Room with a View - Charities Act surveyor's reports: what exactly are they and why are they needed?


03 July 2019

On a sale of charity land charity trustees are usually advised that they must obtain a written report from an independent surveyor.

This requirement often causes confusion. Trustees are often genuinely concerned about the cost of professional advice which they may feel is not necessary. Buyers, who may not be familiar with the legal requirements for charities, may misinterpret the trustees’ motives as being over-cautious, an attempt to delay matters or just to get more money out of the transaction.

This article aims to dispel some myths about the procedure and to clarify some key points.

Why is a Charities Act surveyor’s report needed on a sale of charity land?

1. It is a requirement of the law.

Section 117 of the Charities Act 2011 requires that before committing to a sale (or other relevant disposal) charity trustees must have obtained and considered a written report from a qualified surveyor acting exclusively for the charity and have decided, having considered that report, that the terms of the sale are the best that can reasonably be obtained for the charity.

2. If trustees do not comply with the law they may be personally liable.

If it is found that the sale was not the best course of action for the charity, and the trustees failed to comply with the requirements of the Charities Act, then they may be personally liable for any losses the charity suffers as a result. Whilst charity trustees are usually entitled to an indemnity from the charity’s assets for any liabilities they incur in the exercise of their duties, this depends on their having acted properly.

3. To protect the charity’s assets.

The provision is designed to ensure that the value of charity assets is maximised and trustees do not make unwise decisions.

What is a Charities Act surveyor’s report?

1. It is not a valuation report.

A Charities Act surveyor’s report differs from an ordinary valuation report because the surveyor is required to give guidance on many different issues, not just price.

2. It has to contain the advice points set out in the 1992 Regulations.

The regulations set out exactly what issues the surveyor should cover. These include whether the value of the property could be enhanced by making alterations or seeking planning permission. The surveyor should also advise on the terms for the sale, such as whether it might be appropriate to include covenants or overage provisions.

When is it required?

1. As early as possible.

The report must be obtained before the charity is contractually obliged to enter into the sale but the surveyor should really be consulted at the very outset of the process in order for the trustees to get the best benefit from their advice. One of the things the surveyor must comment on is how best to advertise the property for sale.

2. At appropriate stages.

Some complex transactions may require more than one report, at intervals during the process or as terms change.

Who can write one?

1. A member of the Royal Institution of Chartered Surveyors.

This is the current requirement although the Law Commission is consulting on expanding the category of advisers who can provide Charities Act reports.

2. Independent and objective.

Trustees often ask if they can instruct the selling agent to carry out the Charities Act report. It may be possible for a surveyor in the same firm as the selling agent to prepare the Charities Act report but consider whether the selling agent is independent and objective. If it is not possible for a surveyor to act independently and objectively a surveyor completely unconnected with the relevant transaction should
be instructed. It is the trustees’ responsibility to appoint the right surveyor.

How much do they cost?

1. It varies.

It very much depends on the nature of the property involved but these reports start at something like £500 for a very straightforward transaction. A more complicated report may cost considerably more. As the aim of these provisions is to ensure that trustees take advice, it is extremely unlikely they would be criticised for paying for it. On the other hand, the consequences of failing to commission a report could be severe. 

2. The Charity Commission may issue a waiver where the cost is disproportionate.

It is possible to apply for a waiver of the requirement for a Charities Act surveyor’s report where the cost of obtaining one would genuinely be disproportionate to the benefit. However, the Charity Commission will only do this when there is a very good reason and it may take significant time for a waiver to be issued. 

Does the buyer have to check that the charity trustees have got a report?

1. As long as the buyer is paying ‘money or money’s worth’ - no.

If the transfer deed contains a certificate in the prescribed form that the trustees have complied with the Act then the buyer benefits from a statutory presumption that the facts stated in the certificate are true. Even if a certificate is not included, a buyer who is paying ‘money or money’s worth’ and who is also acting ‘in good faith’ will still be protected.

2. But, buyers should proceed with caution.

If the buyer is not paying ‘money or money’s worth’, knows, or ought to have known, that the trustees have not complied with the requirements, or if a certificate is not included in the documents then ultimately the sale could be vulnerable to being set aside by the Charity Commission if subsequently found to have been a bad deal for the charity. The issues can be complex and therefore it is very important that buyers take specialist advice before proceeding.

For further information or advice please contact Louisa Saunders from our Commercial Property team.

This article is from the summer 2019 issue of Room with a View, our newsletter aimed at professionals within the property industry. To download the latest issue, please visit the newsletter section of our website. Law covered as at July 2019.

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