Charities fortnightly round-up 21

Coronavirus latest

The Prime Minister announced on Tuesday 22 September a new range of restrictions to protect us from the Covid-19 crisis, some of which will apply to charities.

In the briefing, Boris Johnson confirmed that while funerals may have up to 30 attendees, guests for weddings are limited to 15, whilst other standalone life events will be limited by the “rule of six”.

From 24 September, those organisations which sell food or drink (including cafes and those which run restaurants or bar facilities), social clubs, indoor and outdoor leisure facilities and other social venues must close at 10 pm and open no earlier than 5 am.

In addition, the Government has confirmed that it is compulsory for organisations in the hospitality, tourism, and leisure sectors, places of worship, close contact services and local authority-run services to have a system to collect NHS Track and Trace data and to ask customers to provide these details, which must be retained for 21 days.

Charitable purposes – legal update

The Charity Commission has made two recent decisions allowing the registration of two charities. One sets out the reasoning behind when journalism can be charitable. The other demonstrates that what is considered as charitable changes as society changes – allowing the registration of a charity when its predecessor body had previously been rejected as a charity by the courts.

Charitable purposes reflect changes in society

The Theosophical Society in England provides a website, as well as courses, talks, workshops, events and publications on Theosophy and related subjects. The Society, a company limited by guarantee (and the corporate successor to an unincorporated body of the same name founded in the nineteenth century) applied for registration at the Charity Commission having adapted the objects of the unincorporated body drafted in 1896. The courts had previously stated that the unincorporated body was not a charity due (in part) to the advancement of theosophy not being charitable.

In considering the application of registration for the Society the Charity Commission:

• regarded theosophy as advancing moral or ethical improvement, rather than religion (which had not been done previously by legal authorities); and
• recognised the Objects had been re-worded to reflect recognised charitable purposes in law.

It, therefore, agreed the Society was capable of being a charity for the promotion of moral or ethical improvement and the advancement of education for the benefit of the public.

The full decision of the Charity Commission can be found here.

Charitable journalism

The Charity Commission recently published its decision on its registration of Public Interest News Foundation (PINF) as a charitable company limited by guarantee. They have previously stated that journalism can be used by charities to further their charitable purpose such as advancing education, the arts, culture, human rights, common development and so on, but the decision made in relation to PINF makes clear when journalism can be charitable.

To ensure it is for the public’s benefit PINF must not provide or support news media that is purely for entertainment, politically motivated, is biased, inaccurate or infringes on a person’s right to privacy. In addition to providing impartial public interest news, PINF will educate the public about its role as good citizens, making them aware of matters of local concern or promote educational outcomes such as improving public health.

The executive director of PINF has stated: “I think what we’ve successfully done is set a model now for what charitable journalism could look like”.

The full decision of the Charity Commission can be found here.

Funding for charities

Many charities are facing a financial shortfall in having relied heavily on fundraising activities, such as marathons, coffee mornings, street collections and goodwill donations from supporters who themselves are also worried about their personal income and whether they can continue to provide regular donations to charities. The programmes highlighted below, therefore, may be of interest.

The National Lottery Heritage Fund has announced the Green Recovery Challenge Fund for environmental charities and their partners. The deadline for grants of £250,000 to £5 million has passed, but grant applications for £50,000 to £250,000 can be received until noon on 2 October 2020. Further details can be found here.

Although it is not a grant-making programme, the Resilience and Recovery Loan Fund (launched in April 2020) provides emergency loans to charities and social enterprises without a personal guarantee and charges no fee or interest for 12 months. New applications must be received by 30 September and the form can be found here.

Business Interruption Insurance – check your policies for non-damage and disease clauses

On 15 September 2020, the High Court handed down its judgment in a test case brought by the Financial Conduct Authority (FCA) in relation to non-damage Business Interruption Insurance. The case concerned policy cover due to the Covid-19 pandemic. The FCA brought the case as the regulator of insurers to clarify policy coverage in light of the significant impact of Covid-19.

Business Interruption Insurance can, in circumstances covered by the policy wording, cover the loss of profits and other expenses suffered by a policyholder. Whilst policies commonly cover events such as flooding or a fire, some also include situations that do not relate to physical damage e.g. non-damage cover. Non-damage cover and cover relating to infectious or notifiable diseases were considered in this case.

The court decided that the pandemic itself, together with the government and wider public responses, were a single cause of covered loss. They concluded that the majority of 21 sample wordings from 8 insurers did provide cover. More specifically, it was decided that most of the disease clauses and some of the non-access clauses considered by the court provide cover.

