Management topics

Reliance on flexibility

Charities operate in a world where demand is unpredictable. A spike in need can happen overnight. Funding can fluctuate with political change, donor sentiment or economic shocks. Volunteer availability ebbs and flows. And unlike commercial organisations, charities cannot simply scale up by increasing prices or expanding revenue streams.

Zero hours contracts have therefore become a practical tool. They allow charities to bring people in when needed and avoid committing to hours they cannot guarantee. For many workers – students, retirees, people with caring responsibilities – the flexibility is welcome.

The model has always been a compromise. It trades stability for adaptability. And now the government has decided this compromise needs rebalancing.

Predictable working patterns

The upcoming reforms give zero hours workers a new statutory right: the right to request a predictable working pattern. This applies not only to zero hours contracts, but also to other forms of casual or irregular work.

Workers will be able to request a predictable number of hours, working schedule and length of contract. Charities will not be forced to grant every request, but they must follow a formal process and can only refuse on specific statutory grounds.

This is a significant shift. For the first time, the law recognises that unpredictability itself can be a detriment to workers and they should have a mechanism to challenge it.

This matters more for charities than most employers as the charity sector is uniquely exposed to these changes. Here’s why:

HIGH USE OF CASUAL LABOUR. Charities often rely on zero hours staff for retail, events, care services, helplines, seasonal campaigns and emergency response. The volume alone means charities will receive more predictable pattern requests than most employers.

FUNDING CONSTRAINTS. Commercial organisations can absorb structural changes more easily. Charities cannot. If predictable hours increase staffing costs, there is no simple lever to pull.

PUBLIC TRUST AND REPUTATIONAL RISK. Charities are held to higher ethical standards. A refusal that is legally sound may still be perceived as morally questionable by supporters, donors or the media.

OPERATIONAL COMPLEXITY. Charities often run multiple services simultaneously, each with different staffing needs, peaks and troughs. Predictability in one area may create unpredictability in another.

This is why the reforms should not be seen as a technical HR update. They are a strategic shift that touches governance, finance, service delivery and culture.

The reforms will force charities to examine questions they may have avoided:

Do we actually need zero hours contracts in this part of the organisation? Many charities use them out of habit rather than necessity.

Could short hours contracts achieve the same flexibility with less risk? A 4-hour or 8-hour weekly contract can provide stability without removing adaptability.

Are our rotas genuinely unpredictable, or just historically messy? Some unpredictability is structural; some is organisational.

Do we have clear documentation explaining why certain roles must remain flexible? This will be essential when responding to predictable pattern requests.

Are managers trained to handle these conversations constructively? A poorly handled refusal can cause more damage than the refusal itself.

These reforms are not just about compliance. They are about maturity. They push charities to articulate why flexibility is needed, and to ensure that need is genuine, not simply convenient.

Rethinking workforce planning

The reforms will inevitably push charities to rethink how they organise and justify their use of zero hours contracts. For many charities, this will mean confronting questions that have been quietly parked for years. One of the most important is whether zero hours arrangements are genuinely necessary in each part of the charity, or whether they have simply become the default option over time.

A surprising number of charities discover that certain roles could be performed perfectly well on short hours contracts, four or eight hours a week, for example, which still offer flexibility but provide workers with a far greater sense of financial stability.

Another issue is the structure of rotas themselves. Some charities assume their scheduling is inherently unpredictable, when in reality the unpredictability may stem from historical habits, inconsistent planning or outdated systems. The new regime will force charities to distinguish between genuine operational volatility and avoidable organisational messiness.

Clear documentation

Alongside this sits the need for clear documentation. If a charity intends to maintain flexibility in certain roles, it will need to be able to explain why. That justification must be more than a vague reference to “operational need”; it must be specific, evidenced and consistent, because it will form the backbone of any response to a predictable pattern request.

Finally, charities will need to invest in their managers. These conversations are delicate, and a poorly handled refusal can cause more damage than the refusal itself. Managers must understand not only the legal framework but also the cultural expectations of the sector. The reforms are not simply about compliance. They represent a moment of organisational maturity, pushing charities to articulate clearly why flexibility is needed and to ensure that need is genuine rather than convenient.

