OPERATIONAL GUIDANCE

MANAGEMENT OF VILLAGE HALLS

ISSUES CONCERNED WITH USAGE

OG 68 B4-20 July 2001

Purpose: This guidance looks at issues arising from the use of the hall by different types of users.

Divisional responsibility

For action:

Charity Support Division

For information:

All operational divisions

Contents

1. Village hall objects
2. User groups
3. Uses falling outside of the RCA 1958
4. Social contact/entertainment
5. Setting up other facilities in village halls
6. Considerations for the management committee
7. Grants and other funding

Meaning of expressions - list of Glossary terms used in this Guidance
Index to further related information

1. Village hall objects

1.1 The trusts
1.2 Area of benefit

1.1 The trusts

Most village halls have standard objects that fall within the scope of the Recreational Charities Act 1958. A village hall is a facility for recreation or other leisure-time occupation, provided in the interests of social welfare, for the benefit of the public.

Both our own model Scheme and the ACRE model deed specify the objects as:

• the provision of property held on trust for the purposes of a village hall for the use of the inhabitants of the Parish of __________ in the county of _________ (hereinafter called the area of benefit) without distinction of political, religious or other opinions, including use for meetings, lectures and classes and for other forms of recreation or leisure time occupation with the object of improving the conditions of life for the said inhabitants.

1.2 Area of benefit

The area of benefit of a village hall can sometimes give rise to problems or disputes. The main difficulties with this issue tend to be:

• the extent to which the hall may be used by the inhabitants of adjoining parishes; and

• whether inhabitants of an adjoining parish should be eligible to stand for election and vote at annual general meetings.

A village hall exists to provide a facility for the locality in which it is situated. However, it will not always be necessary for the area of benefit to be restricted to the civil parish in which the hall stands. An example may be where a hall is situated on a parish boundary, and half a mile a way is a village (without a hall facility) which lies in another parish. It would make no sense to deny those inhabitants use of the hall. The aim should be to provide a facility for local inhabitants and we should be looking for a pragmatic approach when dealing with these matters.

This can however give rise to difficulties in defining exactly what the area of benefit is. Wherever possible the trust deed needs to be specific about the area served by the hall as some deeds cause difficulties with interpretation. This can arise where the area of benefit is defined as "parish x and the surrounding neighbourhood". Whilst this is used to take account of growing villages and outlying farms/hamlets it can give rise to confusion over what " surrounding neighbourhood" actually means. In turn this can lead to disputes about eligibility, where people wish to stand for the committee or attend the annual general meeting. Accordingly, trustees will need to be pragmatic when defining "surrounding neighbourhood", looking not only to past practice but the emerging needs of the village. When preparing a model scheme it may be better to use "such area adjoining the parish of x as determined from time to time by the committee" or " the parish of x and the electoral wards as y and z as defined from time to time". This wording makes it quite clear who the beneficiaries are and who would be eligible to stand for office or vote at elections. Use of "and the surrounding neighbourhood" will still remain an option for Schemes but it should not be our preferred choice. Trustees should be encouraged to keep under review any changes in the local population and ensure that the terms of the governing document allow both use by and representation of those who the hall might be expected to serve.

2. User groups

The hall is used by a number of organisations called user groups. Their activities are likely to be diverse as they will cater for different sections of the community. Examples might be a mothers and toddlers group, a Brownie Guide Pack, a badminton club or a luncheon club for pensioners. These activities may not always be charitable in their own right but can, within the scope of the Recreational Charities Act 1958, improve the conditions of life for the public at large in the area of benefit.

Groups using the hall on a regular basis will usually have the right under the terms of the governing document to appoint a member of their group to the management committee for the hall. In their capacity as an appointed member of the committee they must act in the best interests of the village hall and not to further the interests of their particular group. Roles and responsibilities of trustees are highlighted in OG 68 B2. The group may sometimes include people who live outside the area of benefit. This will not be a problem providing that these individuals are in the minority and the group is substantially for the benefit of the inhabitants of the area in question.

3. Uses falling outside the scope of the RCA 1958

Not all organisations or individuals wishing to use the hall will come within the scope of the RCA 1958. They may have some of the following characteristics:

• it is run for the private profit of the organiser, for example a Weight Watchers group, or the sale of clothes, carpets etc;

• it is an event being run for private benefit, for example a private party or wedding reception, which are not a recreational type activity of a group or society as contemplated by the Act;

• it results in part of the hall being permanently occupied for the particular purpose such that the hall can no longer be said to be available to the public at large. This relates not only to a non charitable activity, such as the provision of a bar, but may also apply to an activity which might have a charitable object such as an Information Technology Resource Centre (see 5 below), but which is not a recreational facility within the RCA 1958.

