Rethinking your charity’s property requirements

Property is often a relatively low maintenance asset for a charity – until something goes wrong. In some cases, unexpected property liabilities or disputes can threaten a charity’s long-term viability. We talk to Simon Taylor from the Ethical Property Foundation about some key property challenges, and how charities can manage the risks.

21 June 2023

Partly as a result of pandemic-related changes to ways of working, many charities are re-evaluating their property needs, according to Simon Taylor, head of property advisory at the Ethical Property Foundation (EPF), the only dedicated property advice charity serving the UK’s voluntary sector. 

“We’ve certainly seen a large increase in the number of charities approaching us,” explains Simon, “particularly those who don’t have the means to pay for property advice. Some are trying to work out how to make the most of the properties they own, while many charity tenants are also rethinking their options, particularly as local authorities change their property strategies.”

Here are some of the key property considerations that charities need to be aware of – whether they own or rent – and ways to overcome them. 

Assess your property needs

All charities should have a plan in place to periodically assess their properties, in the same way they should for their technology, phone systems and other equipment, Simon suggests.

The first step is for charities to be absolutely clear about what they own, the basis on which they own it, and what they are responsible for. Simon points to various examples where charities have hit hurdles because they don’t have the relevant documentation: “It’s amazing how often organisations don’t have access to this information. One charity wanted to sell a property, but didn’t fully understand the terms of its leasehold agreement. Another wasn’t aware of its liabilities in terms of repairs, such as to the roof or shared spaces.” 

Next, charities and their trustees should review whether their properties are still fit for purpose, both for their operational needs and to meet their charitable objectives if the property is used by beneficiaries. Is the property being used to its full potential, particularly given the move towards hybrid working? Does it still align with the charity’s aims and stakeholders’ needs? Does it have the necessary facilities to allow the charity to provide its vital services? Some charities provide office space for other third sector organisations, so will need to assess whether there is still demand for this.

Of course, charities should also review the costs associated with their property and – where relevant – assess their entire portfolio against their requirements by conducting an options appraisal or strategic review of their needs.

“At the end of the day, charities need to know whether the property is providing good value for money, meeting their charitable objectives where relevant, and, in this competitive environment, whether it is improving an organisation’s attractiveness in terms of attracting funding and recruiting staff, including volunteers,” explains Simon. 

Be aware of lease issues

Simon says EPF receives dozens of lease-related queries each year: “Organisations sometimes enter into leases without fully appreciating the terms and conditions. Sometimes charities can be saddled with unreasonable expectations.” 

To reduce their risk exposure, charities should ensure they’re always fully aware of the basis on which they occupy any property, along with the associated costs of rent, service charges and rates. 

“Unfortunately, we see lots of cases where the person who signed the original tenancy agreement is no longer with the charity, where there isn’t any paperwork in place, or the charity didn’t seek professional advice at the start of the lease. Sometimes a charity has even ended up paying charges and bills for buildings it no longer occupies!” 

As such, it’s crucial that charities seek proper advice whenever they take out a new lease, re-negotiate terms, undergo a rent review, or want to exit a property contract. 

Keep an eye on upkeep and running costs

Some properties tend to require extensive repairs and maintenance – sometimes expected, sometimes not. Simon suggests that organisations create a maintenance plan to help manage the sometimes huge costs associated with managing a property, including having a contingency for any ‘unexpected’ work. “Charities must also be very clear about what they’re responsible for in terms of maintenance and upkeep, irrespective of whether they own, lease or share a building.” 

He adds: “It may also be possible to reduce costs – and even save money – by reviewing a building’s energy usage, and increasing energy efficiencies. And remember, if a charity wants to rent or sell a property it needs to be rated E (in terms of energy efficiency) or better.” 

Think before you sell 

Finally, Simon explains that selling a charity’s property isn’t always straightforward, and recommends that charities seek advice if they want to sell: “For example, trustees are obligated to follow certain procedures to demonstrate they’re optimising the use of the property and acting in the charity’s best interests. This includes obtaining a surveyor’s report from a member of the Royal Institution of Chartered Surveyors which must, among other things, specify the value of the property, the most appropriate method of sale, how to advertise the property, and any work required.” 

Always be ‘property aware’

Simon concludes: “It’s essential that charities and their trustees are ‘property aware’. This includes conducting strategic reviews of their property needs, keeping proper documentation, putting a maintenance plan in place, and periodically assessing ways to manage – and ideally reduce – the costs.”

He suggests that getting expert advice is really important as it can potentially help a charity to reduce its liability and save a lot of money for worthy causes.  

The Ethical Property Foundation offers free and impartial online property guidance and support, webinars and in-person workshops. It also provides affordable consultancy services and can help with a wide range of property-related issues – from leases to buying and selling, and from reducing energy bills to creating a strategy to plan for the future.