What charities should do

The first step for any charity is to audit its zero hours workforce. This means identifying where zero hours contracts are used, why they were introduced and whether those reasons still hold. It is remarkable how often an audit reveals that certain arrangements were created years ago for reasons that no longer apply.

Once that picture is clear, charities can begin mapping the areas most likely to generate predictable pattern requests. Retail operations, care services, helplines and outreach programmes are obvious hotspots, but every charity will have its own pressure points.

From there, charities should develop a clear decision-making framework. Managers need structured guidance on when predictable hours can be granted and when they cannot, because inconsistency is the fastest route to grievances and reputational risk. Training is essential. The new regime requires careful, confident communication, and managers must be equipped to handle requests constructively and empathetically.

It is also sensible to prepare template responses, not rigid scripts, but thoughtful, consistent messaging that helps managers explain decisions clearly and respectfully. Alongside this, charities should explore alternative contract models. Short hours contracts, annualised hours and fixed term arrangements can offer a middle ground between stability and flexibility, reducing reliance on zero hours contracts without undermining operational agility.

Finally, charities may need to revisit their volunteer strategy. Some charities will consider shifting certain tasks from casual workers to volunteers, but this must be approached with care. Volunteers cannot be used to replace paid labour in a way that undermines employment rights or ethical standards. Any shift must be lawful, transparent and aligned with the charity’s values.

Reality charities must face

Zero hours contracts are not disappearing. But the era of unchecked flexibility is ending. Charities must adapt, not reluctantly, but strategically.

The new predictable working pattern regime is a wake-up call. It asks charities to examine their assumptions, rethink their workforce models and engage more honestly with the people who keep their services running.

The charities which thrive will be those which treat this not as a compliance exercise but as a moment to strengthen their culture, clarify their values and build a more stable, sustainable workforce.

Many charities are currently reviewing their assets to maximise their value. This process usually involves identifying both their core property assets and those which are not essential to operations. But after identifying which category each asset fits into, certain steps need to be considered. Here are some of the options.

Strategic reviews

At some stage a charity should conduct a strategic review of its property assets – at the very least to ensure it is making the most out of them, but also as part of charity best practice and compliance. It can also help to ensure the charity is adequately planning for any property related legislative or regulatory changes, such as the planned changes to EPC energy efficiency targets for rented properties by 2030.

Core property assets which need to be retained can often be reviewed to identify cost savings or income-making opportunities. This could be in the form of improving the energy efficiency of a property or adding green energy solutions such as solar panels. Both of these examples can involve a significant capital outlay and a long pay-back period, but looking to the long term can cut costs while positively impacting the environment.

A strategic review could also involve identifying ways to better utilise property assets to generate income, such as through rental opportunities when a building is not being used in its entirety. A strategic review would look at all of the options and identify the most suitable solutions.

Similarly, for non-core assets, strategic reviews can involve looking at whether a property can be utilised in other ways. For instance, a disused piece of land which a charity would like to keep hold of could be utilised for environmental schemes or have minerals underground which could be used to generate income.

In addition, a commercial or residential property may benefit from alterations or a change of use which may require certain permissions.

A strategic review can also identify when a non-core property asset should be disposed of. For example, older assets which require costly work to bring them up to standard or those which have no use and are proving a headache to retain. Selling these could then open up opportunities for charities to reinvest in more modern stock, future-proofing their investments.

Disposal of assets

When looking at the disposal of property assets, various options are available depending on the motivations and the timescales involved. The focus should be on the best outcome for the charity within a timeframe that meets its needs.

The most common method of sale is by private treaty which involves instructing a property professional to list a property on the market to secure a sale. This involves listing a property on the agency’s website as well as platforms such as Rightmove. While this is an incredibly popular way to sell a property and certainly has its merits, even when a buyer is secured, there is still a level of uncertainty, and getting sales over the line can often take a considerable amount of time, with the added risk that these could fall through.

