It should be straightforward for charities and voluntary organisations to buy or rent property, for their own use or as an investment, as well as to sell or lease property. As with any business transaction, it is important you get the best deal for the organisation and follow any rules laid out in the law and your governing document. For example, when renting or buying property, ensure the property is suitable for your needs, is reasonably priced and any mortgage terms are competitive.
Similarly, when selling or leasing charity property, you should ensure you have the necessary permission in your governing document, that you own the title to the property and that you are acting in the best interests of the organisation. If you do not have the power to sell or lease, you may have to apply to the Office of the Scottish Charity Regulator for the authority to change your constitution to allow you to do this.
As well as solicitors and letting agents, third sector organisations can find property through local third sector interfaces, local authorities and through SCVO. Before renting or buying any property, study the plan and description of the premises, and the smallprint of the lease or contract. Property law is complex so get any agreements checked by a lawyer. SCVO members with an income of less than £500,000 can access up to two hours free legal advice on all aspects of property law.
Whether buying or renting, here are some issues to consider:
Check what is included in the rent. Does it cover insurance and service charges? When is it payable? When and how will the rent be reviewed? Remember to factor in all running costs such as business rates, and tax and VAT before entering into a lease. To what extent will you be liable for the internal condition and any dilapidation of the property? You will need to survey the premises prior to occupation so there are no hidden surprises.
What can you do there?
Check for restrictive covenants – this is the name for provisions in a lease that prevent the tenant from doing certain things in or to the property. For example, using it for residential purposes or as a venue for performances. Is it permissible to install extra phone lines? Is it in a residential or conservation area and subject to restrictions on alterations?
The term of the lease should be stated, possibly with a break clause to allow flexibility to allow either the tenant or the landlord to get out of the lease before the end of the term, subject to one or two months’ notice.
Check with the local authority
Check with the building standards department to see if there are any outstanding building notices on the property. The organisation may not have to pay for any work, but it might disrupt its service. Check with the planning department to see if there are any imminent developments that will have an impact on the property, for example, new houses or roads.
Check if the property is fully accessible. Also find out if it is near public transport links or whether there is adequate car parking.
Mortgages and loans
You can take out a mortgage or loan secured against your organisation’s property or land, but you should get legal advice to ensure the loan is needed, is used for an activity that fits with your aims and objectives, and has reasonable and affordable terms and repayments.
- The Ethical Property Foundation advises charities and community groups on property issues.
- The Royal Institution of Chartered Surveyors’ Charity Property Help scheme provides free support and guidance on all property matters.