Procedures Section 2 : Sale of property

• That in the light of strategic plans they themselves, or other NHSScotland interests have no foreseeable use for the property.
• The current and future use of all NHSScotland property on site or in the vicinity, whether or not it is immediately surplus, in order to identify the maximum disposal package;
• The effect of disposal on adjacent NHSScotland property (e.g. preserving suitable means of access in case additional land subsequently becomes surplus, and ensuring that services are not interrupted); and
• Whether there is adjoining land which, if acquired, would help construct a better disposal package – or whether collaboration with an adjoining landowner would allow a larger more attractive site to be sold.

2.4 If the potential sale is complex (e.g. because planning permission for an alternative use could greatly increase its value, because of relationships with other NHS property, or because it is linked to investment in new or refurbished facilities), it is particularly important that Holding Bodies should take professional advice at this stage. Such advice should help to ensure that the right package of land is declared surplus, to identify opportunities to enhance its value by a change of planning status, or to give valuation advice to inform the option appraisal for any investment which may be necessary before the property can be vacated and sold. The preparations for sale (described in paragraph 2.9 below) may be put in hand at this stage, in the interest of speed.

2.5 The aim should be to market surplus property in advance of vacant possession being available in order to minimise abortive heating, maintenance and security costs which will arise if the property is left empty. Property which stands empty for a considerable time can also be difficult to sell. Holding Bodies should not therefore wait until the property has been vacated before initiating action. In doing so care must be taken to ensure that no legally binding commitment is entered into which obliges the Holding Body to give vacant possession of the property before the Holding Body is in a position so to do. Holding Bodies are responsible for setting the timescale for disposal and ensuring (without prejudicing the achievement of the best available outcome) that the timescale is achieved. Some of the factors affecting speed of progress (notably obtaining planning permission) are not within Holding Bodies’ control, but every effort should be made to expedite sale procedures.

2.6 Once identified as surplus to NHSScotland requirements, property should normally be sold on the open market for the best price (or other consideration) obtainable at that time. Leasing may, however, be considered as an alternative – see paragraph 2.17.7 and Procedures Section 3. Paragraph 2.39 below describes specific alternative approaches which may be used where large areas of land with significant development potential, are to be sold.

2.7 Although Holding Bodies should not involve the Accountable Officer precipitately, they should consider at this stage whether any of the notification requirements of Annex I suggest that early consultation with the Accountable Officer is advisable. Even if not, Holding Bodies should consider whether the Health and Social Care Directorates should be informed at this point of any issues of the kind detailed at paragraph 1.15 of Section 1.

2.8 Holding Bodies should take 4 important steps before putting property on the market.

• To make the necessary preparations for sale;
• To secure professional guidance on the valuation and marketing of the property;
• To establish the planning position;
• To check whether there is a priority interest in the property.

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2.19 Residential tenancies entered into on or after 1 April 1990 are subject to the coverage of the relevant statutory provisions including those establishing an assured tenancy. Tenancies entered into prior to that date may be exempt from certain statutory provisions. Accordingly, if a residential property becomes surplus to requirements, careful consideration of the facts of each individual instance is required. Documentation on all tenancies should be passed to the Legal Adviser for a definitive opinion on the rights of the tenant affected.

In cases where a house is occupied as a condition of employment, tenants of tied houses owned by Scottish Ministers and surplus to requirements should be offered the opportunity to purchase the property in accordance with the Scottish Public Finance Manual.

Disposal of tied houses and sales to other sitting tenants
http://www.gov.scot/Topics/Government/Finance/spfm/PropertyManagement/propertydisposal

Where a tenant is not occupying the property as a condition of employment, they may be offered the opportunity to purchase their home, although this could be potentially concessionary, unless to do so would be:

• to the detriment of the value of other property. For example, if a house is situated within the curtilage of a hospital which itself has been declared surplus, or is likely to be declared surplus in the foreseeable future, the piecemeal sale of parts of the site might detract from its total value.
• very difficult for practical reasons. For instance, if a house forms part of a hospital or other building, or if its access or services are shared with other NHS property, it may be practically impossible to sell the house separately.
• against sound financial policy. For instance, if a house stands in a large area of grounds which have a development value, demolition of the house and development of the complete site would make better financial sense.

http://www.gov.scot/Topics/Government/Finance/spfm/gifts

2.20 In instances where Scottish Ministers occupy NHSScotland property under a long lease, such leasehold property may be assigned to occupiers for a premium where the terms of the lease permit and where the lease has 21 years or more to run.

