Property

Land or property to sell?

The chances are that the wording of Section 36(4) of the Charities Act 1993 is not on the tip of your tongue, but if you’re an independent school contemplating a disposal of school property – whether a small staff flat now surplus to requirements or a large area of land for lucrative commercial development – you need to know about it. Gordon Reid reports

Trustees have a statutory duty on a disposal to obtain terms that are “the best that can reasonably be obtained”. As part of that process a written report on the terms has to be obtained before the transaction goes ahead – and Section 36(4) is all about who can provide that report.

The report has to be provided by a “qualified surveyor” who must be (1) “a Fellow or professional associate of the Royal Institution of Chartered Surveyors” (RICS) and (2) reasonably believed by the trustees to “have ability in and experience of” valuing land/property of the type and in the area in question.

Take that small residential flat, for example. Any seller would instruct an estate agent who would market the property, and a deal would be done at the best price possible. But when the seller is a charity and the selling agent passes part (2) of the test but not part (1), then the trustees need to obtain a report from a separate “qualified surveyor”, obviously with an additional cost involved.

It was that sort of situation that prompted the Cabinet Office to launch a consultation earlier this year on whether the definition of “qualified surveyor” should be broadened to include Fellows of the National Association of Estate Agents (NAEA) – the concern being that the current wording doesn’t allow trustees to make a sensible practical decision based on the actual situation: a “proportionate” decision, to use the Cabinet Office preferred term.

What now?
The consultation finished in June and the Cabinet Office has just published its response. As you might expect, all the “interested parties” responded – probably with an equally predictable range of responses: the RICS against, the NAEA in favour, other organisations in favour for residential property only.

The Cabinet Office has concluded that the definition should be widened to include Fellows of the NAEA: their rationale is that doing so will increase the choice of professionals available to charities and allow them to make a “proportionate” decision, matching the skills and experience of the surveyor to the disposal they have in hand which they believe will make the process “quicker, easier and often less expensive”. However, they have also decided that regulation of sales generally should be considered as part of the wider review of the operation of the Charities Act 2006, which must take place next year.

And now?
The conclusion to widen seems to make sense particularly for residential property. It seems that no change is envisaged to the second part of the test so trustees will still have to make sure the author of their report meets the “experience” test but it does mean that the selling agent in our example (who might be best for that job but not in the RICS) can provide the written report and streamline the process.

In any transaction – big or small, straightforward or complex – experience is always going to be the crucial test: whether that experience in marketing a small flat or experience in selling five acres for commercial development.

But with the change tied to the wider review it will be many months before it can be implemented. A coherent approach is generally to be welcomed but a change of this part could have been put in place relatively easily and been of immediate benefit. In the meantime if an estate agent is retained for a sale – make sure he or she meets the “qualified surveyor” test now.

Gordon Reid is head of the commercial property team at Barlow Robbins LLP. Gordon can be contacted on 01483 464 224 or gordonreid@barlowrobbins.com.  

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