Benefits of vesting charity land in the Official Custodian

There are multiple ways for a charity to own a property, depending on how the charity is constituted, for example, by individuals acting as trustees or by the company if the charity is a company or a Charitable Incorporated Organisation (CIO). Where the land is held in the name of individual trustees, each time a trustee steps down, the Land Registry would need to be notified so that the register of title can be updated, which can be both administratively and financially burdensome for the charity.

The application to notify the Land Registry is also crucial so that the land is not vested in those trustees who are not associated with the charity any longer and result in poor management of the land. Moreover, if a trustee if being replaced upon the death of the previous trustee, the death of the previous trustee would need to be proved.

An Easier Approach – Vesting the land in the Official Custodian:

An unincorporated charity could adopt a simpler approach if it doesn’t want to be responsible for applying to the Land Registry each time a trustee changes, and this is by vesting the land in the Official Custodian (OC). Through vesting the land in the OC, the charity can eliminate the need to update the Land Registry each time a trustee changes because the land would be vested in the OC regardless of who the trustees are. Another advantage is that the services of the OC are free. These advantages make this route a desirable and an effective one for unincorporated charities.

The land may be vested in the OC as a result of an order made by the court, or more commonly, by making an online application to the Charity Commission. The trustees would be required to have the registered number for the charity, details of the land to be vested and the evidence of the charity’s ownership of the land. Subsequently, the OC would hold the legal title to the land on behalf of the charity and the beneficial ownership would remain with the charity.

Who manages the land after vesting in the OC?

Vesting the land in the OC does not remove the charity trustees from their responsibilities to manage the land. The trustees are still responsible for the upkeep, collection of rents and maintenance of the land, and ensuring that the land is being used for the purpose for which it’s been held on trust. In addition, the land may be subject to other legal restrictions on sale / disposal (for example, a legal charge in favour of a lender), and these must be complied with where a charity wishes to vest land in the OC. The Commission appoints a member of its staff to take up the role of the OC.

How quickly can the land be vested?

The Commission doesn’t deal with applications from charities on a case by case basis. The Commission makes a single vesting order at the end of each month for all charities. If there are any problems with a charity’s application at the time of making a vesting order for that month, then the Commission would make a vesting order in relation to the charity’s application in the following month provided the relevant problems have been rectified.

Other requirements and exclusions:

Charities may think that it would be an appropriate time to apply for a vesting order upon the death of a trustee. However, the Commission requires that the land is held by at least two living trustees in order to apply for the vesting order. If there is just one trustee left, then a second trustee would need to be added onto the register of title before an application can be made for the vesting order.

As a condition to vesting the land in the OC, the charity land conveyed to the trustees must not be subject to express condition or any law that requires such land to be returned to the donor or their heirs once the charitable purpose has ended.

While vesting the charity land in the OC can be helpful, it may not be the most suitable option for all charities because the most appropriate ownership structure of a charity property is context driven and would include a multi-factorial assessment.

We can help your charity find the right option to own charity land and, if you decide that obtaining a vesting order would be the most suitable option for you, we can assist in making the application to the Charity Commission on your behalf. If you would like to discuss this further or would like more information, please email mark.chapman@herrington-carmichael.com or call us at 01276 686 222.