Charity Commission

The law

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1. Mergers of almshouse charities

When almshouse charities are experiencing problems with attracting new beneficiaries, or upgrading or maintaining the almshouses, many trustees firstly think of selling and replacing the almshouses, rather than considering other alternatives, such as mergers. If trustees approach us for authority to sell the almshouses, we should first ask them if they have been in touch with the Almshouse Association, and if not, encourage them seek further advice before deciding to sell.

Trustees may approach the Charities Aid Foundation (CAF) to ask it to fund a feasibility study into the financial and managerial issues relating to mergers. They should also be directed to our publication RS4 - Collaborative working and mergers, available on our web site. It covers the sorts of questions trustees should be considering before deciding a course of action. See also OG 65 B3 - Mergers of almshouse charities.

2. Sale and replacement of almshouses

2.1 Reasons for sale and replacement
2.2 Possible options
2.3 Is a Scheme needed?
2.4 Proceeds of sale

2.1 Reasons for sale and replacement

If it is clear that the trustees have taken every reasonable step to fill almshouse vacancies (eg they have asked the Almshouse Association for guidance, or have approached a local authority for assistance), but this has proved impossible because either:

• the buildings are so run down that it would be impossible to raise sufficient money to make them habitable by today's standards; or

• no matter how much the beneficiary class is opened up and the area of benefit extended (see section 1.8 of OG 65 B1), it is impossible to find suitable qualified applicants); or

• the area where the almshouses are located has changed and is no longer suitable for the beneficiaries to live in, or the location is too remote; or

• there are no other suitable almshouse charities for a merger to be possible;

the almshouses may have to be sold and replaced.

2.2 Possible options

There may, however, be a number of options which the trustees can consider in connection with the sale or the proceeds of sale. For example:

• the sale of part of the property and the use of the proceeds in developing the remaining buildings (provided that any capital which is expended is replaced);

• the sale of the existing site and the use of the proceeds to build or convert other property in the vicinity to produce a smaller number of almshouses;

• the appointment of an experienced RSL, or the Leonard Hackett Memorial Trust (see section 2 of OG 65 B2) as a trustee;

• the sale of the premises and the transfer of the proceeds of sale to another permanently endowed almshouse charity in the vicinity which caters for a similar beneficiary class (provided the transferred permanent endowment remains impressed with permanent endowment trusts). This may be particularly appropriate if the second charity is itself in need of funds. The Almshouse Association is usually aware of which almshouse charities are seeking funds and can offer advice on this point.

2.3 Is a Scheme needed?

Our general line is that, where there is to be an equivalent replacement of specie land, no Scheme or Order is required to authorise the disposal of the original property, because there is no real change to the trusts. Where a disposal does involve a change to the trusts of the charity, but does not involve any real change to the objects of the charity, then the disposal may normally be authorised by a s.105 Order, rather than by Scheme. However, in all other cases, a Scheme is necessary.

The effect of section 9 of the Housing Act 1996 is that any disposal of land by an almshouse charity which is a Registered Social Landlord will fall within s.117(3) of the Charities Act. It is thereby taken out of the land disposal controls of s.117 of the Charities Act. But, as the language of s.9 makes clear, this has no bearing on the authority which is required to effect a disposal of specie land.

See also OG 54 Disposals of charity interests in property.

2.4 Proceeds of sale

Where the proceeds of sale are to be transferred to another almshouse charity, the governing document of the receiving charity should be checked to ensure that its beneficiary class is sufficiently similar to that of the transferring charity. If not, a Scheme may be necessary to widen it.

Where transfer to another almshouse charity is impossible, our Scheme should provide for the proceeds of the sale to be invested and the income used to assist the persons who would otherwise have qualified as residents of the almshouses on the usual relief in need trusts.

In some cases, the proceeds of sale may be quite substantial, so that if setting up a grant-making charity, it is important for the trustees to confirm that they are satisfied that they will have no difficulty in distributing the charity's income each year. If they do anticipate difficulties, then our Scheme should provide that any income which cannot be applied for the primary beneficiary class should be applied either for similar beneficiaries over a wider area of benefit, or alternatively, for other charitable purposes within the original area of benefit. In this respect, the same considerations outlined in section 1.8 of OG 65 B1 would apply

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