Granting a short lease
Background:
Trustees of the Airborne Baby Trust, based at Wingworth Airport, are planning to move to Cotbed Airfield but they don’t expect this to happen for another five years. They have bought new office space there but don’t want to leave it empty until they are ready to move in. They decided to lease it in the meantime.
What the trustees did:
The trustees contacted a local estate agent who:
- specialised in commercial units
- was used to dealing with properties at Cotbed
They felt he had the experience to know exactly what he was dealing with. After seeing his report and considering his advice, the trustees advertised the lease.
The trustees met to discuss the offers they had received. Based on the estate agent’s advice, the trustees decided that one of the offers was the best they were likely to get.
They arranged for their solicitor to draw up the legal documents:
- including the statements and certificates needed
- making sure the details of the lease allowed them to take back possession of the office when the lease endedensured they regained possession at the end of the term
Did the trustees need our consent?
No - the trustees were able to go through with the lease without our consent as:
- it was for less than seven years
- they followed the requirements before they entered any contract or agreement to lease
The were able to use an estate agent - instead of a qualified surveyor - as it was a short lease with no premium or fine (extra payment in addition to the rent).
See also:
Top of page
Granting a long lease
Background:
The trustees of the ABC Cat Care Home Ltd had reduced their staff so had moved to smaller offices.
Rather than sell, they kept their original offices and decided to let them on a long lease to get some regular income from it. The charity’s Memorandum and Articles of Association had the usual provisions giving them power to dispose of their charity land - in this case through a lease.
What the trustees did:
The trustees appointed their usual solicitor to act for them. As they were planning the lease to be longer than seven years the trustees also asked for advice from a local qualified surveyor, before they even thought about entering into a contract.
They asked the surveyor to make a report that complied with The Charities (Qualified Surveyors' Reports) Regulations 1992 (see appendix K2 of CC28). He advised them to advertise with two local estate agents who dealt mainly with leasing commercial properties.
The trustees considered the surveyor's report and valuation of the terms and advertised the property. After reviewing the offers they received, the trustees decided to accept the one that seemed to give the best terms that they could reasonably expect to get in the circumstances. They then instructed their solicitor to draw up the contracts, including the statements and certificates needed in the documentation.
Did the trustees need our consent?
No they didn't because:
- the governing document gave power to dispose of property
- they were not granting a lease to a connected person
- they were able to take, and act upon, advice from a qualified surveyor
- they were able to advertise in the way advised by their surveyor
- they were satisfied that they got the best terms reasonably available
The trustees did not even need to inform the Charity Commission of their plans.
See also:
Top of page
Granting a lease to someone connected to the charity (a connected person)
Background:
Trustees of the Upper Downton Playbus Charity owned a yard where, until recently, they had stored their bus and equipment.
The yard was next door to a garden centre run by the wife of one of the trustees. The charity had moved their storage to another site so the yard was now empty. The trustees considered selling but thought that at some time in the future they might need to use it again. Rather than sell the yard they decided to lease it for 10 years.
The trustee whose wife owned the land next door suggested she might take up the lease. He knew she was thinking of opening a tea shop as part of her garden centre business; the site next door seemed ideal.
What the trustees did:
The trustees knew that the fellow trustee's wife was classed as a ‘connected person’ and that they could not grant a lease to her without consent from the Charity Commission.
Whenever they discussed it they made sure that the trustee concerned always left the meeting to:
- avoid a conflict of interest
- make sure he didn't influence the thinking or decision making of the other trustees
The trustees employed a qualified surveyor to report on the property and value it. They then followed the advice of the surveyor by advertising the lease to see:
- what other offers they might receive
- whether the offer the garden centre had made was a reasonable one
Next, the trustees downloaded the necessary application forms and notes from our website and completed them. On the application form they told the Commission:
- the value of the land as set out by their qualified surveyor
- information about the advertising they had carried out
- offers they had received as well as the offer from the trustee's wife
- that they wanted to accept the offer from the trustee's wife because it was about the same as any other they had received but she was able to complete and take up the lease quickly allowing the charity access to the funds soon
Did the trustees need our consent?
Yes, because the trustees were granting the lease to a connected person, it was a legal requirement for the trustees to obtain our consent.
In these circumstances it's likely that we would have given our consent for the trustees to grant the lease to the trustee’s wife because:
- the trustees had done all the things they could to be sure the connected person did not influence them
- they had made the best efforts to get the best terms for the lease
We would not automatically give consent; we will consider each case on its merits.
See also:
Top of page
Granting a lease without professional advice
Background:
Trustees of the Billsworth Financial Advice Charity owned an office building but part of it was empty and not being used by the charity. The trustees wanted to lease the unused parts of the building to generate some income for the charity. Without taking advice, they negotiated with a local artist, who wanted to use the rooms as a gallery, and exchanged contracts for the lease.
What they needed to do:
The trustees did not comply with the legal requirements before they entered into the agreement to lease the property. They should have:
- got a surveyor's report
- advertised, if the surveyor had suggested that, to try to get the best terms
Did they need our consent?
Yes they did, because they did not take, and act upon, a surveyor’s advice.
Timing is important. The trustees should have gathered all the relevant information before entering the agreement to lease.
Because they did things in the wrong order, the trustees now had to come to us for consent to finalise the lease of the office space to the artist. We had to make an Order allowing the lease to go ahead.
This meant that:
- the transaction was held up
- the trustees didn't get their money for the lease as soon as they would have liked
It also risked the artist pulling out of the lease and trying to find another space for his gallery. This would have resulted in loss of funds the charity was expecting to gain from the lease.
See also:
Top of page