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The Charities Act of 2011 is an important piece of legislation for the officially recognized nonprofit sector in the UK. It stipulates a number of fundamental requirements for the proper governance and operation of charities, one of the most significant being that they must obtain qualified advice before making property decisions. These decisions might include acquiring a property, renting one, or disposing of real estate—it all comes into play when we talk about property transactions in the charitable sector. We will look in detail at what the Act requires and how RICS plays its part in ensuring that the sector complies.
It is the duty of charity trustees to demand a written report when land or property is let or sold. This report must be provided by a qualified surveyor, who is a member of RICS, and must be in prescribed form. RICS has adopted the RICS Red Book for this purpose.
RICS is the world’s leading professional body for qualification and standard setting in land, property, and construction. However, universities regularly churn out the surveyors needed to staff RICS and, therefore, offer the perfectly specialist advice necessary for Charities Act valuations.
A panel of valuers from RICS provides valuation services to charities. These services are provided by experienced valuers who hold the necessary qualifications and are members of the Valuer Registration Scheme (VRS).
Section 119 of the Charities Act 2011 is the basis upon which valuations are prepared, and in legal terms, the documents that arise from the many property-related transactions and events in which charities find themselves forming a vital underpinning for the charity’s work and facilitating the transaction or event concerned.
Under the Charities Act 2011, registered charities that sell land are required to obtain a written report from a qualified surveyor before moving forward with the sale. This is a significant step to ensure that the charity is obtaining the appropriate value for the land. The Act specifically outlines this requirement in section 119, and it applies to “disposals of an interest in land,” extending to the sale of a portion of that land. The surveyor must be a member of the RICS, which is the professional body that oversees and regulates the estate management profession in the UK.
The report must include the following details:
Section 119 states that charity trustees must take appropriate measures and seek legal guidance when selling or otherwise disposing of land or property. They must point their decision toward the essential, prime directive of “holding and protecting the charity’s assets” in order to effectuate the beneficial purposes that the charity and its governing documents stipulate.
Under the auspices of the Charity Commission for England and Wales, CC33 is guidance provided to charity trustees. It is aimed at helping them understand the legal requirements and best practices governing the acquisition and disposal of charity land and property. In essence, it seeks to ensure that the trustees of all sorts of charitable bodies are well aware of the relevant provisions of the Charities Act and, in particular, sections 117 to 122 on the acquisition, disposal, and mortgaging of charity property.
The CC33 guidance covers several important aspects, such as:
Even though CC33 is not legally binding, it serves the essential function of advising charity trustees on how best to comply with the Charities Act 2011. The CC33 covers the aspect of managing a charity’s land and property, providing extremely valuable guidance.
Charities in England and Wales are overseen by the Charity Commission. The Commission itself does not directly obtain RICS valuations, but its main function is to set guidelines and ensure that the rules and regulations in the Charities Act 2011 are followed by registered charities. These rules and regulations pertain to property transactions.
When charities acquire, dispose of, or lease land or property, they must obtain professional advice. That is the essence of the law as set out in the Charities Act 2011 and its associated guidance. Charity trustees are required to obtain a written report from a qualified surveyor, who is usually a member of RICS. The default position for charities when contemplating a property transaction — whether buying, selling, or renting — is that they must secure and pay for the kind of professional advice that any sensible private individual or business would obtain as a matter of course.
In this context, the Charity Commission has three main functions.
Consequently, the Charity Commission does not obtain the RICS appraisals directly for the charities but is looking to ensure that charities follow the regulation set out by the commission. In this case, the commission’s regulation means that charities must get professional help to ensure that they are operating by the necessary governance standards. The Charity Commission follows all this up with some monitoring and, by all appearances, is intent on making a more robust system in which charities that need it can get the help they must have to follow the rules.
The Non-Domicile Valuation applies to individuals who are living in the UK but are not domiciled here. It is an important form of assessment for individuals who own property in the UK, especially if they could be held liable for inheritance tax on their worldwide assets.
A Divorce Settlement Valuation provides a means of ascertaining the true value of your property so that it can be divided accurately in your divorce settlement. This guarantees that you will not be short-changed and that any joint property will be fairly valued for division among the parties.