It is a matter for the management committee to decide the times at which groups and organisations use the hall and what charge, if any, is made. Any use falling outside the objects, such as private parties or commercial sales, should only take place so as not to interfere with the use of the hall for the public benefit. With occasional bookings, first call on the use of the hall would be given to a group falling within the scope of the 1958 Act, although it is recognised that circumstances may arise where pre-booked use by a non-user group may take precedence over a last minute request from a regular user group. A fee at an ordinary commercial rate should be charged in respect of any use (including charitable use) falling outside the RCA 1958. Only where an organisation possesses objects falling within the RCA 1958 can the management committee decide to forego a fee or charge a smaller fee.

4. Social contact and entertainment

Issues often raised in connection with use of village halls are those of social contact and entertainment. Under the RCA 1958 there is no objection in principle to a charitable organisation being set up to provide premises for general public use which may then be used by individuals or groups for the purposes of social contact or entertainment. A village hall fits into this category.

The difficulty arises where the organisation itself provides the social contact or entertainment. We would not generally regard provision of facilities of this kind as meeting a social need of the kind which falls within the social welfare requirement of the 1958 Act. It would therefore be charitable to provide a village hall which might be hired for any purpose such as line dancing or playing bridge. But the groups hiring the premises for those purposes would not themselves be charitable. However, it would not be charitable simply to provide facilities for one of those purposes. Additionally, there is no objection to the village hall itself running events on an occasional basis for the purpose of fund-raising. CC35 contains information on charities and trading.

5. Setting up other facilities in village halls

5.1 Types of facilities
5.2 Rural regeneration

5.1 Types of facilities

A village hall can be the focal point for activities in a village. In some villages facilities such as sub-post offices and shops are closing and village halls are seen as a place where such activities can be revived or continued. In other villages the halls are seen as somewhere to place information technology facilities so that everyone may have access to new developments in this field. However, a village hall is established to provide a facility for recreational activities. Where, therefore, some other use is intended this would be outside the scope of the objects for which it was established. Any proposals to provide other facilities of the type mentioned will need careful consideration.

ACRE has specific information for village halls where they wish to set up a post office or an information technology resource centre within a hall. See OG 68 C1 for details of how to contact ACRE including details of their web site for village halls.

Much will depend on the way the facility is to be set up and who will run it but questions arise mainly in the following areas:

• private benefits which accrue to those operating the facility;

• the rules concerning charities and trading; and

• the fact that part of the village hall may no longer be available for the object for which it was established.

Section 6 below sets out considerations required by the management committee concerning the use of village halls.

5.2 Rural regeneration

Proposals for sub-post offices, shops and information technology centres can sometimes be suggested as part of a rural regeneration scheme. We would first need to consider whether the proposal could be accommodated by the charity's objects. In addition, the scheme would have to comply with our requirements for such projects set out in our leaflet RR2 Promotion of Urban and Rural Regeneration.

The Review of the Register Co-ordinator should be informed of proposals for development schemes in rural areas, whether as part of a regeneration scheme or simply proposals for improvement/change in their own right. This information will be taken into account when developing our policies for charities in rural areas.

6. Considerations for the management committee

6.1 Initial considerations
6.2 Frequency of use
6.3 Property considerations
6.4 Trading issues
6.5 Change of objects

6.1 Initial considerations

It is for the management committee to decide their own course of action on the running and use of the hall, after taking professional or other advice as necessary. They may seek advice from us about what they need to consider before allowing organisations to use the hall. Whilst we advise management committees about usage we should also be looking out for inappropriate use. Where we find that inappropriate use significantly affects the charity's ability to function primarily for its beneficiaries we will need to work with the committee to bring it back into line.

When determining use of the hall the management committee will first need to consider the nature of proposed activities and whether the hall is to be used:

• generally within the terms of the Recreational Charities Act 1958, as in 4 above;

• for non-charitable activities, as in 3 above; or

• for alternative uses which may be charitable, as in 5 above.

The nature of the activities will influence further action and decisions of the management committee. Examples of the more common questions raised would be:

• how often will the hall be used; is this a one-off or a regular event? See issues raised in frequency of use at 6.2 below.

• is representation on the management committee appropriate? It may be desirable for a regular user to appoint a committee member, see section 1.6 of OG 68 B2.

• where this is a fund-raising activity for the hall, is it of a substantial or incidental nature? The extent of the fund-raising may amount to trading and have implications for income tax liability, see trading issues at 6.4 below.

• is a designated area of the hall required for the activity? See property considerations at 6.3 below.

• would the designated area be surplus to the requirements of the charitable purposes carried out in the hall? An area cannot be given up for non-charitable purposes on a regular basis where it is needed for charitable use.

