12th March 2020

Charities Act Property Valuations

Having just completed a valuation under the Charities Act 2011 it occurs to me that a short blog on the subject would be worthwhile.  The amount of property left to charity is staggering, from small parcels of land to large houses, farms, development sites – the range is every type of property you can think of.

There are specific requirements under the Charities Act 2011 which stipulate how charities have to handle property when it is left to them.  In particular there is a requirement under s119 for the respective charity to receive independent advice from a chartered surveyor prior to any disposition.  A disposition could be sale or long lease (more than seven years).

The chartered surveyor must also be a registered valuer and needs to confirm that they have appropriate expertise in the type of property (e.g. residential, commercial, agricultural) and in the geographic area.  The valuer will provide a valuation (for either rent or sale) and comment on a recommended course of action for disposal.  This might include auction sale, private treaty or sale to a special purchaser.

Where a property has already been marketed and a sale or lease provisionally agreed, the valuer must comment on the appropriateness of the marketing process.  They will review time on the market, number of viewings and level of interest as well as offers received.  This is alongside their own assessment of value, based on transactional evidence and experience of local market conditions.

The independence of the valuer is designed to ensure that charities receive best value.  Often there can be a number of charitable beneficiaries, sometimes with different aims for realising the cash.  There can also be interaction with executors and family members, perhaps with some ambition to retain property within the family.  The valuer has to sit aside from these interests and report in a nonpartisan fashion.

Occasionally legacy property can have an element of development potential, or hope value, and the valuer has to consider this.  In general, charities are not able to speculate, but there are exceptions; for example, the legator may make specific provision for future development, with the funds to do so.  The valuer must consider whether any development is likely to be realised and advise the charity accordingly.  They may recommend a sale subject to development provisions (clawback or overage) so that risk is borne by a third-party owner, but with an uplift should development occur.

The requirements under the Charities Act go beyond those of the RICS Red Book (valuation guidance), requiring a commentary on the disposition in addition to the valuation itself.

Whilst most major charities have legacy officers, and sometimes property teams, smaller charities are often unaware of the provisions

Oakwood has good experience in providing appropriate reports throughout the north west and North Wales and we are always delighted to have a chat about potential requirements to give some preliminary advice without obligation.

Graham Bowcock

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