Many charities are unaware of their obligations in relation to property they own or use. As a result, they’re risking their financial health and reputation, as well as the safety of the public, writes Kenny Gray, partner in the charities group at Lindsays.

Scottish charities of all sizes could unwittingly be sitting on a powder keg of possible fines or reputational damage. Their trustees could also be at risk of financial or criminal penalties.

The problem concerns the obligations they face as owners or tenants of property – from shops to village halls to care homes to youth hostels. Given that over 500 village halls alone are managed as charities in Scotland, the problem is likely to be sizeable. Most charities are aware of some of their obligations, but not all.

The gaps in compliance often come to light when a property is bought, sold or leased. However, failures may also emerge in other circumstances – perhaps through complaints from members of the public or, worse, through a service user or customer being injured. In addition to the issues of conscience and reputation involved, there could be fines running into five or six figures. If the charity is unincorporated, its trustees could be personally liable.

What obligations are we talking about?

There could be fines running into five or six figures. If the charity is unincorporated, its trustees could be personally liable.

Much of the list is not especially esoteric, and concerns areas like identifying and preventing possible exposure to asbestos, fire regulations (carrying out a risk assessment and implementing safety procedures, etc), accessibility of the premises for disabled persons, and the safety of gas appliances. It’s in the detail where the complication seeps in, and where breaches tend to happen.

Typically, when a charity comes to us about selling or leasing a property, there will be a file of compliance documentation. A good start, of course, but often many of the documents will turn out to be years old. And this is where risks lie for so many charities.

Take fire risk assessments. As a rule of thumb, these need to be updated if the layout of a property is changed.

Or electrical and gas compliance. The regulations for portable appliances, gas safety and wiring are all slightly different to each other in terms of the requirements for ‘recommended’ and ‘mandatory’ checks, and their frequency.

Or take legionella. It may be an issue charities associate with larger properties, yet any premises with hot and cold water systems, air conditioning, or a shower will need a legionella risk assessment – and not just as a one-off.

What could the penalty be for non-compliance?

Then look at the extent of recent fines and penalties on such issues, and the scale of the risk becomes clear. For example, a charitable trust in England faced fines and costs totalling £35,000 for safety failings on asbestos. Fines for fire safety breaches can reach six figures.

What can you do?

There is no single, simple solution to statutory compliance, and regulations continue to change apace. The obligations extend to both owners and tenants of property, and depend on the area of compliance and type of building. Where a property is leased, the lease terms often also extend the tenant’s regulatory responsibilities.

However, charities of any size can adopt some basic principles in relation to property that they own or use:

• Take health and safety matters seriously: appoint a designated person or group within the organisation to ensure that assessments are undertaken regularly to identify and record potential dangers, and proper procedures implemented to mitigate risks.
• Consider it a living issue: if you have any compliance documentation that hasn’t been reviewed for a while, you’re likely to have a problem, particularly if the layout of the property has changed. Risk assessments for some obligations can be done by the charity itself to save on fees, but it is important to take advice on where this may, or may not, be possible.
• Diary ahead: include timely reminders for compliance issues arising in the coming year as an integral part of the maintenance and repairs regime.
• Put the onus elsewhere: any charity renting or acquiring property should ensure the landlord or seller provides fully up-to-date compliance documentation. If a comprehensive package is not being provided a price reduction (or increased rent-free period in a lease situation) may be appropriate to compensate the charity for the additional costs it will incur making the property compliant.

And finally, take advice. Given the technicality of statutory compliance, this is not an area where charity managers and trustees should learn by trial and error. Further, the size of possible fines and severity of other consequences mean that investment in statutory compliance is money well spent. If charities want to add one thing to their to-do list for year-end, statutory compliance may well be it.

Kenny Gray is a partner at Lindsays’ charity group.