• is there a case to grant a license or lease? See property considerations at 6.3 below.

• should rental be at market rate? Non charitable users should pay a market rate for using the hall whereas there may be a more favourable rate for charitable usage.

• is a change of objects required? See section 6.5 below.

Both the management committee and those using the hall should be clear on what is considered as regular, exclusive and permanent use of the hall or parts of it. Most user groups may want what they see as exclusive use of the hall on their particular days and times. An example of this might be a badminton club not wanting others using the hall whilst they play badminton on one night each week. This type of use does not create a problem. The difficulties arise when the hall or parts of it are given over to an activity on a permanent or long-term basis (ie all day every day) such that it will no longer be available to others. An example of this might be a bar.

6.2 Frequency of use

The management committee have a responsibility to ensure the hall is used to its full potential for proper charitable purposes. The frequency of use by various groups may raise different questions depending upon the nature of that organisation or use. For example:

• is it appropriate for regular users to appoint a member to the management committee?

• is a designated area required for certain activities, eg a bar?

• do non-charitable activities outweigh the charitable activities, putting grants or rate-relief at risk?

• do established and successful activities prevent other activities developing?

When seeking answers or solutions to problems much will depend on the circumstances prevailing at the hall at the time. The Rural Community Council Village Halls Adviser may sometimes be able to help in reaching solutions to difficult situations that arise. They may be able to mediate between parties with different interests or look at alternative funding solutions.

6.3 Property considerations

In their duty to protect the charitable nature of the hall, the management committee will have particular responsibilities where part of the hall is being used for an activity that does not fall within the objects. Those responsibilities are to ensure:

• that the area used is surplus to requirements of the charitable use of the hall;

• that this use of the hall will not interfere with other organisations using the hall for charitable purposes;

• that they have power to enter into any letting agreement and that there are no restrictive covenants to prevent such use;

• that proper agreement is reached on the terms for use under a lease or license;

• a market rental/licence fee is charged for use of the property;

• that they have proper insurance cover for the activity; and

• that such use will not endanger charitable status, rate-relief or grant funding.

Where the hall itself is held upon a lease there may be conditions to prevent sub-letting. Also the freehold of a village hall may have covenants restricting use, such as the sale of alcohol. Where a covenant applies the management committee will need to take its own professional advice about release of covenants or restrictions.

The basis upon which an organisation occupies the area of the hall on a more than occasional basis will need to formalised by a licence or lease.

An occupational license is a more beneficial agreement for the village hall as the organisation has no legal interest in the property itself. The licence gives a contractual right to use the property and contains the terms under which the property can be used, along with the fee to be paid.

A lease will have the disadvantage in giving the organisation a legal interest in the property for a fixed period. The village hall may find it difficult to alter its premises or move to a new location whilst a lease is in force. It is also possible for that organisation to use its leasehold interest as security for loans.

6.4 Trading issues

Occasionally, a regular trading activity might be proposed, such as a bar, in order to raise funds for the village hall.

Charity law does not permit charities to exercise a trade on a substantial or regular basis simply for the purpose of raising funds, although it may be possible to hive off such activities to a non-charitable trading company. However, small non-primary purpose trading is disregarded for tax purposes and is regarded as incidental to charitable purposes. Further advice for trustees is available in our leaflet CC35.

In addition, charity trustees have a duty to avoid incurring unnecessary tax liabilities. If a charity exercises a trade simply for the purpose of raising funds, it may not only be in breach of charity law, but may also incur tax liabilities on trading profits. The trustees should seek advice on tax liability from the Inland Revenue.

The trustees have a duty to act prudently in the carrying out of their duties and will need to consider carefully the nature of the trading taking place and the limits imposed by tax exemptions. These considerations will include whether or not the trading should take place through a separate trading company which gifts its profits back to the charity.

Additionally, certain income of the charity may fall within the scope of VAT and if this income exceeds the VAT threshold, the charity should register. If there are any doubts professional advice should be sought.

6.5 Change of objects

Where an organisation wishes to use the hall for a purpose which is charitable but does not fall within the scope of the Recreational Charities Act 1958, the trustees may wish to consider whether a change of objects may be appropriate. An example of such a purpose may be to advance education by the provision of an Information Technology Centre to update skills of the public in the use of computers.

It is unlikely that the governing document for the hall will allow the management committee to make changes to the objects without our permission. This would usually require our sanction by way of a Scheme. However, when they approach us, the management committee will need to put a reasoned case for the changes. This will need to include an assessment of:

• how frequently the property is used and by whom (it is regular rather than one-off use that is of issue); and

• whether the original objects can still be fully carried out if the additional activities are permitted.

