Trustees will now usually be required to obtain a Designated Adviser’s Report (DAR) from an independent property adviser. This takes the place of the old Qualified Surveyor’s Report. The changes came into force from June 2023 as part of the Charities Act 2022.
Overall, the reforms simplify the reports which may help to speed up the disposal process and may also save charities money in straight-forward cases.
If you are looking for a DAR, or need further advice on how the legal changes affect your charity land disposals, Caxtons can help. Our dedicated team of chartered surveyors have many years’ experience of providing property appraisals for Charities Act compliance.
So what exactly has changed?
- There is now a wider choice of designated advisers who can provide charities with advice on disposals.
- Trustees, officers or employees of the charity can provide advice on a disposal themselves under certain circumstances.
- Trustees have been given discretion to decide how to advertise a proposed disposal.
- Charities are no longer required to obtain permission from The Charity Commission to grant a residential lease to an employee for a short or fixed term tenancy.
However, charities are required by law to obtain a DAR for most disposals.
Trustees must also be satisfied that the proposed terms of the disposal are the best they can reasonably obtain for their charity.
If trustees do not comply with the law, and it is found that the sale was not in the best interests of the charity, trustees may be held personally liable for any losses suffered by the charity.
They are also advised to keep a clear record of their decision-making. They do not have to follow all of the DAR’s recommendations but should record their reasons for this.
These rules are aimed at protecting charity assets from poor decisions by trustees.
What is a Designated Adviser’s Report?
A DAR is not simply a valuation report, as it has to cover a number of matters including:
- The value of the land.
- Steps which could be taken to enhance its value.
- Whether the land should be advertised and, if so, how.
- Any other measures which could be taken to make sure that the charity obtains the best terms from the disposal.
- Any further issues which the adviser thinks should be drawn to the attention of the charity’s trustees.
The report must comply with the Charities (Dispositions of Land: Designated Advisers and Reports) Regulations 2023, with which the adviser should be familiar.
The DAR also has to include a statement by the adviser that they have the relevant experience to value the sort of land in question. Plus, the adviser must also state that they have no interest which conflicts, or would appear to conflict, with that of the charity.
When is a DAR needed?
Trustees will need to obtain a DAR for most disposals of charity land including sales and leases for longer than 7 years.
However, a DAR is not required when a charity buys land or when it leases land for 7 years or less.
The trustees should obtain the report at the beginning of the disposal process. In any event, they must have obtained and considered a report from a designated adviser acting exclusively for the charity before committing to the disposal. The charity must also have decided that, on the basis of the report, the terms of the disposal are the best that can be obtained for the charity.
In some more complicated cases, more than one DAR may be needed over time or as the terms change.
Who can write a DAR?
The new rules widen the choice of who can write the report. However, trustees should obtain a DAR from an independent property professional with the relevant experience of the kind of land in question.
An adviser must be one of the following:
- A fellow or professional associate of the Royal Institution of Chartered Surveyors (RICS).
- A fellow of the Central Association for Agricultural Valuers (CAAV).
- A fellow of the NAEA Propertymark (National Association of Estate Agents).
The trustees must ensure the adviser they select is covered by an adequate insurance policy.
Under the reforms, a designated adviser can now also be a trustee, officer or employee of the charity provided they are members of one of the professional bodies listed above. The charity must also manage any conflicts of interest and consider whether its governing document allows trustees to be paid for services provided to the charity. If so, the charity must follow the legal requirements for paying trustees.
The charity must also check its insurance policy to ensure it is covered for negligent advice given by an adviser who is also a trustee, officer or employee of the charity.
Need a DAR? Try Caxtons
Our dedicated valuation team has years of experience of providing professional property reports which are compliant with the Charities Act. We operate for a wide variety of charities across the South East during the disposal of residential, commercial and development property. Our highly experienced chartered surveyors are members of the Royal Institution of Chartered Surveyors (RICS).
If you need any advice over obtaining a DAR, our friendly Valuation and Lease Advisory team will be happy to help you. You can call them on 01227 788088, or email our Head of Valuation and Lease Advisory Daniel Thackray direct on [email protected]
For further information on disposing of charity land, visit the Government website here.
