Sitting on a property powder keg: why Scottish charities must keep their house in good order

Kenny Gray, commercial property partner at Lindsays
Kenny Gray, commercial property partner at Lindsays
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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 and village halls to care homes and youth hostels. Given that more than 500 village halls alone are managed as charities in Scotland, the problem is likely to be sizeable. In our experience, most charities are aware of some of their obligations, but not all.

The gaps in compliance often tend to come to light when a property is bought, sold or leased. That is, if luck is on their side. If they’re less fortunate, their failures on statutory compliance will 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? Much of the list concerns areas like identifying and preventing possible exposure to asbestos, fire regulations, 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 we see so many breaches.

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 many documents will turn out to be years old. This is where risks lie.

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. Or legionella. 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.

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.

There is no single, simple solution to statutory compliance, and regulations continue to change apace. However, charities of all sizes can adopt some basic principles in relation to property they own or use:

* Take health and safety matters seriously: Appoint a designated person or group within the organisation to ensure assessments are undertaken regularly to identify and record potential dangers;

* 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;

* Diary ahead: include timely reminders for compliance issues arising in the coming year as an integral part of a 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;

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.

Kenny Gray is a Commercial Property Partner in the Charities Group at Lindsays