemption has been registered. From 1 April 2023, it will be unlawful to continue to let a commercial property with an F or G rating.

Landlords who let F or G-rated properties without having registered a valid exemption will be liable to financial penalties based on the rateable value of the property. The minimum fine is £5,000 and the maximum £150,000. There will also be “publication penalties”. A publication penalty means that the local authority will publish details of the landlord’s breach on a publicly accessible part of the National PRS Exemptions Register.

By now landlords should have taken steps to ensure that vacant properties, and those about to become vacant or be re-let, are up to standard or, alternatively, have claimed an exemption. Landlords need to have plans in place to bring all properties up to standard (E or above) by April 2023 or ensure that exemptions are registered.

Detailed information can be found on the gov.uk website, here.

Fitness for Human Habitation – New Rights for Tenants

The Government is committed to improving standards for tenants in the private and social rented sectors. It is therefore supporting a Private Members’ Bill tabled by Karen Buck, a Labour MP: the Homes (Fitness for Human Habitation and Liability for Housing Standards) Bill. (visit the Parliament website here to track the Bill’s progress.)

New Duty for Landlords and Remedies for Tenants

The Bill obliges landlords to keep rental properties in good condition by implying into a tenancy agreement a covenant by the landlord to ensure that the property is fit for human habitation at the beginning, and for the duration of the tenancy.

If a landlord fails to keep a property in good condition, the tenant will have the right to sue the landlord for breach of contract on the ground that the property is unfit for human habitation.

What are Landlords’ Current Obligations?

Landlords already have a statutory duty to keep their properties fit for human habitation. Relevant factors include damp, ventilation, lighting, and facilities for food preparation. This duty is enforced by local authorities using the Housing Health and Safety Rating System (HHSRS). An offence is committed if a landlord fails to comply with an enforcement notice.

However, there is currently no means for a tenant to take direct enforcement action against a landlord. They are reliant on the local authority doing so on their behalf.

How will Tenants Benefit from the New Law?

If the Bill is enacted (which is expected to happen) tenants will be able to take their landlord to court. The court may order the landlord to take action to make the property fit for human habitation and/or to pay compensation to the tenant.

How does this Affect You?

Are you a residential landlord, tenant, or agent? Do you welcome this legislation or are you worried about vexatious claims? As ever, we are keen to know your views.

HMO Reforms Update

Last month we wrote about the Government’s proposed HMO reforms. An Order has now been made extending the scope of mandatory licensing by removing the “three or more storeys” requirement. Landlords have until 1 October 2018 to apply for a licence for properties not previously subject to mandatory licensing. There will be no grace period after 1 October.

We await news on the introduction of minimum room sizes standards.

The Residential Landlords Association believes many of the HMO reforms are unnecessary and says they will put a huge strain on local authorities. Despite their raising these concerns with the Government, the Government has pressed ahead with the changes. What do you think? How are landlords, local authorities, and mortgage providers responding to the new HMO licensing rules? Please share your experiences with us by leaving a comment.

Technical Issues in Charity Law | Part One

The Law Commission published a Report on 14 September 2017 on various technical issues in charity law, focussing on areas where there is inappropriate regulation of charities and any unnecessary legal complexity and inconsistency. It aims to remove or adjust the legal and regulatory burden on charities, whilst still safeguarding the public interest in ensuring that charities are properly run. (It does not also address high profile issues such as the law of public benefit, the charitable status of independent schools, or fundraising practices.)

The Report proposes a number of important changes to charity law. The draft Bill appended to the Report, when enacted, will bring those changes into effect. We have reviewed the Report and set out below a summary of those of its recommendations likely to be of interest to small and medium sized charities. For details of those recommendations, please see the Report (or a summary of it) on the Law Commission’s website.

