You are here: | Capital and Facilities | Property Transactions | C: Procedures | Section 5: Acquisition of property
Scope
5.1 This Section provides detailed guidance on the procedures and safeguards to be adopted in any proposal to acquire property whether by outright purchase, lease, excambion, inter-departmental sale/transfer or as part of a services package under a PPP initiative. It should be read alongside Procedures Section 1 which gives an overview of certain procedural matters which are common to all NHSScotland property transactions .
5.2 Where specific procedures are not laid down Holding Bodies must act in accordance with best professional advice .
Professional Advice
5.3 Where private sector valuers are appointed to provide advice it is important that appropriately qualified professional firms are retained i.e. those firms having members of the Royal Institution of Chartered Surveyors among their partners should normally be appointed.
5.4 The key to the speedy and successful purchase of property is to ensure that the procedural guidance is followed, that as much activity as possible is carried out concurrently and that appropriately qualified professional advisers are consulted at an early stage and kept fully informed at key stages thereafter.
5.5 The process of property acquisition must be started in sufficient time to ensure that development is not held up. This is particularly important if it is likely that the use of compulsory purchase powers may be necessary as such procedures are lengthy and may take 18 months or more to promote in contentious cases.
5.6 Where there may be a lapse of time between the acquisition of a property and the start of development on it, it is essential that the Holding Body should not let the property lie vacant or unoccupied if an alternative temporary use can be found. Land can, for example, be used to provide car parking or may be let for agricultural use. Buildings may be used for storage, etc. (subject to any necessary, planning consents). Every attempt must be made to avoid criticism that newly acquired property is unused and to prevent unauthorised use of empty property. Legal advice must be sought in respect of any temporary use so that this is properly documented and any such arrangement can be terminated timeously.
5.7 Ultimately the Holding Body is responsible for coordinating the necessary input and taking appropriate decisions (if necessary after consultation with the Health and Social Care Directorates). After any notification of a property transaction to the Accountable Officer the responsibility for the implementation of any action required rests with the Holding Body concerned.
5.8 The following are the key stages in the acquisition of property:
5.9 The decision to acquire property should be driven by a Holding Body’s overall strategic plan for the delivery of healthcare. The need for additional property must be established after a systematic review of existing property as required by a Holding Body’s Property and Asset Management Strategy.
5.10 In the majority of cases the requirement will be for land to be developed for a specialised use. The area of land required will be identified from a detailed analysis of the service provision required to meet the strategic objectives of the Holding Body.
5.11 Where property to be acquired is of the type found generally on the market, e.g. offices, then the space audit should identify:
5.12 The above criteria will enable a wide range of alternative options to be considered including different locations, types of properties and tenures. The space audit together with the statement of need will give a clear direction to the search and forms the foundation for any instruction to Property Advisers when appointed to identify suitable properties.
5.13 A financial appraisal is necessary to demonstrate that investing in the new accommodation is affordable to the Holding Body. An initial option appraisal in line with the Scottish Capital Investment Manual should be undertaken to establish the comparative costs of the various options in Net Present Value (NPV) or Net Present Cost (NPC) terms. A more detailed financial appraisal should follow for each option short-listed.
5.14 Holding Bodies should initially consider whether or not property is available from other Holding Bodies within the immediate area. If no such accommodation is available Holding Bodies can consult SG Property Division to ascertain whether there is suitable existing property available within the Scottish Government estate or the Government’s Civil estate. These procedures are designed to ensure that public money is not wasted in acquiring a property on the open market when suitable property exists within the wider public sector estate.
5.15 When no suitable property is available from within the public sector the Property Adviser will undertake a search of the property market to establish a long list of suitable land and/or buildings.
5.16 The long list of options will need to be reduced for full evaluation to a number that provides a real choice but is manageable - at least 3 options are recommended. Costs may not have been explicitly identified at this stage but sufficient information should be available to sift the long list and eliminate options which are clearly unaffordable or which would result in inferior service provision when compared to other options.
5.18 A decision should not be taken on a particular solution before a range of options has been fully considered and appraised. All costs should be as at the date of the appraisal and must be on a comparable basis throughout the appraisal period which must be defined. No adjustments should be made for future inflation but future significant relative price changes should be included in the calculations.
5.19 The Shortleet of options should also be subjected to sensitivity testing i.e. the options are tested to see how they respond to changes such as an unexpected rise in costs, the exercising of lease break options or premature termination.
5.20 It is most important that negotiations are not hampered by premature or ill-considered contacts with the existing owner. An owner/landlord must not be given the impression that his site is essential - this may inflate his expectations of the selling price or rent. When enquiring about the availability of a property, Holding Bodies or their Property Advisers should simply inform the owner (or his agents) of the Holding Body’s possible interest in acquiring the property. Conditions of any kind should not be discussed to ensure that the Property Adviser’s later negotiations are not prejudiced.
5.21 If purchase is identified as the preferred option the Holding Body should advise the Legal Adviser and Property Adviser (or other adviser if alternative arrangements have been agreed with the Health and Social Care Directorates). The Property Adviser should carry out negotiations with the owner with appropriate support from the Legal Adviser. The Holding Body should ensure, by consulting the planning authority, that planning consent exists or will be forthcoming for the proposed use of the property (whether or not that is different from its existing use).
