Impact of coronavirus pandemic on charity property


20 April 2020

As the property sector struggles to adjust to unprecedented global events and with charity shops closed and key fundraising events cancelled, we highlight some of the key news affecting charity property.

Support from Government

The Chancellor, Rishi Sunak, recently announced a £750m coronavirus package for charities, saying “one of our greatest strengths as a society is our civil society” and that charities “have not been forgotten”. The Government will also match the money raised when Comic Relief and Children In Need hold their “Big Night In” fundraising event on 23 April.

However, NCVO estimates the financial black hole facing the charity sector is more in the order of £4bn over the course of 12 weeks. Whilst much of the detail is still being clarified, the £750m support appears very much to be geared towards charities providing essential services or direct support to relieve hardship to people affected by the pandemic, such as hospices and the St John’s Ambulance and those providing local support in the community. For example, international aid charities would not seem to be covered.

Whilst many charities are furloughing workers under the Government’s Job Retention Scheme to safeguard finances, this is not suited to some charities which cannot simply shut up shop - animal welfare charities are just one example.

You can read NCVO’s commentary on the funding package here.

Business rates

Charities already benefit from 80% relief from business rates, with the remaining 20% at the discretion of the local authority. The Government has announced that in response to the coronavirus pandemic there will be an Expanded Retail Discount of 100% in 2020/21. Charities who do not benefit could also look into applying for empty property relief, although this generally only applies for up to three months. There is a good summary of the options here.

Charities should beware of participating in business rates avoidance schemes in return for donations.

Rents

Charity tenants are worried about whether they will be able to pay their rent, just as charities who hold investment properties are concerned whether they will receive any rent.

Shortly before the March quarter day the Government announced that it would extend the moratorium on lease forfeiture to commercial leases for the three months up to 30 June 2020.  This means that a landlord cannot currently forfeit a commercial lease for non-payment of rent alone.  There are other options available if a tenant is in default, for example calling on rent deposits or guarantees.  It is important to understand that this does not mean the tenant does not have to pay the rent, nor does it constitute a waiver the landlord’s right to pursue rent which is due.

It is likely the situation will be updated just before the next traditional quarter day which is 24 June. There is more information in our previous article.

In the meantime, communication can often the key to preserving a good relationship between landlords and tenants. It may be possible for the rent to be paid monthly for a time or for rent to be suspended for a period, in return for the tenant extending the lease by an equivalent period.

Now, more than ever, it is important to understand and diarise the key dates in your leases, such as break dates or rent review dates.

Charities Act surveyor’s reports

For charities engaged in disposing of property the restrictions contained in the Charities Act 2011 have not been relaxed and so there will often still be a requirement to obtain a surveyor’s report on a sale, grant of a long lease or of easements. It will clearly be more difficult for trustees to obtain these reports but surveyors may be able to be creative and produce reports based on online plans and telephone interviews with trustees.

Ethical Property Foundation

The Ethical Property Foundation is offering a COVID-19 Charity Property Webinar on 23 April covering how to manage your building, questions for your landlord and next steps. This webinar is free and will also have a Q&A session with expert property advisors. You can register for your place here.

The Foundation has also launched a COVID-19 Charity Property Survey which they say will help tailor the support they are offering and provide vital actions for Government and funders on how they can aid charities. This survey only takes three minutes to complete, please do so here.

For more information on the above matter, please get in touch with Louisa Saunders or another member of the Charities and Social Enterprise Team to discuss your specific requirements.

The content of this article is for general information only. It is not, and should not be taken as, legal advice. If you require any further information in relation to this article please contact the author in the first instance. Law covered as at April 2020.