The Full Building Survey report includes the following:
When it comes to the detail that the surveyor will go into concerning defects, repairs, and maintenance, the Homebuyer Survey is fairly standard. Full Building Surveys, however, are more refined and go into more detail about possible and likely defects. Repairs and maintenance are covered in more detail. The Survey cost depends on the age, size, and value of the property.
The analysis they undertake is a visual inspection. This means that, for the most part, the building components that can be seen will be looked at and assessed in accordance with the surveyor’s remit. The Home Survey Report will show you the visible defects and then go on to discuss the kinds of partially hidden or totally hidden defects that the surveyor thinks you should be aware of. It will also try to clarify what kinds of repair work need to be done and the nature of the repairs. The survey is effectively a way to consider “defects” and their potential impact on the building.
A Building Survey Report contains the most important information for understanding the condition of a property. The surveyors that undertake the work follow a set procedure. The first part of the report contains a general overview of the property and its surroundings. The second part details the major and minor problems with the property’s components, inside and out. These problems range from serious structural defects to issues with doors or windows that don’t close properly, and everything in between. The report is written in clear English, complemented by diagrams and photographs. If any of the problems found are what a surveyor might consider important, that’s what the report indicates—using clear and unambiguous language.
Surveyors usually use a tick box to indicate methods of repair when drafting a building survey report. They are also required to comment on the timescale of any repairs. A condition rating is typically included: what needs to be addressed immediately, what is in the process of deteriorating but is in reasonable condition, and what has not deteriorated at all.
A building surveyor is responsible for a variety of checks and tests during a building inspection. These could be checks or tests for damp and woodworm, or they could be visual inspections of the building’s structure. In building surveying, there are visual inspections of roofs – checking for tiles and slates (if applicable) and also checking for leadwork (if applicable) and looking at the junctions between roof and wall. If the wall structure has brick in it, the surveyor will visually check for any “spalling” (brick breaking apart visibly) and any bulging (brick failing to hold its place visibly), for example.
If defects need fixing immediately, then the options recommended for this survey specify what to repair and give some idea of how long the problem has existed. For the most part, this survey describes recommended repair approaches that are standard in the industry and that do not require excessive expenditure. Future maintenance is also discussed, including what to expect when the problem being surveyed is not repaired and what to expect with repairs that are made but with questionable methodology.
Your surveyor will explain some of the legal aspects of purchasing the building, covering—in as much or as little detail as you desire, and their implications, but this is subject to your solicitor verifying.
You might consider having a separate market valuation done to determine whether the property’s asking price is warranted. You’ll also need a reinstatement cost valuation for insurance reasons.
RICS’s industry guidelines suggest building surveys for properties that are large, very old, in some disrepair, or have unusual features. Building surveys are also recommended if you plan to do any significant renovations or extensions.
If you’re purchasing a relatively modern home that’s in decent shape and built to ordinary standards, then a Home Buyer Survey is an acceptable choice. If you want the assurance of an inspection and report that are pretty much guaranteed to turn up any issues that might be hidden or just hard to see, then you should go for a Full Building Survey instead.
The Full Building Survey is more detailed; it is more specifically tailored to the property your surveyor would be inspecting. It also comes with more advice on the visible defects found and on the potential hidden defects that they suspect may be present. Your surveyor will illustrate reports with photographs so that you can clearly see what has been discovered. Both the Home Buyer and Full Building Surveys describe the repairs needed, the order in which the repairs should be done, and the kind of “maintenance measures” that will be required to keep the property in good condition.
A HomeBuyer Report does include a market valuation as well as reinstatement costs. However, a Full Building Survey does not. The main reason for the differences in what is and isn’t included in the two types of reports is how focused the reports are on the condition of the property. The Full Building Survey is the most in-depth and comprehensive survey of a property that you can have done.
When it comes to valuing assets for the Charities Act 2011, appointing the correct surveyor is critical for compliance. There are three key facets to ensuring that a surveyor is appropriate:
Looking for a Chartered Surveyor? If you are buying a property, contact us for a building survey. Our panel of CIOB, RPSA and RICS surveyors will help you with the Level 2 or Level 3 property survey you need in Notting Hill. We can also assist you in Red Book Valuations, Party Wall Awards and other services. Reach out to us today for building surveyors, valuers and party wall surveyors in London!