2.21 Where a minority of flats are empty or a minority of the tenants do not wish to buy, the Holding Body should arrange for the preparation of a Deed of Conditions, covering repairs and maintenance, prior to the sale of individual flats. If a majority of flats are empty or a majority of the occupiers do not wish to buy, the Holding Body should consider sale to a Housing Association as an alternative to sale on the open market. Any Deed of Conditions should also take account of any roads, footpaths, amenity areas etc., which have not been taken over by the Local Authority (although every effort should be made where possible to ensure that the Local Authority does take over such responsibilities). Holding Bodies must consult their professional advisers in any such cases.

Valuation

2.22 As with other NHSScotland disposals, a house for sale to a sitting tenant must be professionally valued.

2.23 The appointed Property Adviser professional valuer must be instructed to value the house on the following assumptions:

• Vacant possession - on the assumption that the tenant or the tenant's family are not in the market.
• Exclusion of tenant’s improvements - which should be agreed before the professional valuer is instructed.
• Exclusion of tenant’s liability for repairs under the terms of the lease.

Appointment of a Marketing Agent and Marketing of the Property

2.24 Where it is estimated the value of the property will be under £10,000 disposal may proceed without the appointment of a marketing agent. If it is proposed to dispense with a marketing agent for any other reason the relevant Accountable Officer must be informed.

2.25 The marketing agent, in consultation with the Holding Body responsible for the disposal, will normally:

• carry out a full appraisal of the property, clarify the legal position with the Legal Adviser, analyse the appropriate markets and advise on the type, extent and cost of advertising required.
• prepare an advertisement and insert it in appropriate newspapers and property journals. The advertisement and its cost must be cleared in advance with the Holding Body concerned.
• draw up marketing particulars in consultation with the Holding Body, and circulate them to interested parties.
• handle all contact with potential purchasers, including telephone enquiries, meetings and correspondence.
• arrange for the land and buildings to be inspected by or on behalf of potential purchasers.
• agree a closing date for offers with the Holding Body and the independent valuer if appointed and advise all potential purchasers. A fixed date and time must be set for the receipt of formal offers.
• offer should be received in accordance with the Holding Body's Standing Financial Instructions and opened by the Holding Body in the presence of the marketing agent who should assess offers.
• after discussion with the Holding Body make a recommendation in writing as to which offer to accept.

2.26 SG Property Division and the Legal Adviser can provide advice to the Holding Body on all aspects of the agent/client relationship.

2.27 Once the property is placed on the market, unless there was agreement to adhere to the Guidelines for the Transfer of Property within the Scottish Public Sector, all enquiries from prospective purchasers or their agents should be directed to the marketing agent/solicitor handling the sale. If enquirers approach the Holding Body directly before the property is put on the market Holding Bodies must not offer any advice on price, asking price or closing date. The onus is on the purchaser to inform himself/herself about the property and make up his/her own mind.

2.28 The Holding Body, with the assistance of the Legal Adviser if necessary, must monitor the work of the marketing agent to avoid the risk that unnecessary delay occurs or that any important feature is overlooked.

2.29 After the property has been put on the market, all enquiries from, or on behalf of, prospective purchasers should be directed to the marketing agent (or Legal Adviser if no agents have been appointed). Others involved in the sale must not advise prospective purchasers – for instance about how much they should offer or whether a particular offer is likely to be successful. They should always make clear that it is for the prospective purchaser to make up his own mind, with such professional advice as he considers necessary. In any case of doubt, the advice of the Legal Adviser should be sought.

2.30 As soon as practicable after the closing date, the Holding Body should arrange for offers to be opened, in accordance with the Standing Financial Instructions. The Property Adviser (whose representative should be present when offers are opened) should then provide a written report which includes either a recommendation to accept the best offer or, if this is not clear, advice as to the strategy to be pursued as regards further evaluation of the offers or negotiation with one or more of the offerors. The report to be copied with a copy to the Legal Adviser and the Independent Valuer if appointed. The Holding Body with the advice of the Legal Adviser, the Property Adviser and the Independent Valuer, if appointed, should reach a conclusion on which offer, if any, should be accepted. A meeting of interested parties is often invaluable in order to reach a speedy decision. Where necessary in order to clarify issues of Planning, timing and Unit valuation, those submitting, or a short list of those submitting, offers may be asked to present to the Holding Body and its professional advisers prior to a preferred bidder being identified.

