Section A - Introduction
This Focus Note sets out guidance in relation to the requirement for a Qualified Surveyor’s Report (QSR) under s.119(1) of the Charities Act 2011 (2011 Act) on disposals of charity land. Disposals include not only sales but other disposals that Managing Trustees often come across including; the grant of leases of more than 7 years, easements and lease surrenders.
Section B - The Qualified Surveyor’s Report
B1 Why do you need a Qualified Surveyor’s Report?
This is a requirement under Section 119 (1) of the 2011 Act. S.119(1) requires charity trustees, before disposing of charitable land, to:
- obtain and consider a written report from a qualified surveyor instructed by them and acting exclusively for the charity
- advertise the proposed sale in accordance with the surveyor’s advice, unless the surveyor has advised that advertising would not be in the best interests of the charity
- decide that the terms of any proposed sale are the best that can reasonably be obtained
Section 119(3) of the 2011 Act defines a qualified surveyor as one who:
- is a fellow or professional associate of the Royal Institution of Chartered Surveyors or satisfies such other requirement or requirements as may be prescribed by regulations made by the [government] Minister; and
- is reasonably believed by the charity trustees to have ability in, and experience of, the valuation of land of the particular kind, and in the particular area, in question
Before commissioning a QSR please ask the surveyor to confirm that they are a Member or Fellow of RICS. They would usually have the letters; FRICS or MRICS after their name. Please also ask them to confirm that they have the appropriate experience required under s119(3)(b).
B3 What must a Qualified Surveyor’s Report include?
A QSR must address all nine paragraphs of the Schedule to the Charities (Qualified Surveyors’ Reports) Regulations 1992 (the Regulations) and preferably in the same order. Where the surveyor is of the view that a particular paragraph is not relevant s/he should say so, rather than simply ignoring it. The Regulations are set out in Statutory Instrument 1992 No.2980. For ease of reference the regulations are set out in the Schedule to this Focus Note.
When the QSR is sent to TMCP for approval, TMCP Legal will confirm approval if all nine paragraphs have been addressed.
Section C - Commissioning the Qualified Surveyor’s Report
C1 How do we instruct a surveyor?
First, please select a surveyor with the experience referred to in Section 119(3) of the 2011 Act (see Section B2). Your Circuit or District may be able to recommend a surveyor who has experience in preparing QSRs for Methodist property in your area.
Please explain that the property being disposed of is charitable land and that a QSR is required under s.119(1) of the 2011 Act. Please give your surveyor a copy of this Focus Note together with a copy of the QSR (Preparing) Focus Note. If the property includes a burial ground then please let the surveyor have a copy of the Burial Ground Sale Focus Note and Burial Ground Guidance. If you are proposing to grant a lease, please provide a copy of the Non-Residential (Landlord) Lease Heads of Terms.
C2 At what stage of the transaction do we need to obtain the Qualified Surveyor’s Report?
The requirement under s.119(1)(b) of the 2011 Act is to; “advertise the proposed sale in accordance with the surveyor’s advice”. Accordingly, TMCP must see and approve the QSR before the property goes on the market. It is highly recommended that you speak to a surveyor at the earliest opportunity so that he/she can confirm whether the proposed disposition is in the best interests of the charity and if it is, what action you need to take to command best price.
Obtaining a QSR, or at least speaking to your surveyor at the outset, should provide Managing Trustees with comfort and protection. Managing Trustees as charity trustees are entitled to rely on the professional advice that is given to them. This professional advice provides the Managing Trustees with something to fall back on if questions are raised later as to why a certain course of action was taken. Managing Trustees may feel that it makes sense to make the most of the advice that they are obliged to obtain under statute and to use their surveyor’s experience and expertise to guide them and explore all available options.
Obtaining the QSR without delay should also help the Managing Trustees to avoid spending precious time and resources on one course of action only to be told that it is not in the best interests of the charity to proceed in that way. Managing Trustees may feel that having the endorsement of their surveyor behind them avoids putting themselves and the reputation of the charity locally at risk.
If you do have ideas for disposing of the property or specific plans for any land retained, please discuss these with your surveyor so that these ideas can be taken on board. Make sure that your surveyor knows your intentions and concerns so that he/she can consider any wider issues and provide advice in the QSR that is helpful to the Managing Trustees and specific to your particular situation. The QSR should not be seen as a mere box ticking exercise but instead, as a positive tool that can really help Managing Trustees to dispose of land in the best interests of the charity.
Section D - Using the Qualified Surveyor’s Report
D1 What do we do with the Qualified Surveyor’s Report once we have obtained it?
Please send the QSR to TMCP for approval as soon as possible and do not put the property on the market or commence negotiations with a potential buyer, tenant or otherwise before approval has been given. TMCP Legal can then provide any specific guidance to you based on the information in the QSR and set out the next steps to follow.
Please consider your surveyor’s advice in the QSR carefully. As charity trustees, Managing Trustees are obliged to act upon the advice in the QSR. Please bear in mind that if the advice in the QSR is ignored then TMCP will be unable to concur with the transaction.
D2 A third party has expressed an interest in the property. Can we show them the Qualified Surveyor’s Report?