One of the newest methods of disposing of a property asset is via online auction. Unlike traditional, in-person auctions, this modern method benefits from an incredible amount of flexibility, and its success is not impacted by external factors such as the time of day it is being held, the weather or location which could hinder attendance. While properties are listed at a competitive price to attract bidders, properties can achieve extremely strong results, selling for 20% or 30% above the guide price.

How online auctions work

With online auctions the auction provider may be a specialist auction-only company operating internet bidding, or property consultants/estate agents offering their own online auction services. Ahead of the auction, the property is prepared for marketing. This includes sourcing photography and preparing the legal pack containing information such as local authority searches. The auction provider would also work with the vendor to decide on a guide and reserve price.

Each property is an individual sale, and the auction can begin as soon as the property is ready for marketing and the client is happy to begin. The property is listed online and includes the property details, legal pack, guide price and the auction end time – with the reserve being kept confidential and not disclosed to the public.

Potential purchasers would register to place bids, and the IT behind the system should mean that the auction provider can see exactly who is registered and their level of engagement which gives the provider, particularly in the case of a property consultant/estate agent provider, some really strong statistics to discuss with the vendor.

It enables the more flexible and nuanced auction provider to identify when properties are doing well and have strong interest, or conversely, it can identify properties which aren’t doing quite as well. This enables such a provider to work with the vendor and plan the next steps well in advance of the end of the auction, such as adjusting the price and extending the end date to allow more time to attract new buyers.

The advantage of this kind of arrangement is that whilst there is an end time, once the reserve is met, any bids that are submitted in the last five minutes reset the timer for an additional five minutes. That means that if you have a number of people bidding, this can continue beyond the end time to ensure the vendor has got the best price. It provides a way of demonstrating the auction has achieved the best price and ensures potential purchasers aren’t able to jump in at the last second to secure a cheaper price.

If a property doesn’t quite achieve the reserve price, depending on the auction provider, the provider can go back to the charity and discuss if it would be willing to sell for less. If the charity is willing, the provider can then go back to the highest bidder and still sell the property under the auction conditions within the same day if instructed to do so.

Once the auction has ended, it's a legally binding exchange of contracts, giving certainty of sale.

The timescales involved

It typically takes around four to six weeks to prepare a property for marketing. When the property is ready, the auction itself could last for 28 days. Once the auction is completed it is, as just mentioned, a legally binding contract which means that if everything goes smoothly, the vendor could have the money in the bank within three to three and a half months of starting the process, which is very appealing. There are specialist auction-only providers which could provide a faster process but these, arguably, lack the more in-depth service of a professional property consultant auction provider

Timescales are the obvious benefit, and this method is perfect for those charities looking for certainty of sale or which have a specific accounting or funding deadline and need to get some capital receipts in by a certain date. Where there is such a facility for the vendor, you can also extend the auction as many times as required to increase the amount of time people have to place their bids.

Online auctions are also a brilliant way of being completely transparent, something that can be particularly appealing for charities reporting to a board of trustees. It enables the charity vendor to report that the property has been fully exposed to the market, it’s been marketed for a specific time period and the resulting competitive bidding is a true test of market price.

Finally, online auctions suit modern lifestyles, enabling buyers to bid online wherever they are. In the past when a property failed at an in-person auction, it would get flipped back into the private treaty market, putting vendors back to square one. Marketing properties by online auction can expose them to a pool of proceedable cash buyers, provide valuable statistics in relation to the level of interest in a property, and once the auction has ended, contracts are exchanged which gives certainty to the charity vendor.

Legacies can be a great source of income for charities. In 2023/24 the estimated value of legacies to the charity sector was around £4 billion.

Types of disputes

Before considering what you should do when faced with a dispute, here is a short summary of the main types of legacy dispute which charities are likely to come across:

CLAIMS AGAINST THE VALIDITY OF WILLS. These can be claims against a will of which you are a beneficiary, perhaps by a disappointed family member, or by another charity to overturn a later will which does not benefit it.

The main grounds of challenge include lack of testamentary capacity (i.e. that the testator lacked capacity to make their will), want of knowledge and approval (i.e. that the testator did not know or approve the contents of the will, perhaps because someone else drafted it), and undue influence (where the testator is coerced into making the will).