5.22 When acquiring property by lease the Property Adviser should negotiate and provisionally agree Heads of Terms. All correspondence should be copied to the Legal Adviser and, in the case of transfers between Crown Bodies, to the District Valuer (if he is not already participating in the negotiations as Property Adviser) or to the Property Adviser as appropriate.
5.23 Whether acquiring property by purchase or by lease it is advisable to have a second option which can be pursued should negotiations for the preferred option fail.
5.24 Holding Bodies must ensure that the chosen property is technically suitable for the intended use. This will involve obtaining a full building survey. The appointed Property Adviser, building consultant or the Holding Body’s own staff may be able to supply the necessary advice.
5.25 The advice of the Legal Adviser must be obtained on all terms for purchase or lease before a binding commitment is entered into.
5.26 Having considered the terms provisionally agreed by the Property Adviser and any comments from the Legal Adviser the final decision should be taken by the Holding Body. A meeting of interested parties is often invaluable in order to help reach a speedy decision.
5.27 There may be occasions when normal procedures must be short circuited because the market is very active. In such instances a Holding Body should brief the Legal Adviser, the Property Adviser and (where notification to the Accountable Officer is required) the Scottish Government Health and Social Care Directorates in advance about the possibility of expediting the procedures. A final decision can then be taken speedily by telephone if necessary when a suitable property comes onto the market.
5.28 Once a final decision is taken to acquire a property a formal offer should be submitted by the Legal Adviser on behalf of the Holding Body. The Legal Adviser is responsible for investigating the seller’s title and carrying out the conveyancing. The Holding Body’s payment in settlement of the transaction should be passed to the Legal Adviser for transmission to the seller. However it is the Holding Body which is ultimately responsible for protecting the Scottish Ministers’ interests. Certification should also be completed at this point.
5.29 Where the preferred option is to lease existing accommodation it is good practice to have a Schedule of Condition prepared by a building surveyor and agreed by the landlord prior to occupation. This will record the condition and state of repair and decoration and assist with the assessment of any dilapidations claim by the landlord at the end of the lease. A Schedule of Condition will normally be annexed as a Schedule to the lease itself so that it forms part of the signed lease between the parties.
5.30 Fit-out of a building can be an expensive item and Holding Bodies must ensure that adequate provision has been made for such costs in the initial option appraisals. Fitting out a new building or converting and fitting out an existing building is specialised work and SG Property Division can advise on appropriate surveyors or property consultants to supervise the work. Alternatively if agreed by the Health and Social Care Directorates supervision can be undertaken by the Holding Bodies’ own staff.
5.31 Adequate time should be allowed for physically relocating the service to the new accommodation.
Further detailed information on most of the above stages is contained in the Scottish Capital Investment Manual.
5.32 Holding Bodies are free to conclude property acquisition (including acquisitions by lease) without reference to the Health and Social Care Directorates unless notification to the Accountable Officer is required in the specific circumstances listed at Annex I. These circumstances include acquisition by lease where the annual rent exceeds £250,000 per annum or where a premium exceeding £1 million is proposed (including extension of an existing lease). The notification arrangements and certification requirements are described at paragraphs 1.17 to 1.19 of Section 1.
5.33 Where notification to the Accountable Officer is required for a proposed course of action, full supporting information must be provided in line with the requirements of Annex II. The amount of supporting information needed depends on the circumstances of the acquisition but it will be noted from Annex II that the supporting information should always cover the following points:
5.34 Scottish Ministers have the power to acquire property compulsorily where it is not possible to acquire by agreement – provided that the property concerned is needed for Health Service purposes and that there are no other suitable alternative properties available. There is no power to acquire property compulsorily to facilitate the disposal or enhance the value of surplus NHSScotland property. Holding Bodies do not have powers of compulsory purchase. Where a Holding Body considers that there is justification for using compulsory powers they must notify the Scottish Government Health and Social Care Directorates setting out the full circumstances of the case including the supporting information detailed at paragraph 5.33 above and Annex II. If the Accountable Officer (following any consultation with Ministers) agrees that compulsory purchase should proceed, any action deemed necessary will be taken by the Holding Body on the instructions of the Health and Social Care Directorates. Annex IV sets out detailed arrangements for acquisition by compulsory purchase order.
5.35 There are very occasional circumstances where excambion (an exchange of property) is the most satisfactory way of acquiring property. In these circumstances the Holding Body should obtain a valuation for both the property which is being acquired and the surplus property for which it is to be exchanged – and an assessment of any balancing payment which is needed. Where excambion between Crown Bodies is involved a valuation must be provided by the District Valuer or a suitably qualified Property Adviser acceptable to both parties to the transaction. Otherwise an appointed Property Adviser (who may in any case be the District Valuer) should undertake the work under the normal arrangements. The requirement for the valuation work to be done by the District Valuer or Property Adviser where Crown Bodies (including local authorities) are involved applies whether or not private sector agents are acting for the Holding Body or the Crown Body (or local authority) owning the other property involved in the excambion. The Legal Adviser should be involved in the normal way.
5.36 The option appraisal process described at paragraph 5.13 may result in the lease of accommodation being preferred to an outright purchase. Holding Bodies should not enter into leases unless the option appraisal clearly indicates that leasing is the most cost-effective option. The circumstances where an acquisition by lease requires notification to the Accountable Officer are described at Annex I. The views of the Legal Adviser and the Property Adviser must be sought on the terms of a proposed lease in every case.
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