This section contains a selection of anonymised case studies based on applications submitted to the Charities Regulator. Details of the matters may have been altered to ensure anonymity, but the case studies should serve to illustrate the nature of the issues that arise in the course of consideration of applications by the Charity Services Committee (the “CSC”). The CSC is the sub-committee of the Board of the Charities Regulator that reviews applications for the exercise of discretionary statutory functions pursuant to the Charities Acts 1961-1973 and makes recommendations on them to the Board of the Charities Regulator which makes decisions.
Case Study 1 – Sale of Charity Property with Development Land Potential – s34, Charities Act 1961
A religious charity with a large property in an urban area with scope for development of residential dwellings submitted an application to the Charities Regulatory Authority (“the Charities Regulator”) for authorisation of sale for market value of the property. Payment for the property was partially cash, partially restoration works to the property (still in use by the charity) and partially contingent on the price per unit that would ultimately be achieved by the developer when selling the houses.
A number of years after the charity agreed the terms of sale with the developer, subject to planning and regulatory approval, it submitted its application for authorisation to the Charities Regulator. The valuation report submitted made it apparent that the property was not marketed for sale on the open market making it very difficult to ascertain if market value was being obtained for its charity property. A valuer’s opinion of market value will always be more accurate if the market has been tested.
Another issue was that while the valuation report was comprehensive, it was addressed to the developer’s lenders. This was not acceptable to the Charities Regulator as the purpose of the valuation report is to establish from the charity’s perspective that it is getting market valuefor its charity property. The valuation report should always be prepared for the benefit of the charity and on its instruction.
Additional assurances and documentation were sought and obtained from the charity, including an independent valuation report from a different valuer, before the Board of the Charities Regulator granted authorisation of sale of the property.
- Charities should engage the services of an independent valuer prior to making a decision to sell charity property. Valuers can provide advice on the market value, options for marketing and maximising the value that can be achieved from a sale. Charities should not agree a price for the sale of charity property before seeking professional advice from an independent valuer.
- The Charities Regulator follows a robust process when authorising the sale of charity property, taking into account numerous matters including the best interests of the charity and the Regulator’s role in enhancing public trust and confidence in the sector.. We take a pragmatic approach and support charities by guiding them on the governance standards that are expected in making decisions to sell charity property; and the supporting documentation that will ultimately support those decisions.
- The Charities Regulator provides services to charities pursuant to the Charities Acts 1961-1973, including the authorisation of sale of charity property, at its discretion. All applications initiate a legal process. They must be reviewed by the Board of the Charities Regulator through its sub-committee, the Charity Services Committee (the “CSC”). The CSC makes recommendations to grant or refuse an authorisation to the Board of the Charities Regulator which makes the decision in each case.
- Charities must be up to date with their statutory obligations including filing their annual reports with the Charities Regulator and must ensure that all details relating to their charity are up-to-date on the Register of Charities before submitting an application to the Charities Regulator under the Charities Acts 1961 and 1973.
Case Study 2 - Sale of charity shop off-market – s34, Charities Act 1961
*Published in Annual Report 2022 (on 25 July 2023) – page 39
In 2022 the CSU considered the sale of a charity property in Dublin city centre. Initially the sale was agreed “off-market” however this was not authorised by the Charities Regulator. This was because, based on the application documentation presented, including comparable property prices in that location and the price that was originally paid by the charity to buy the property, the sale agreed price was not considered to represent market value. The Charities Regulator directed that the property was put on the market for a period of six weeks with appropriate marketing and signage to bring the sale of the property to the attention of all potential bidders. Several higher offers were received and the highest offer was accepted. The price achieved was 25% higher than the price the charity originally agreed. This resulted in a six figure sum increase in the sale price which could be used for the charitable purposes of the charity. The application for authorisation of sale was granted in respect of the higher sale price for the property.
Case Study 3 - Sale proceeds to be applied for the original purposes the property was held – s34 / s29, Charities Act 1961
A charity which held a school building for the benefit of children of a particular religion in the local area made an application to the Charities Regulator to authorise the sale of the school building. It proposed to use the sale proceeds for the benefit of schoolchildren in another area.
The Board of the Charities Regulator considered the original trusts on which the property was held, as outlined in the title deeds to the property when it was acquired by the charity. The Board of the Charities Regulator did not authorise the property sale based on the application made because the proceeds of sale were not going to be used for the original charitable purposes. The sale was subsequently authorised when the trustees’ amended the proposal for the application of sale proceeds so that it was consistent with the trusts on which the school building was held.
Charities may wish to dispose of charity property for many reasons, including that the property is surplus to its requirements, no longer fit for purpose, no longer in a location where the charity delivers its services or for other reasons, such as the property is no longer suitable for occupation or habitation.
However, charity trustees are under a duty to ensure that charity property is used for exclusively charitable purposes and that the proceeds of any sale of charity property are applied towards the original purposes for which it was held.