Making it Easier to Make Ex Gratia Payments

The Report considers ex gratia payments out of charity funds. As we explain in our Guidance Note, Ex Gratia Payments by a Charity, an “ex gratia” payment is one which the trustees of a charity feel morally obliged to make, but which they have no legal power to make. For example, it might be clear from the circumstances that a testator intended to include in his Will a legacy to a family member but did not live long enough to amend his Will. In such a case, the charity’s legal entitlement to the residue under the Will would be greater than intended, and the trustees might therefore wish to pay such a legacy on a voluntary basis. The Guidance Note also details various other circumstances in which trustees might wish to make an ex gratia payment. (“Payment” for present purposes, includes a transfer, waiver or release of any property or rights.)

Charity trustees can currently ask the Charity Commission to authorise an ex gratia payment but if it is a small ex gratia payment, the costs of obtaining authorisation and the resulting delay before making the payment may be disproportionate to its value. The Report proposes amending the law to give trustees the power to make ex gratia payments that are small relative to the income of the charity without their having to obtain Charity Commission authorisation. Any payment is deemed “small” for this purpose under the Bill if it is no more than a certain amount and its gross income in its last financial year is no more than a certain amount, as follows:

  • ● £1,000, where gross income is up to £25,000;
  • ● £2,500, where gross income is more than £25,000 and up to £250,000;
  • ● £10,000, where gross income is more than £250,000 and up to £1 million; and
  • ● £20,000, where gross income is more than £1 million.

Trustees currently must personally take any particular decision to make an ex gratia payment, and they must only make a payment if they personally “regard themselves as being under a moral obligation” to do so; a subjective test. The Report proposes an objective test instead, namely that an ex gratia payment may be made if trustees “could reasonably be regarded as being under a moral obligation” to make the payment.

The Report proposes that, to ensure efficiency in charity administration, trustees should in future have power to delegate any decision to make an ex gratia payment wherever they wish to do so. With that power, they could then decide to make all such decisions personally or delegate any or all such decisions. Where any officer of the charity (e.g. the chief executive or a legacy officer) is delegated to make any such decision, the officer could then decide on behalf of the trustees if the objective test has been met. Where the test is met in any case, the trustees will have power (but not a duty) to make a payment.

For further guidance about ex gratia payments, see our Guidance Note, Ex Gratia Payments by a Charity.

Fundraising Appeals

Our Guidance Note, Fundraising Appeals By Charities – Suitable Wording for Appeals explains the current legal position where too much, or too little, money is raised by a charity in response to a fundraising appeal.

At present, where too much is raised, the Charity Commission can direct that the surplus is applied cy-près (“Cy-près” means “as near as possible”.); when too little is raised, the funds cannot usually be applied cy-près and the trustees must try to contact donors to offer a refund.

For small donations, the cost of contacting donors will often be disproportionate to the value of the donations. Where too little is raised, there needs to be a balance between protecting donors’ wishes and the administrative inconvenience and expense of contacting donors. The Report recommends reduction of that expense by amending current law such that the law does not require trustees to offer a refund of any donation of £120 or less in a year, and such that such donations can be applied cy-près. Trustees would only then have to try to contact a donor if he requested that when making the donation.

When funds raised are to be applied cy-près (because too much or too little has been raised by the appeal), trustees can currently ask the Charity Commission to make a scheme authorising the funds to be used for other similar purposes. In the case of small amounts, the charity’s and the Commission’s associated costs may be disproportionate to the amount in question. The Report therefore recommends amending the law so that, if a fund does not exceed £1,000, the trustees may apply it to new purposes without Charity Commission consent, provided that they first consider the desirability of securing that the fund is used for similar purposes.

Changing Purposes, Amending Governing Documents

The Report notes the importance of the ability to make changes to a charity’s governing document quickly and efficiently, whilst retaining safeguards so that any such changes are in the best interests of the charity and its beneficiaries. It concludes that greater alignment of the procedures currently available to corporate and unincorporated charities when altering their governing documents would be beneficial to create legal simplicity and consistency. It consequently recommends new powers for unincorporated charities to be able to make changes to their governing documents so that those powers are brought into line with those of charitable companies and CIOs. The Report also recommends that the same requirements for Charity Commission consent should apply to all charities, whatever their legal form, when they alter their purposes.

Your Experience

Will any of these proposed reforms be relevant to your charity? Do you think they will be beneficial for your charity or for other charities? As ever, we would like to hear from you.

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