We should be as supportive as we can for such changes providing the new objects will not prejudice the rights of the existing users. Often the new object can be added as a secondary object so that it need only be advanced without prejudice to the first object. Our power to sanction a new object will derive from section 13 of the Charities Act 1993.

7. Grants and other funding

7.1 General considerations
7.2 Conditional grants

7.1 General considerations

Grants and funding are available to charities from a variety of sources. OG 68 C1 lists some organisations that may be helpful to village halls in this respect.

Charity trustees in general are under a duty to maximise the effectiveness of their charity and look after their property. A way that this can be done is to seek funding opportunities which will enable the charity's work to develop. Within a village hall context grant funding should be viewed by us as a positive step, although it needs to be recognised that in providing such funding:

• the present beneficiaries or users continue to receive at least the same level of service;

• the future running of the hall is not placed in jeopardy; and

• any conditions attached to the funding are not too onerous or likely to lead to a breach of trust.

It may be that the funding will be to support charitable activities falling outside village hall objects and thus a change of objects will be needed. Again, this should be viewed in a positive light using sections 13(1)(b), (c) and (e) of the Charities Act 1993 to affect changes.

7.2 Conditional grants

Some grants are only made with conditions attached. These might include personal covenants to be signed by trustees guaranteeing repayment of grants if the charity closes or securing a charge over charity property to ensure that the grant conditions are met.

When assessing these conditions the management committee will need to ensure that:

• the property of the charity is not put at risk by agreeing to conditions that cannot be fulfilled;

• their discretion as trustees is not removed by the conditions imposed; and

• they have authority to agree to a charge over charity property or that authority is sought from us; and

• where a charge over property is sought by the grant giver, there is sound reason for the charge and the extent of the charge is reasonable considering the size of the grant being given.

If a village hall obtains a grant which requires an interest in the charity's land as security for fulfilment of the grant conditions, the charity must, of course have the power in its governing document or from us to offer such security. But the management committee must, in addition, seek consent from us to enter into such a charge, by means of an Order under section 38 of the 1993 Act. The procedure in section 38(2) and (3) is not available, because the obligation to be secured is not the repayment of a loan, but is the repayment of a grant.

When making an application for such consent the management committee should submit the following supporting information:

• copies of all settled documentation, ie all documents where the wording is agreed but that are not yet executed; this might include:

• the grant agreement;

• any supplemental agreement ;

• the engrossments of the charge deed which will incorporate any agreed recitals and will have on the front page the form of Charity Commission Order authorising the granting of the charge. (Where it is easier to give our consent in by sheet Order this document will not be necessary);

• a copy of any professional advice received confirming the charity's ability to enter into the arrangement;

• an indication of the source of finance for the project which is not being provided by the grant giver; and

• details of advice from the charity's accountant, financial advisor or other appropriate person which shows that the management committee has obtained and considered proper advice on whether it is reasonable for them to enter into the grant agreement on the terms proposed, and on the ability of the charity to discharge any obligation which may be imposed upon it as a result of entry into the agreement on those terms, having regard to any existing borrowings or other liabilities of the charity.

An Order under section 38 of the 1993 Act can be made at Pay Band 4 level. We would normally grant such an Order providing that it is clear the interests of the charity are being protected and the grantor is not being provided with more security than is necessary.

In some cases (eg involving the Millennium Commission) the party providing the grant looks for a "deed of dedication" from the charity trustees of the village hall, rather than a formal charge to secure the repayment of the grant if the charity fails to comply with the conditions on which the grant was given.

A deed of dedication will normally be worded in such a way as to create contractual obligations connected with ensuring use for the purposes for which the grant was given (for example preventing, during the expected useful life of the grant-aided buildings/improvements, disposals/changes of use without the consent of the Millennium Commission or other grant maker). Deeds of dedication will not normally create interests in land, and the execution of such a deed by or on behalf of a charity is not, therefore, within the ambit of the controls in sections 36 or 38 of the Charities Act 1993 (legal advice should be taken in any cases of doubt). If the charity has the capacity and the power to enter into the deed of dedication, our authority under section 26 of the 1993 Act is not required. The charity will ordinarily be taken to have a power to enter into a deed of dedication in return for funding where:

• the undertakings to be given in the deed by or on behalf of the charity relate only to use or disposal by the charity of the assets provided by the grant, and are compatible with the furtherance of its objects; and

• the undertakings are not to subsist for longer than the expected useful life of the assets being provided with the financial assistance of the grant-maker; and

• the undertakings are expressed in terms which are flexible enough to permit their modification with the consent of the grant-maker.

The following words and phrases are defined in the Glossary of Terms:

•
•

1993 Act
trustees

Go to: Index to further related information