How charities can get the best deal

Posted by Strettons on 9th August 2019 -

Over the past 30 years, Strettons have advised numerous charities how best to dispose of a variety of properties including schools, churches, synagogues, halls, houses, and land and whether it would be best for them to sell by private treaty or auction.

With the improved market, often with several parties chasing a property, it might seem logical for auction to be the best method of disposal. However, a charity and its trustees, who have a legal responsibility, need to be satisfied that they are making the right decision.

They need to take heed of The Charities act 2011 (s.119 (1)) which obliges a charity to have a written report from a "qualified surveyor". This includes advice on the correct means of disposal and marketing "in order that the terms are the best that can reasonably be obtained".

An auction offers an open and transparent method of sale, but if a charity wants to have some control over who buys it, as might a religious charity not wanting to sell to another with opposing beliefs, a negotiated private treaty sale might be more appropriate.

From our experience, charities, who may be potential buyers, are not always able to work at the pace required for an auction sale. 

It may then be more appropriate to recommend a period of private treaty or pre-auction marketing with a view to proceeding to auction if the level of interest is justified. 

Similarly, at auction, a special purchaser would only need to make one bid more than anyone else. If these circumstances are identified it may be est to not sell by auction and negotiated privately to obtain special value. Conversely, where there is more than one potential buyer with a special interest, an auction might be the logical method of sale.

A charity is expected to achieve "best consideration" which might be at odds with the reserve price which is usually the minimum price expected to be achieved. Again, however, a period of a private treaty or pre-auction marketing will allow the charity, "qualified surveyor" and auctioneer to be satisfied as to an appropriate reserve price which the charity has to be comfortable reporting to the Charities Commission. It will be too late to do this once the property has been "knocked down" by the auctioneer which signifies an exchange of contracts. 

In recommending a reserve to a charity it is always useful to give some background to any pre-auction marketing and to explain that the reserve is at a level we would expect to be able to certify is a price which fairly reflects "best consideration". Whilst we would not expect to achieve a significantly higher figure, it is always possible that, in a competitive bidding situation, bidders may be prepared to bid above the reserve. this may seem an excuse for a conservative reserve but we know from experience that many properties, especially unusual ones that may not have been on the market in living memory, typically such as those owned by many charities, far exceed expectations at auction which, of course, in itself might vindicate the decision to sell by auction.

Over the years, roughly half of the charity owned properties we have sold have been by auction which demonstrates that auction has its place when charities want to dispose of property assets. However, unlike non-charity sellers, who may not have the same duty to trustees or the Charities Commission, the charity and their "qualified surveyor" (who may, of course, be the auctioneer), need to be satisfied that the charity is comfortable selling by auction and that it is has taken appropriate advice in the process leading to a sale - in an odd way this shows that charity does begin at home.

This blog was taken from our most recent Briefing Notes: Issue 92, to see more Residential and Commercial news briefs, click here.