CLAIMS UNDER THE INHERITANCE (PROVISION FOR FAMILY AND DEPENDANTS) ACT 1975. This law allows certain classes of people such as spouses, cohabitees, children and dependants to claim against an estate if they feel that the Will does not make reasonable provision for them.

Ever more common

This type of claim has become ever more common, particularly following the Supreme Court case of Ilott v Blue Cross in 2017. Charities regularly find themselves as defendants to claims by estranged children amongst others.

CLAIMS IN PROPRIETARY ESTOPPEL. This is a claim that the deceased promised the claimant something and that they relied on the promise to their detriment. These claims disproportionately tend to involve farms, for example where someone has worked on the farm for years at low or no pay on the promise of receiving the farm on the death of the owner.

CLAIMS INVOLVING POORLY DRAFTED WILLS. Charities seem to suffer disproportionately from these where, for example, the Will drafter has used an incorrect name for the charity or written the name of one charity but the address or charity number of another. The court can be asked to interpret or rectify the will to try to overcome the problems, or the charity may need to bring a negligence claim if a professional will drafter is involved.

ADMINISTRATION ISSUES. Charities regularly encounter problems with executors or their solicitors, for example delays to the administration, failing to apportion inheritance tax correctly or distributing the estate incorrectly. There are various ways of resolving these situations such as removing the executors, bringing a claim against them for an account or, in the case of professionals, claiming in negligence.

The pre-action process

So what should a charity do when faced with a legacy dispute? You've received a letter of claim or been tipped off that the deceased made an odd will shortly before death which cut out their favourite charity. Maybe nothing has happened for months or even years on a valuable estate of which your charity is a beneficiary. What next?

The first step is to act fast. If you have concerns about the validity of a will and want to stop it from being admitted to probate, lodge a caveat with the Probate Registry. This is cheap (the fee is only £3) and it gives you time to investigate. If you receive a letter of claim, acknowledge it.

If you are one of a number of charity beneficiaries, contact the others. Charities regularly work together on legacy disputes which saves costs and time.

Gather evidence, for example, the will file, medical records and, in an Inheritance Act claim, financial information from the other party. Don't just accept what you are told. Often the real situation is very different from that portrayed in a letter of claim, as that is written through the lens of the claimant.

Instruct a specialist solicitor to advise you. The Association of Contentious Trust and Probate Specialists (ACTAPS) has a directory of specialist solicitors. Once you have finished gathering evidence, you or your solicitor will be able to evaluate this and be clear on the merits of the claim so that you know where you stand.

All of the above will normally take place before any court proceedings, at what is called the pre-action stage of the claim. The parties exchange letters of claim and response and relevant evidence. Most claims will be resolved at this stage (more on settlement below).

Court proceedings

If it is not possible to resolve the matter pre-action, it will go to formal court proceedings. What happens next will depend on whether the charity is the claimant or defendant. If it is the claimant, it will issue a claim form supported by either particulars of claim or a witness statement, depending on the type of proceedings, which set out the claim in more detail. The claimant will then serve these on the defendants.

With some types of proceedings, for example claims against the validity of a will, the claimant will also need to provide disclosure of key documents at the same time that they serve the claim form.

Disclosure can be an onerous and time consuming process if there are lots of relevant documents to sort through. In legacy disputes, however, charities tend not to have been involved with the deceased prior to death so the number of documents they will have on their electronic filing systems is usually minimal.

There may be some supporter records but most of the relevant evidence will be that obtained during the evidence gathering process, such as medical records, and is likely to be held by the charity's solicitors.

If the charity is the defendant then, once the claimant serves the proceedings, the charity will have a chance to respond, either by way of a defence or witness statement. The court will then likely list the matter for a hearing, either to set out a timetable for the claim or, if it is a simple claim, to dispose of it. The timetable will include directions for further disclosure if appropriate, exchange of witness statements and expert evidence.

Finally, the court will list the matter for a trial at which witnesses will be cross-examined and the parties will make their submissions.