Please do not share the contents of the QSR with any third parties. The QSR must be kept confidential to the charity and their professional advisers, even if somebody else e.g. a tenant is paying for it.
The Charities (Qualified Surveyors’ Reports) Regulations 1992 (Regulations) are set out in Statutory Instrument 1992 No.2980.
This Schedule sets out the wording for ease of reference:
1 What is to be sold
- A description of the relevant land and its location to include:
- the measurements of the relevant land
- its current use
- the number of buildings (if any) included in the relevant land
- the measurements of any such buildings
- the number of rooms in any such buildings and the measurements of those rooms
- Where any information required by sub-paragraph (1) above may be clearly given by means of a plan, it may be so given and any such plan need not be drawn to scale
2 Existing Leases
- Whether the relevant land, or any part of it, is leased by or from the charity trustees and, if it is, details of:
- the length of the lease, and the period of it which is outstanding
- the rent payable under the lease
- any service charge which is so payable
- the provisions in the lease for any review of the rent payable under it or any service charge so payable
- the liability under the lease for repairs and dilapidations
- any other provision in the lease which, in the opinion of the surveyor, affects the value of the relevant land
3 Easements and Covenants
Whether the relevant land is subject to the burden of, or enjoys the benefit of, any easement or restrictive covenant or is subject to any annual or other periodic sum charged on or issuing out of the land except rent reserved by a lease or tenancy.
4 Condition of buildings and need for repair
- Whether any buildings included in the relevant land are in good repair and, if not, the surveyor's advice:
- as to whether or not it would be in the best interests of the charity for repairs to be carried out prior to the proposed sale
- as to what those repairs, if any, should be
- as to the estimated cost of any repairs s/he advises
5 Alterations to buildings
Where, in the opinion of the surveyor, it would be in the best interests of the charity to alter any buildings included in the relevant land prior to sale (because, for example, adaptations to the buildings for their current use are not such as to command the best market price on the proposed sale), that opinion and an estimate of the outlay required for any alterations which s/he suggests.
6 Method of Sale
- Advice as to the manner of selling the relevant land so that the terms on which it is sold are the best that can reasonably be obtained for the charity, including:
- where appropriate, a recommendation that the land should be divided for the purposes of the sale
- unless the surveyor's advice is that it would not be in the best interests of the charity to advertise the proposed sale, the period for which and the manner in which the proposed sale should be advertised
- where the surveyor's advice is that it would not be in the best interests of the charity to advertise the proposed sale, his/her reasons for that advice (for example, that s/he believes someone with a special interest in acquiring the relevant land will pay considerably more than the market price for it)
- any view the surveyor may have on the desirability or otherwise of delaying the proposed sale and, if s/he believes such delay is desirable, what the period of that delay should be
- Where the surveyor feels able to give such advice and where such advice is relevant, advice as to the chargeability or otherwise of value added tax on the proposed disposition and the effect of such advice on the valuations given under paragraph 8 below.
- Where either the surveyor does not feel able to give such advice or such advice is not in his\her opinion relevant, a statement to that effect.
The surveyor's opinion as to:
- the current value of the relevant land having regard to its current state of repair and current circumstances, such as the presence of a tenant who enjoys statutory protection
- what the value of the relevant land would be:
- where s/he has given advice under paragraph 4 above, if that advice is followed or
- where s/he has expressed an opinion under paragraph 5 above, if that opinion is acted upon or
- if both that advice is followed and that opinion is acted upon
- where s/he has made a recommendation under paragraph 6(a)i above, the increase in the value of the relevant land if the recommendation were followed
- where his/her advice is that it would not be in the best interests of the charity to advertise the proposed sale because s/he believes a higher price can be obtained by not doing so, the amount by which that price exceeds the price that could be obtained if the proposed sale were advertised
- where s/he has advised a delay in the proposed sale under paragraph 6(a)iv above, the amount by which s/he believes the price which could be obtained consequent on such a delay exceeds the price that could be obtained without it
9 Alternative Options
Where the surveyor is of the opinion that the proposed sale is not in the best interests of the charity because it is not a sale that makes the best use of the relevant land, that opinion and the reasons for it, together with his\her advice as to the type of sale which would constitute the best use of the land (including such advice as may be relevant as to the prospects of buying out any sitting tenant or of succeeding in an application for change of use of the land under the laws relating to town and country planning etc).
Please note that this document is to provide guidance and assistance to Managing Trustees and their professional advisers. This guidance note is general in nature, may not reflect all recent legal developments and may not apply to the specific facts and circumstances of any particular matter.
Also note that nothing within the documents and guidance notes provided by TMCP nor any receipt or use of such information, should be construed or relied on as advertising or soliciting to provide any legal services. Nor does it create any solicitor-client relationship or provide any legal representation, advice or opinion whatsoever on behalf of TMCP or its employees.
Accordingly, neither TMCP nor its employees accept any responsibility for use of this document or action taken as a result of information provided in it.
Please remember that Managing Trustees need to take advice that is specific to the situation at hand. This document is not legal advice and is no substitute for such advice from Managing Trustees' own legal advisers.
If you have any queries in relation to the guidance in this Focus Note please contact TMCP Legal for further assistance.