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Disposing of or repurposing a building owned by a charity is never just a simple transaction. For registered charities, it’s a process that comes with specific legal responsibilities – and rightly so. Trustees have a duty to ensure that any sale delivers the best possible value for the charity and complies with the law.
Known for their openness and speed, auctions offer a reliable and well-informed route for charities to dispose of property assets.
Whether you're selling a redundant community hall, a former office space, or surplus land, here's what you need to know before heading to auction.
Before any sale can proceed, trustees must obtain a Designated Adviser’s Report (DAR) – previously known as a Section 119 report under the Charities Act. This is a legal requirement and a vital safeguard to ensure the charity is acting in its best interests.
The DAR must:
This report must be prepared by a qualified professional, such as a surveyor, estate agent, or agricultural valuer, who is independent of the charity.
If the DAR recommends auction as the preferred route, there are a few additional steps trustees must take:
1. Set a reserve price
The reserve price is the minimum amount the property can be sold for at auction. It must be set at or above the lowest valuation provided in the DAR. This protects the charity from underselling its assets and ensures compliance with the Charities Act.
2. Check for connected persons
If the potential buyer is a connected person – such as a trustee, employee, or someone closely associated with the charity – the sale cannot proceed without a formal Charity Commission order. This is to prevent conflicts of interest and ensure transparency.
3. Include the right sale conditions
The auction contract must reflect the charity’s legal obligations. This includes clauses related to connected persons, use of proceeds, and any restrictions on the property. Legal advice is essential to ensure the documentation is watertight.
The benefits of selling charity assets at auction are two-fold:
Transparency for all parties: One of the key advantages of auction is the transparency it offers clients, regardless of what asset they are selling. For charities, the auction sales process provides an indisputable record of the market value on the day, which helps trustees fulfil their duty to achieve the best price. This also mitigates any concerns around whether the property was sold fairly.
Maximise value: Selling charity-owned land or properties via auction can result in strong prices being achieved, and is a particularly effective route for unique or desirable properties in sought-after areas. If the property attracts strong interest, competitive bidding can drive the price above market expectations. This can be a powerful way to unlock the full financial potential of the asset, helping to maximise returns with minimal delay.
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