The Commission first became aware of concerns about the sale of the charity’s property in Belgrave Square in London in 2013, over four years after some of the events took place.

The charity owned a leasehold interest in the property which was due to expire on 25 December 2047. Although under the terms of the lease the charity paid only a minimal annual rent, it was being asked by the landlord to expend substantial sums on the upkeep of the property (for which the charity was responsible under the terms of the lease) which it could not afford to do. This being so, the charity trustees wished to dispose of the property and find alternative premises. The disposal of the property was complicated by a particularly restrictive clause in the lease about the use of the property.

Initially the charity began attempting to sell the property for £8m in 2008/09, but failed to conduct due diligence and the deal fell through. However, in 2010, it did sell to Platinum Prime Property Investments Limited (PPPI), a company registered in the British Virgin Islands (BVI) for a lesser consideration of £6m.

The disposal was completed on 23 December 2010. The property was then immediately sold on by PPPI to another BVI registered company, Rose Season Enterprises Ltd, for over £21m.

The subsequent investigation concluded that the trustees failed to fulfil their legal duties and responsibilities towards the charity, and that ‘the failures and breaches were not minor or technical in nature’ but ‘amount to basic and serious mismanagement’.

The report criticises the failure by the trustees to obtain a report from a surveyor who was suitably qualified as required under charity law for a disposal of this type. It finds that the trustees failed to seek independent specialist advice about how to ensure the charity would benefit from a possible post-sale increase in the value of the property if a change in the use of the property and/or enfranchisement was secured, as happened.

The inquiry’s view was that the charity should have known that a commercial company would only purchase the property if it had good reason to believe it would secure enfranchisement or successfully negotiate a change of use. The inquiry also concluded that the trustees failed to take proper account of concerns raised by the charity’s solicitor before the sale was completed.

Although the trustees told the inquiry that there was a financial imperative to dispose of the property and there was only one prospective purchaser, the report concludes that the trustees failed to conduct proper due diligence into the buyer of the property, a shell company with no assets.

There were mitigating factors as to why further regulatory action in the case was not appropriate, including a retrospective valuation of the property subsequently obtained by the charity that could be argued as being supportive of the 2010 sale price. Also, the Commission did not find evidence that the trustees, or anyone associated with the charity, derived unauthorised private benefit from the sale or any indication of bad faith on the part of the buyer, and the main person who authorised the disposal is now deceased.

Harvey Grenville, head of investigations and enforcement at the Charity Commission, said: ‘This case highlights that disposing of charity land can involve complex arrangements, which charities need to be careful about and obtain proper professional advice on.’

Grenville pointed out that the law in this area is designed to ensure that a charity’s assets are protected and that when disposing of charity assets it is only in the best interests of the charity. The Commission has developed more detailed guidance on disposing of land and is urging charities to refer to and use this.

The Spiritualist Association of Great Britain (formerly The Marylebone Spiritualist Association) Ltd Inquiry report is here.

Guidance: Sales leases transfers or mortgages: what trustees need to know about disposing of charity land is here.