Legal Framework
This article sets out the implications of Church of England schools moving site or closing. It provides an overview of the statutory implications under the Diocesan Boards of Education Measure 2021 (the Measure), the Reverter of Sites Act 1987 and s554 of the Education Act 1996.
We mention in passing the implications under the School Standards and Framework Act 1998 and the Academies Act 2010, but the procedure to follow when determining whether a site has public value or been provided publicly funded and the extent to which any account should be made of that on disposal is outside the scope of this briefing.
The trustees of Church of England schools (the trustees) are subject to the Diocesan Boards of Education Measure 2021, which sets out the relationship between the Diocesan Board of Education (DBE) and the trustees. The DBE will advise and support trustees throughout the process of their school moving or closing.
Usually, at least one of the trustees will be serving as a Foundation Governor, either ex officio in accordance with the Instrument of Government at the school, or as an appointed trustee. The trustees will be aware of the governing body’s (the governors’) plans for the school.
The DBE will be working closely with the local authority and the governors either in respect of the planned move of the school to a new site, or to minimise the disruptive effects of the closure of the school.
The DBE and the governors should give the trustees as much notice as possible of any proposal to move or close the school. The DBE should alert the trustees to the complicated legislation which applies to trustees in these circumstances. The DBE should encourage trustees to instruct specialist solicitors who are familiar with the legislation. Trustees seldom have sufficient funds to meet their legal costs. Usually, the DBE will meet the trustees’ costs on the understanding that these costs will be repaid from the proceeds of sale of the trustees’ land.
Under section 7(5) of the Measure, trustees must obtain advice from the DBE before entering into an agreement to dispose of any of their land.
The school is moving to a new site
If the school is voluntary controlled or voluntary aided, the local authority will purchase a new site or cause a new site to be provided by developers under a s106 agreement. As soon as the children have moved onto the new site, the local authority must transfer the new site to the trustees free of charge. The trustees will typically be expected to sell the old site. Usually, the new site can only be financed if the local authority receive the net proceeds of sale of all of the old site.
However, it is important that the trustees instruct their surveyor to establish the percentage value of each parcel of land at the site, determining both any public value and charitable value. The local authority is entitled to the net proceeds of sale of any public land i.e. land which the trustees received from the local authority by way of statutory transfer (ST land).
Typically, the trustees will then use the net proceeds of sale of their original trust land (charitable land) to purchase a beneficial interest in the new site. In effect, the local authority has forward funded the new site which will allow the trustees to better carry out their trust objects of providing education in accordance with the tenets of the Church of England.
A record of these arrangements should be made in order to assist any future assessment of public and charitable value.
So long as it is the settled intention of all parties that the school will move, the trustees do not need to be too concerned about the reverter provisions of any land conveyed to them under section 2 of the School Sites Acts 1841.
It used to be considered that any such land which was no longer being used for the trust purposes reverted automatically to the estate of the original donor. Recent judgments have indicated that if it is the trustees’ settled intention that the school will move to a new site, the old site will not automatically revert even if it is no longer being used for the purposes of the school.
The situation is more complicated if the school has become an academy because the Department for Education (DfE) has not yet made provision for the local authority to transfer the new site to the trustees free of charge. In these circumstances, the trustees will need to work closely with the DBE and local authority in order to ensure that the school does move, rather than close. We would advise documentation is put in place at the outset to record the understanding and the agreement reached. This will avoid later dispute and help the parties to plan for the steps that need to be taken.
The DfE is aware of the problem relating to land used for an academy and is intending to remedy it.
Role of the Department for Education
This is set out in the guidance of February 2021 called “Involving the Secretary of State in land transactions” which the DBE will assist the trustees to navigate.
The DfE is increasingly anxious to assert that land held by trustees has been publicly funded. However, unless the trustees have been served with a notice under Schedule 22 School Standards & Framework Act 1998 from the local authority that any improvements are to be regarded as being of a qualifying capital nature, original trust land is not publicly funded.
The DfE also concerns itself with any planned disposal of land defined as playing field under section 77 of the School Standards and Framework Act 1998 and a referral may be made to the School Playing Field Advisory Panel.
The trustees’ solicitors will work closely with the DBE in respect of an application or notification to the Secretary of State to sell or lease the trustees’ land. The Secretary of State has the power to direct that any trustees’ land which is either ST land or has been publicly funded can be occupied by a free school and that any playing fields can be occupied by another school.
There is no time limit under which the Secretary of State must respond. Unfortunately, officials at the DfE do not have a clear understanding of their role in this respect. There is very seldom any possibility of any free school or any other school wishing to use the existing site. This is because the local authority, the governors and the DBE will have worked hard to ensure that the new site addresses any need to absorb any additional pupils, as well as accommodating pupils from the original site.
As soon as the Secretary of State agrees that there is no alternative school use for the trustees’ land, the trustees will sell the land in accordance with the advice of their chartered surveyor under the provisions of the Charities Act 2011 as amended.