If a property was held for the general purposes of the charity, for example, it may be sufficient to state that the sale proceeds will be applied for those purposes. If the property was held for the benefit of beneficiaries in a particular area or of a particular gender or who have a particular need, then the property may form part of what is known as a “restricted fund” and the proceeds of sale must be held for those purposes. We have guidance in relation to this on our website.
If it is planned to use the proceeds of sale for a broader purpose or category of beneficiaries, then it may be necessary to make an application for a cy-près scheme, either to the Charities Regulator or to the Courts, to alter the objects of the trust on which the property or its sale proceeds are held.
Case Study 4 - Advantageous to the charity – s34, Charities Act 1961
A charity which held a derelict property on one acre made an application for authorisation of sale of the property for €12,000.
The applicant had submitted a one page valuation report which stated that the price agreed was the best price available, however no details of marketing were provided. The Board of the Charities Regulator, which has the power to authorise these applications, did not consider that this represented market value and directed the applicant to market the property:
The Charities Regulator directs that the property must be offered and advertised for sale on the open market on a joint agency basis for a minimum period of eight weeks with a reserve price no less than the higher value in the valuation reports submitted. Marketing should include the erection of signage at the property and advertisements in the agents’ offices, online and in at least one edition of a local newspaper. The property must be made available for inspection by all and any interested parties. The Charity should give consideration to all offers received. Full details of the marketing history, inspections and bidding should be submitted to the Charities Regulator, together with any changes to the proposed terms of sale.
Numerous factors were identified in the first valuation report submitted with the application that impacted the property’s value and marketability. Despite these, following marketing of the property on the open market, a sale to a third party was agreed for a sum of €60,000. This sum was five times the original price agreed. The original auctioneer produced a report to show that land values per acre in the area were approximately €8,000 per acre. In addition, the development potential at the site did not seem to have been taken into account in the first valuation report submitted.
In order to meet the standard set by the legislation (section 34 of the Charities Act 1961), that the sale is “advantageous” to the charity, the charity must demonstrate that it is getting market value. Having regard to the general principles of trust law, trustees must ensure that the proposed sale is of benefit to the charity or its beneficiaries, in all circumstances.
Case Study 5 - Executors acting in the administration of an estate – s21, Charities Act 1961
The executors in the estate of a Deceased who left charitable bequests to their local parish sought an opinion of the Board of the Charities Regulator under its seal as to whether the terms of the will create a new charitable organisation which would be subject to the application process for registration as a charity, or whether they may pay the bequest to an existing identified registered charity.
The Deceased included a condition that the charitable bequests in his will were to be held in trust for the benefit of the parish and not for the benefit of the diocese. They also directed that the directions of the parish priest should be sought in relation to selling the assets; or transferring title to them.
Counsel’s Opinion was submitted with the application. Counsel’s Opinion was (1) the property must first be vested in the executors for the purposes set out in the will and (2) the opinion of the Authority should be sought before any transfer of the assets.
The Charities Regulator is obliged to consider complete applications received under section 21 of the Charities Act 1961, but is not obliged to provide a statement of its opinion or advice. The Charities Regulator considered all supporting documentation including Counsel’s Opinion. In the circumstances of the application presented, where the charity was able to procure its own legal advice and it had obtained specialist legal advice from a barrister, the Board of the Charities Regulator considered that it was not necessary to provide an opinion or advice.
Case Study 6 - Compromise of a claim against a charity – s22, Charities Act 1961
A deceased individual left their entire estate in their will to three charities and did not leave anything to their three children. While two of the children had been provided for during their lifetime by the deceased, the third had not. Children do not have any automatic rights to a share in their parents’ estates, however they can make an application to Court for provision from the estate where the parents have failed in their moral duty to provide for them either during lifetime or on death. The third child made such an application against the estate.
Executors have a duty to administer the estate in accordance with the provisions of the will. A full defence to the Court proceedings brought by the child was made on behalf of the Executor. Counsel for the estate provided an Opinion to the Executor that given the circumstances of the case, where the deceased has effectively made no provision for his child from an early age, that it was a very difficult claim to defend successfully. Counsel concluded that should the matter proceed to trial it would be reasonable to expect that an award of 50% of the value of the Estate would be awarded to the child in addition to their legal costs. In addition, the legal costs in defending the case could amount to almost 50% of the value of the modest estate.
The parties agreed a compromise, subject to regulatory approval by the Board of the Charities Regulator under section 22 of the Charities Act 1961, that the plaintiff would accept 40% of the estate inclusive of legal costs. The three charity beneficiaries, having taken independent legal advice, agreed that this was an acceptable outcome in the circumstances and that it made sense to avoid further legal costs and court proceedings.
The Board of the Charities Regulator ruled that it was fit and proper and for the benefit of the charities to agree the compromise and authorised it pursuant to section 22 of the Charities Act 1961. As charities without such a power in their constitution (or executors acting under the terms of a will which does not provide such a power) cannot compromise a claim, they would have had to go to Court to agree the compromise if they did not seek the Charities Regulator’s approval.