Aspects of settlement

Very few cases make it to trial. Most are resolved through alternative dispute resolution (ADR). It is important to consider ADR at every stage of a dispute. Not only will settling the matter reduce the charity's costs, but making offers, either in correspondence or at some sort of settlement meeting, can be a good tactical move to put your opponents under pressure. It may also be possible to include a confidentiality agreement to help protect the charity's reputation.

There are various forms of ADR. Mediation is a very popular form of ADR which works well for legacy disputes. It is a type of settlement meeting where the parties spend the day with an independent mediator (either online or in person) who shuttles between them and tries to bring them to a settlement. One of the main benefits of mediation, particularly for charities, is that it is a completely confidential process so that nothing said during the mediation can be referred to later.

Mediation also helps to focus the parties' minds and, if you have an effective mediator, enables them to see the reality of their position and the risks involved in pursuing the matter further. Although it is not inexpensive, it is considerably cheaper than going to trial and is particularly useful in disputes where there is a degree of uncertainty for both parties, such as most claims against the validity of wills or proprietary estoppel claims.

Increasingly active role

In recent years, where there are issued proceedings, the court has taken an increasingly active role in ADR. It regularly conducts settlement hearings, for example, financial dispute resolution hearings. This involves the parties attending court for the day.

Rather than hearing the evidence and making a decision, the judge will read the papers in advance and set the parties various time limited tasks during the day to encourage them to think realistically about settlement. At some point during the day, the judge will give their view on the merits of the claim as it stands, again to encourage the parties to take a realistic approach to settlement.

Some disputes do not warrant the expense of mediation, for example where the estate is modest or where the charity feels confident of success, for example a claim for the removal of executors where they have delayed for many years. In those cases, offers in correspondence can be more cost effective.

Ultimately, in claims involving a non-monetary outcome, such as the removal of executors, it may be necessary to push the matter to a hearing so that progress can be made with the estate administration.

Reputational issues

As well as the legal issues, charities can face reputational threats when dealing with disputes, such as press interest or social media posts. Whilst it is important to be aware of the threats, and to mitigate them by, for example, having a press statement ready in appropriate cases, they shouldn't determine the charity's response to a claim. At the end of the day, by bringing or defending a claim, a charity is usually just trying to make sure that its supporter's wishes are carried out.

Disputes involving wills are becoming increasingly common. By being prepared when they arise and managing them appropriately, charities can help to safeguard their legacy income and reputation.

Other varieties of merger are available! Such as where one charity is appointed as sole member of a corporate charity or sole trustee of another charity. These are not necessarily seen as full mergers, and trustees may struggle conceptually with the powers and duties applicable to them when acting as a board member of a corporate trustee or corporate member of a charity.

Charity incorporations are also a form of merger. This occurs when the trustees of a charitable trust or unincorporated association conclude that it is preferable to operate under a corporate structure, for example, to limit their liability to third parties and attract future board members. The unincorporated charity merges with a new corporate body by transferring to it all assets and liabilities for the better fulfilment of its purposes.

Quest for financial sustainability

Operational mergers are often driven by the quest for financial sustainability. In an environment where charities compete for the same funds and operate under squeaky tight margins, combining forces can achieve the efficiencies and economies of scale needed for a viable business model. A lot of mergers are induced by pressures on the publicly funded sectors, such as care, the arts and voluntary services.

Equally, the compliance and regulatory expectations on service delivery charities can cause trustees to seek out merger partners who can offer more robust “back office” structures providing good internal governance systems and processes.

Sometimes mergers are a logical choice for the end of a charity’s natural life. This may come about due to a reduced need for the charity’s services, or other shifts in the operating environment, requiring significant adaptations to the charity’s business model in order to keep pace. Trustees may decide that they have simply “run out of steam” and, having neither the means nor appetite to see through such a change themselves, feel that a merger is the best option.

Future legacies

You might ask why trustees don’t just allocate remaining charitable funds to appropriate causes and close the charity in these circumstances? The answer is, often, to capture future legacies. Under Charities Act 2022 provisions which sought to close a statutory loophole, the effect of registering a merger on the Charity Commission’s register of merged charities is that all subsequent gifts to the transferor take effect as a gift to the transferee.