2.31 The acceptability of an offer will depend on whether it is subject to conditions, whether these conditions can be accepted or amended; the financial standing of those making the offers; and the possibility of obtaining a better price by offering the land for sale afresh (bearing in mind security and maintenance costs in the meantime). Sometimes the terms of an offer may make it appropriate to carry out a financial appraisal e.g. where the transaction forms part of a wider investment decision or is of an unusual nature such as where payment by instalments or phased sale is involved. The Property Adviser and Legal Adviser should assist here, but assistance with the appraisal is available from SG Property Division. The best offer (taking account of price and any relevant conditions) should normally be accepted if it is above the guide price. When a decision has been reached on which offer should be accepted, certification should be completed by the Chief Executive of the Holding Body in the light of the certification provided by advisers (see paragraphs 1.17 to 1.18 of Section 1).

2.32 The circumstances in which the Accountable Officer must be notified before acceptance of an offer for property are listed at Annex I. These circumstances include those where any appointed Independent Valuer and the Property Adviser are unable to agree on any particular aspect. If notification is required, the Holding Body must provide all the necessary supporting information, (see paragraph 1.16 of Section 1 and Annex II), including certification (see paragraphs 1.17 to 1.18 of Section 1 and Annex III).

2.33 Late bids or revisions to offers require careful consideration. Holding Bodies which receive a late or revised offer after the closing date, but before the sale has become legally binding, which is significantly higher than those received before the deadline may consider such an offer however, if so, it is of utmost importance that the review and report processes above must be undertaken. It will be mandatory to reference to SGHSC as a matter of Ministerial interest and there could be potential for litigation in some cases.

2.34 The credit-worthiness of the offerors should be examined in sales on the open market before any bid is accepted. Where the Property Adviser is used to establish the credit-worthiness of offerors. Holding Bodies should ensure that they obtain in writing the advice, and the nature of the evidence on which it is based, in respect of the offer which it is proposed to accept and any higher bids which are recommended for rejection because of doubts about the offerors’ financial credentials.

2.35 Unconditional bids (i.e. offers which are not tied to planning or related requirements) need very careful consideration. In circumstances where there is doubt as to the potential use, or the planning position, an unconditional bid is likely to be either at a substantial discount to the real value or will give rise to an unacceptable risk of loss of income. However, where it is well established what type of development will occur, it may be appropriate to entertain an unconditional bid; where an unconditional bid is acceptable it provides proceeds quickly to the Holding Body. Professional advice is particularly important in these circumstances. It should include the Property Adviser’s written assurance that the unconditional bid to be accepted is the highest offer in monetary terms.

2.36 Once a decision has been taken on which offer to accept, the Legal Adviser should arrange for missives to be concluded in consultation with the Holding Body and the Property Adviser. Once missives have been concluded, the Legal Adviser should complete the transaction by handling the conveyancing. The Holding Body is ultimately responsible for coordinating the necessary action on completion of the transaction and ensuring that the legal arrangements provide the maximum possible protection of Scottish Ministers interests.

Monitoring

2.38 Holding Bodies’ handling of property transactions is subject to post disposal monitoring of individual cases. Monitoring is carried out on the basis of an annual cycle. The basis for monitoring is a monitoring pro-forma which should be completed by bodies for every transaction as it progresses. The results of post disposal monitoring exercises are considered carefully by the Scottish Government Health and Social Care Directorates. The monitoring procedures are explained in Management Section 6.

2.39.1 Profit Sharing (often described as Joint Venture Agreements). These arrangements allow the Holding Body to participate in a substantial growth in values if a development is highly successful. The main disadvantage is that negotiation to settle the terms of the arrangement can be complex and time consuming. Great care must be taken to ensure that any reduced payment at the outset is more than offset by a realistic estimate or later profits – and that the developers’ costs and sale terms are realistic and can be professionally checked to ensure that the predicted profit share is in practice likely to be achieved. The key technique is the agreement of a “base value” which is paid at the outset (or in stages at regular intervals, or as the development proceeds), together with a shared “development profit” (which is the difference between the development value and the development costs) to be shared between the parties in accordance with agreed terms.