How Will the Charities Act 2011 Impact Upon Trustees?

The Charities Act 2011 (the Act) consolidates existing charities legislation and will come into force in March 2012.  One of the vital aspects of being a trustee is to ensure that the ‘charitable purposes’ of the charity are continuously met and in light of the implementation of the Act, trustees should consider the processes which they have in place and ensure that the Act is being complied with. 

A current area of contention in connection with this topic is in relation to the decisions of trustees to enter into tenancy agreements to occupy empty commercial premises. Full business rates are due on commercial properties that are unoccupied for more than 3 months. However, a charity qualifies for at least an 80% discount on these rates if the property is mainly being used for charitable purposes. Where properties are difficult to let, charities are being approached by landlords in relation to entering into low rent tenancy agreements which would enable the landlord to pay reduced business rates.

The Charity Commission has suggested that in these instances, they may not consider that the premises are being used to further the charity’s charitable purpose and also that the landlord may be individually benefitting from the arrangement as a result of paying lower business rates. If a proper decision making process is therefore not undertaken by trustees to make sure that any tenancy agreement will further the charity’s purpose, is for the exclusive benefit of the charity and is in its best interests, the result can be business rates avoidance.

If you require any advice on this topic or in relation to any other aspect of charity law, please contact Kerry Smith, solicitor in the Commercial, Charities and Public Sector team on 0870 238 8176.