In a true charity merger, there is at least one transferor which folds into a transferee charity and then dissolves. The decision as to which charity is to wind up depends on several factors, including its structure, the nature of the assets it holds, the terms of contracts and liabilities, the charity’s name and future branding considerations.

The choice may be clear from the circumstances but otherwise needs to be discussed and agreed between the parties. Merger partners generally want to try to avoid a perception of a takeover.

Important steps to take

It's useful to consider the various steps and key considerations involved in a charity merger:

PLAN AND PREPARE. In a pre-merger planning stage, the transferor would be advised to undertake a house keeping exercise to ensure that all its records and registers are up to date. Copies of all contracts, accounting records etc. should be placed onto a secure data system.

THE “KNOW YOUR PARTNER” PHASE. The merging charities will need to get to know one another intimately. There is a particular onus on the receiving charity trustees to understand what it will be taking on. A charity merger involves acquiring all the assets and liabilities of the transferor - not cherry picking. The due diligence phase of a charity merger is key and should not be rushed or short-circuited.

Legal agreements covering access to personal data and sensitive information sharing can facilitate a secure and confidential exchange of data between the parties.

SIMILARITY OF OBJECTS. The very first task is to assess the compatibility of the charities’ objects. One charity may need to modify its purposes to be sufficiently like those of the other charity. Objects changes are “regulated alterations” that require prior consent from the Charity Commission. There is also a possibility that the governing document (usually of the transferor charity) will need amending to include an express power to merge.

PROCESS. It is important to figure out at this stage the legal mechanism and timetable for agreeing the merger – will this require a vote of the charity’s members or is a trustee decision sufficient? Are there other bodies who need to be involved (such as a regulatory or umbrella body). Is Charity Commission approval of the merger required?

HEADS OF TERMS. It is helpful at an early stage to document the key terms and milestones for the merger, and establish a project group with representatives from both boards to work within the parameters set out in the heads of terms. These should identify mission-critical points to be provided for in the merger documentation.

COMMUNICATIONS STRATEGY. The communication, branding and consultation strategy will need to be a joint undertaking between transferor and transferee. Aligned to the heads of terms, it should set out the approach to be taken when consulting with stakeholders and informing them of the merger and the messaging around the transaction.

CONSULT WITH STAKEHOLDERS. This should be done early on in any merger process. Stakeholders are people who work with the charity in all sorts of ways including its beneficiaries, funders and supporters. Consultation may take the form of newsletters, surveys, webinars or physical meetings at which the draft merger strategy is developed.

Worry about changes

It is important not to disenfranchise people by presenting the decision as a “fait accompli”. It is natural for people to worry about how changes will affect them and whether the charity’s personal and/or community ties will be lost by being absorbed into a larger entity. Boards should listen to concerns and provide as much reassurance as the circumstances permit.

Mergers can also be a difficult time for employees as they will be aware of possible workforce duplication and that redundancies may result. Their rights are protected by Transfer of Undertakings (TUPE) regulations. Charities must inform and consult their employees in line with TUPE requirements and ensure that any redundancies made after the merger are for economic, technical or organisational reasons.

IDENTIFY THIRD PARTIES. Operational mergers frequently involve an array of contractual obligations that need to be either formally ended or passed on to the transferee. This often means bringing third parties such as commissioners, funders, lenders, suppliers, and landlords into the equation.

Early liaison with pension providers is essential to understanding the consequences of winding up the transferor and/or transferring members out of the scheme. This can prove critical to the viability of a merger.

Passing over liabilities

Getting third party consents to the assignment or novation of the transferor’s obligations to the transferee can add significantly to time and legal costs. The transferor needs to pass all its liabilities over to the transferee on the agreed merger date because post-merger, it will be little more than a “shell” charity, devoid of assets and unable to meet any operational obligations.

Although indemnities are generally provided as part of the transfer agreement, ideally the aim is to avoid the charity and/or its trustees retaining any liabilities associated with operating the charity beyond the merger date.

DOCUMENT THE MERGER APPROPRIATELY. There is generally a suite of legal documents to put in place for the merger, including a vesting declaration, transfer or merger agreement which will document the business transfer and highlight any restricted assets, including permanent endowment, that must be ring-fenced by the transferee.

