The Trustees of charities are in a position of responsibility for the way in which the charity’s money is spent. Quite rightly, there is a lot of guidance and regulation, alongside a number of statutory instruments, that aim to ensure trustees act properly and are accountable for their decisions. Important statutory provisions include the Companies Act 2006, Charities Act 2006, Trusts of Land and Appointment of Trustees Act 1996, and the Trustee Act 2000. In addition, the Charity Commission publishes various booklets giving advice on specific topics.
When considering purchasing a property the trustees of a charity are required to take all reasonable steps to ensure;
- That the property is suitable for its intended use (particularly with reference to any legal or planning restrictions).
- That any necessary planning permissions are obtained.
- That the price or rent is fair.
- That the terms of any lease are fair and reasonable, and fully understood by the trustees of the charity.
When a charity is acquiring leasehold property or buying a property from one of the trustees of the charity, the charity will be required to obtain an Order from the Charity Commission before completing the transaction. The Charity Commission will typically expect any application for such an order to be accompanied by a report from a Chartered Surveyor. Aside from those circumstances, there is no legal requirement that a charity obtains professional advice when making a property acquisition. However, even where there is no legal requirement, the Charity Commission strongly recommends that a report is commissioned from a Chartered Surveyor prior to any property acquisition.
Valuation reports provided by Chartered Surveyors have to be produced in accordance with the RICS – Valuation Professional Standards 2017 (commonly referred to as ‘Red Book’ valuations). The Standards set out the various requirements for levels of investigation undertaken by valuers alongside the matters that need to be addressed in valuation reports. Additionally, the Charities Commission recommends that valuation reports undertaken for charities contemplating the acquisition of property include;
- A description of the property and details any planning permission required.
- A valuation of the property.
- Advice on the price the trustees ought to offer to pay, and the maximum big they ought to make.
- A description of any repairs or alterations the trustees would need to make, and their estimated cost.
- A reasoned recommendation as to whether it is in the interest of the charity to purchase the property.
- Any other matters the valuer thinks relevant, including a description of any restrictive or other covenants.
Source: RICS
Some of these matters go beyond the RICS requirements for valuation reports, so it would be advisable for the trustees to discuss these matters (insofar as they are pertinent to the acquisition being contemplated) with their chosen valuer at the time of instruction, to ensure that all necessary matters are addressed in the valuer’s report. When choosing a surveyor the trustees should ensure that the person in question is a qualified Member of the RICS, a RICS Registered Valuer, and has sufficient experience of the local property market.
