The requirement to obtain the consent of the Charities Regulator to a property transfer can be a crucial milestone in a transaction. It can entirely dictate both how a transaction is structured and how, or even if, the transfer proceeds.
It is therefore vital that the question of whether Charities Regulator consent is required is properly analysed. If consent is required, it is equally vital that the consent application is properly compiled, submitted and managed.
We have extensive experience in the sale of charity property and our Real Estate team has specialist expertise in dealing with Charities Regulator consent applications. In this article, we share some of our insights and experience in considering these issues, including assessing if consent is needed and navigating the process if it is.
What is the Charities Regulator?
The Charities Regulatory Authority (the CRA), commonly known as the Charities Regulator, is the statutory body responsible for regulating charitable organisations in Ireland. The CRA has the power to consent to or not consent to the sale of charitable properties in certain situations.
CRA authorisation – when is it required?
This is an extremely important question that is often not properly considered. Not all disposals of charity property require authorisation of the CRA. Many charities and solicitors assume that consent is always required when dealing with charitable property. This can result in transactions being delayed while making unnecessary applications for consent. The CRA has itself stressed that:
- Charities should avoid making unnecessary applications, and
- The CRA will be unable to approve certain transactions relating to charitable property where consent was not strictly required
The assessment as to whether CRA authorisation is required is a complex analysis that should be undertaken by legal advisers experienced in dealing with the CRA, and in particular, CRA consents for real estate transactions.
An in depth assessment of the charities governing documents will be required in addition to a review of the title deeds relating to the property. This could be as simple as reviewing the current title to the property and the governing documents but it could also require a very detailed historic analysis of the title.
So, consent is required – what now?
If authorisation of the CRA is required, then an application must be made to the CRA. Trustees have an obligation to act in the best interests of a charity and this will be a key consideration in the application process.
We consider below some of the key issues that commonly arise in these applications for consent.
Marketing & valuations
All charities are required by law to obtain a market value when disposing of their property, except in certain specific circumstances.
The CRA strongly recommend that charities list the charity property for sale on the open market. This may not always be possible. If it is not possible, the CRA say that the application will be subject to additional scrutiny and consequently will usually take longer to process
When making an application, the applicant must lodge a valuation report that is dated within six months of the date the application was submitted to the CRA. Only “Red Book” or “Blue Book” valuation reports are acceptable. These are formal opinions of value and can be relied upon by the instructing party. Where the property was not listed for sale on the open market, two valuations may be required. As well as a valuation, it is recommended that all marketing materials relating to the sale of the property, together with anonymised details of viewing and bidding history form part of the application.
Check the Register of Charities & the Property Trustees
If individual trustees are the legal owners of the property, they are often also trustees of the charity on the Register of Charities. A charity should ensure that it has updated the Register of Charities with all current charity trustees. If it has not been updated, this will be one of the first queries raised by the CRA and this could delay matters. Note that it is possible for the charity trustees and the property trustees to be different.
It’s important to also check before commencing the sale process that there are property owning trustees who are available to sign and that the title registration is up to date. If there are issues in this regard, it may not be possible to contract to sell the property.
Timelines & queries
The timeline to obtain CRA authorisation will depend on how complicated the transaction is. The CRA has advised that all applications should be made as early as possible and that any proposed completion date as defined in the Contract for Sale should be long after the application is submitted. In practice, most contracts will be specified to be subject to CRA consent and completion will not happen until consent is obtained.
The CRA has the right to raise queries regarding the documents submitted as part of the application. In addition, the CRA may require further evidence of the proposed use of any income derived from the sale. Failure to respond to these queries can cause delays in the application being reviewed.
The CRA has advised that applications can take a number of months to process and that the authorisation for the disposal of charity property is at the discretion of the CRA.
Charities should be aware that the CRA assessment and queries can be broad in nature. The CRA may carry out an in depth analysis of the charity and its plans for the future to assess if the transaction is for the charity’s benefit.
Application & signatories
The application is made via an online system. There are a number of documents which must be uploaded as part of the application. These documents will vary depending on the property, however at a minimum, the below documents will be required:
- The fully executed Contract for Sale
- The map of the property
- The valuation report
- The charity governing documents, and
- The application form signed by the trustees
The need to get the application form signed by various trustees and other potential signatories can delay matters as signatories may not be readily available. Legal advice will be needed to confirm who needs to sign.
It may also be helpful to submit letters explaining the transaction, if it is in any way complicated.
Conclusion
- Start early
The consent process can be lengthy, so begin early. Get legal advisers involved at an early stage to assess if consent will be required and, if it is, to ensure everything is in order to make the application. - Check if consent is needed
Not all transfers of charity property require Charities Regulator consent. Consult legal advisers who specialise in Charities Regulator applications to avoid unnecessary applications. - Need to show market value was obtained
Ensure that the Charities Regulator requirements regarding proving market value are provided, if required. These will vary depending on the transaction but may include valuations, marketing efforts and bidding histories.
As the pre-eminent provider of legal services to the Charity and Not-for-Profit sector in Ireland, our Charity Law & Not-For Profit team and Real Estate team have niche expertise in this area and can help clients navigate this complicated process.
The content of this article is provided for information purposes only and does not constitute legal or other advice.
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