Whilst some policy samples were found not to cover such Covid-19 related closures, the judgement is welcome news for a significant number of charities and businesses alike, particularly those with spaces such as charity shops and hospitality venues that were closed. As with any insurance policy, charities should carefully review the specific wording of their policies and the specific circumstances of their premises closures in light of the judgment.

Guidance by the FCA asks insurers to undertake reviews and to communicate with policyholders about the case and their policies. However, the case may be appealed – so watch this space!

For more information click here.

Look out for a more detailed e-briefing that we will publish soon.

Charitable landlords facing rent arrears – recent changes to recovery and eviction procedures

Changes to the Commercial Rent Arrears Recovery procedure

Since March 2020, charitable landlords of commercial properties have been impacted by the rules regulating how they are to deal with their tenants. A moratorium has been in place, preventing landlords from forfeiting commercial tenancies for non-payment of rent. Changes to the Commercial Rent Arrears Recovery procedure (CRAR) have also increased the minimum net unpaid rent that must be outstanding before CRAR can be relied upon, to an amount equivalent to 189 days’ rent, which has prevented landlords from attending premises to seize goods in order to force the payment of rent.

Those regulations are now due to change again. The moratorium against forfeiture has been extended a further time to 31 December 2020. Between 29 September and 25 December 2020, 276 days’ must be due before CRAR can be relied upon. It is of course entirely possible that there will be further extensions following the expiry of these periods.

So where does this leave a charity with a non-paying tenant?

Well, their options remain limited. It is unlawful to forfeit or to exercise CRAR outside of the regulations set out above. However, charitable landlords remain entitled to issue proceedings to recover rent arrears and in considering how to proceed must bear in mind their obligation to act in the charity’s best interests.

Nevertheless, we would caution against issuing proceedings without proper consideration of the tenant’s ability to pay, or where forcing the issue will mean the tenant has no long-term prospect of continuing to trade. In the latter scenario, taking action against the tenant could result in a charity holding empty premises, liability to meet rates and little prospect of re-letting in this market.

In those circumstances, it is arguably in the best interests of the charity (if its objects allow) to agree a reduced rent, or further payment holiday if this ultimately ensures some recovery of rent and/or preserves the tenant’s long term prospects at the premises, thereby reducing the risk of empty premises for a longer period of time.

If you would like to discuss further please contact Phil Scully or Rhys Baker.

An end to the stay on possession claims and evictions for residential properties

Charitable landlords of residential properties will be aware that there has been a stay on all possession claims and a ban on all evictions from 27 March which ended on 20 September 2020. Changes that were made under the Coronavirus Act 2020 about possession notice periods continue, although the notice periods have been changed again recently – for less than 6 months’ rent arrears, it has been extended to a 6 month notice period.

The revised notice periods remain in force temporarily until 31 March 2021. See our e-briefing, Possession notices – all change once more! for more details of the notice period changes that apply.

If a charitable landlord has an existing possession case which has been stayed then there are various steps that need to be taken to start those cases again. It will not happen automatically, and landlords are now required in almost all cases to file a reactivation notice. This must provide information about how the pandemic has affected the tenant or leaseholder and their household, as well as proof of arrears. The court will continue to take into account the length of non-payment and any serious anti-social behaviour etc. 

The Government has produced a template reactivation notice to use. More details can be found in our e-briefings: Reactivation of possession claims post-stay and Reactivation notices for possession claims that have been stayed.

Clearly, all charitable landlords will want to make enquiries with their tenants as to whether their arrears or the reason for not leaving a property when they agreed to do so (or their fixed-term tenancy ended) is due to Covid-19 or not. Landlords are not under a duty to make enquiries but the guidance makes clear that adjournments are likely if no attempts have been made to gather this information.

For landlords who already have a possession order and are awaiting eviction dates, you will need to write to the court to ask them to fix a new eviction date.

Landlords should expect all residential possession cases to take considerably longer partly because the time limit that was fixed to the first hearing date being within eight weeks of issuing the proceedings has now been removed and because the court has a very large backlog of both stayed cases and new cases being sent to be issued. The most recent guidance makes clear that landlords should explore all settlement possibilities before starting or reactivating a possession claim.

For more information

If you would like further information please contact Helen Tucker or Baljit Basra in our Housing Litigation team.

Sarah Tomlinson is an Associate in the Charities and Social Business team, with over 15 years’ experience and specialises in charity governance, property trusts and regulatory issues, group structures, collaborations and mergers. Out of the office Sarah enjoys going to the theatre (virtually at present!), is a school governor and does a lot of running around after her four children!

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