Trustee and/or member resolutions documenting a “best interests” decision making process will be needed. It is suggested using the seven principles in the Commission’s CC27 as a guide.

BOARD CONTINUITY. Within the merger framework, some of the transferor trustees may join the board of the transferee charity, which can have several positive impacts. It preserves a degree of continuity and gives reassurance to staff and beneficiaries that their interests will be represented in the new world of the merged charity (although it is important to remember that this can also result in a conflict of interest or loyalty for those trustees).

The transferor trustees can help to ensure that the merger strategy is implemented in accordance with the letter and spirit of the merger agreement, and oversee practicalities such as the orderly winding up of the charity and registering the merger with the Charity Commission.

Remembering the human factors

In the current climate of uncertainty and rapid change in society and technology, choosing to collaborate – via a charity merger – rather than to compete, may be the way to turn these challenges into an opportunity. This article has explored the legal aspects of a charity merger, it is no less important to highlight the softer, human factors like a shared culture and values which are just as, if not more, fundamental. Like any marriage or alliance, it is the groundwork that you put into knowing your partner and building up mutual trust and respect that ultimately determines the success of a charity merger.

There are over 11,200 charity shops in the UK and according to the Charity Retail Association, these provide their parent charities with around £363m of income each year. They also provide full time employment to around 26,000 people and volunteering opportunities for many more.

Claims for dilapidations

Issues often arise where a lease has expired, no talks have been entered into or they have been inconclusive, the person who agreed the original terms on behalf of the charity has left and the landlord does not want to grant the charity a new lease. In this instance a charity may also have claims made against it for dilapidations, to pay for the cost of returning the property back into suitable repair or removing any fitted-out items in accordance with its obligations under its tenancy agreement.

Charities with a lease may have also been asked to contract out of some of the statutory rights which apply to usual business tenancies under the Landlord and Tenant Act 1954 and so they may not fully understand what legal rights and responsibilities they have, particularly at the end of the contractual term.

A lease will have certain holding over protection under the Landlord and Tenant Act 1954 (LTA 1954). This allows the charity to continue to occupy the property even after the contractual term of the lease has ended. If a charity has a protected lease under the LTA 1954, it has the statutory right to a new lease at the end of the term on similar terms to the current lease.

To initiate a lease renewal, a tenant may have to serve a Section 26 notice on the landlord to put forward terms for a new lease and generate a conversation around a new lease. A Section 26 notice cannot be served where the landlord has served a Section 25 notice that either offers a new lease or opposes the grant of a new lease.

On both sides there are certain steps which need to be taken when approaching these negotiations, and a charity may inadvertently end up in lengthy negotiations requiring legal assistance or in a dispute with a landlord. Care needs to be taken and it is important to seek the advice of a solicitor who is mindful of the costs that a charity could incur to resolve these situations.

Redevelop the premises

Where a tenant has validly served a Section 26 notice on the landlord, the landlord has two months from service of the notice to object to a renewal lease based on a limited number of grounds set out in Section 30 of the LTA 1954. The most common grounds for opposition are where the landlord intends to redevelop the premises or intends to occupy the premises themselves.

The Section 26 notice must set out a date that the new tenancy will take effect. If the lease is not agreed and completed before the date specified in the notice, the tenant will lose its security of tenure rights and the landlord does not have to offer the tenant a new tenancy.

If the lease is not completed before the deadline set out in the notice, the parties will have to agree to an extension, or the tenant will have to issue protective renewal proceedings at court. Unless the parties are far apart in their negotiations and proposed terms for a new lease, it is usually in the interests of both the landlord and the tenant to agree an extension of time to the deadline set out in the notice to avoid incurring significant fees in issuing and defending court proceedings.

Where a landlord is successful in opposing a new tenancy, the tenant may be entitled to compensation. This will depend on the ground relied upon by the landlord in opposing a new tenancy while the level of compensation is linked to the length of time the tenant has been in occupation of the premises.

It is important to take legal advice before agreeing to any new lease to understand the legal and financial obligations the charity will have in the future and to allow trustees to consider whether having a retail premises is still the right strategy for fundraising.