UPDATE DETAILS

Removal, variation of specie trusts

Specie property is land or buildings held on trusts which require it to be used for a particular purpose of the charity rather than for the charity’s general purposes. Examples of specie trusts include use as a place of worship or for the accommodation of a particular class of beneficiaries.

There may be historic specie trusts affecting property which are effectively obsolete or which no longer fit with the way a charity meets the needs of its beneficiaries e.g. a children’s home or an orphanage.

Trustees may, in the course of reviewing their property portfolio, decide that they want to sell the property and to apply the sale proceeds for wider purposes than those authorised by the trust.

In such circumstances, it is possible to apply to the Charity Commission for what is known as a cy pres scheme varying the specie trusts affecting the property.

The Charities Act 1993 (as amended quite substantially by the Charities Act 2006) sets out the powers of the Commission to alter trusts affecting specie property and the circumstances in which the Commission will exercise those powers.

The legislation is detailed, but the Commission now has powers to vary the trusts not only in circumstances where the original purpose of the trust has failed, but also to reflect changing economic and social circumstances which affect the way in which the charity’s objects are best achieved.

The legislation is new and there is no real indication of how social and economic circumstances will be interpreted, but Charity Commission guidance makes clear that the object of the exercise is to evaluate the ongoing usefulness of the charity’s trusts in the broadest sense.

Among the examples given as factors which the Commission might take into account is the fact that provision of care for people with disabilities is now generally based around enabling them to live in their own home rather than housing them in institutions.

Trustees have a duty to keep their property assets under review and to ensure their operational effectiveness and in some cases this will include taking appropriate steps to vary or remove trusts.

For further information, please contact:
JAMES McCALLUM on 020 8394 6481, James.McCallum@russell-cooke.co.uk or MARY CHEVES on 020 8394 6465, Mary.Cheves@russell-cooke.co.uk