The school is closing
The trustees will be working with the DBE and the governors to ensure that the children at the school move to suitable new schools. The trustees should ask the DBE to underwrite their unavoidable costs from diocesan Church Schools Uniform Statutory Trust fund (CSUST). Trustees seldom have any funds until their land is sold. The trustees should ask the DBE to assist with insuring the empty premises and making practical arrangements to minimise the risk of vandalism.
Usually, the trustees’ plans to dispose of the school site should be well advanced, in order to reduce the risk of vandalism to the empty school.
Occasionally, trustees will be holding their land on trusts that are not wholly educational. Once the school has closed, the trustees will no longer be subject to the Measure. The trustees are free to use their original trust land to benefit their wider trust purposes. These are usually for the benefit of the elderly or infirm, or for general ecclesiastical purposes. This does not apply to any ST land. The trustees will need to agree with the local authority whether they can buy or rent the ST land or whether the trustees must sell it or transfer it back to the local authority subject to the local authority meeting the trustees’ costs.
Most church schools are held on wholly educational trusts. If the land is given under section 2 of the School Sites Acts 1841 the school site will revert to the estate of the original donor if the beneficiaries can be identified. Sometimes the donor’s family has died out.
The Reverter of Sites Act 1987 requires the trustees to advertise widely to identify the reversioner. It may be more sensible to instruct genealogists, such as Fraser & Fraser, to trace the reversioner, as this is likely to prevent a large number of claimants coming forward at the advertisement stage.
The trustees are responsible for evaluating the competing claims, which is technical, difficult and expensive. The reversioners are only entitled to the net proceeds of sale. Establishing the identity of the reversioner is a legitimate cost.
Even if some of the land is subject to reverter, there may be other parcels which the trustees have acquired by gift, purchase or adverse possession which are not subject to reverter. The trustees’ surveyor will need to make a valuation to apportion percentage values to be attached to the trustees’ land including any ST land (or publicly funded land).
In some rare instances, the trustees have retained closed school sites and used them for pre-schools or church halls, in breach of the then trustees’ obligations when the school closed.
If the use is long established and if the DBE consents, the trustees may apply to the Charity Commission for a new scheme which will legitimise the long-established use.
Usually, trustees will sell the school site as soon as the DfE has agreed it does not wish to move a free school onto the site, or to arrange for another school to use any playing fields.
Section 554 Orders
When the net proceeds of sale of the school site have been established, the DBE rather than the trustees will apply for a s554 order under the provisions of the Education Act 1996. A s554 order usually provides for 11/14ths of the net proceeds of sale to be allocated to the diocesan CSUST and 3/14ths to be paid to the parochial church council to establish a religious fund to provide religious education by way of a Sunday school, or otherwise, in the parish which served the closed school. This division reflects the traditional use of the school by the incumbent on Saturday afternoons and Sundays.
The DfE guidance, issued in February 2020, on Section 554 Orders generally sets out helpful advice for trustees and the DBE in relation to the process to be followed.
However, the DfE overview in the guidance is unhelpful. In particular, the assertion that the trust would fail if the school did not close but moved to a new site is misleading. So too is the DfE’s assertion that if a teacher’s house, usually known as a schoolhouse, is no longer used as a teacher’s house (in circumstances when the school remains open), the trust has failed in part and can be subject to a s554 order.
It is open to the trustees to lease the schoolhouse to a tenant at a commercial rent to provide an income from which to repair the schoolhouse, as the governors cannot use their funds to do so.
The trustees can then devote any surplus income to the school. It is in the school’s interests for the trustees to retain the schoolhouse, which may subsequently be taken into the school, or be used by teachers in the future.
DBEs should check with specialist solicitors whether a s554 order would be appropriate and not rely purely on the DfE guidance.
The process of applying for a s554 order is laborious. Once the various parties have been notified and a decision taken about how best to address a possible reversioner and the s554 application has been completed, the DfE still takes between two to three years to process the application and issue the s554 order. Even if there is no question of a reversion because the land was not given under s 2 of the School Sites Act 1841 the advertising requirements often prompt people such as governors of neighbouring schools, community activists and parish councils to assert that they are interested parties even though they do not fit the criteria. The DfE has historically been very pusillanimous about rejecting these claims so the DBE or their solicitors must just persevere with explaining repeatedly that these claims are unmeritorious and should be ignored.
The DfE handling of s554 order applications had been improving but was a very low priority during the pandemic.
Trustees and DBEs are vulnerable to criticism for allowing difficult historic cases to remain unresolved. DBEs should identify and then encourage the trustees (whether the trust is of the closed school site or the proceeds of sale of the site) to regularise their positions. DBEs should then apply for a s554 order in respect of such cases if appropriate
Further Information
For further advice and support with applications please contact Andrea Squires or Cordelia Hall.