Housing Associations Guide - Part 4 Appendix 1

1.01Acquisition – this Appendix sets out the Department for Social Development’s (DSD) requirements in respect of the acquisition of land and property for social housing use. All schemes involving an acquisition element will require the services of an independent qualified valuer to assess the market value of the land/property for Grant purposes. In all schemes – including Works Only schemes - the services of a valuer may be required to undertake valuations in connection with the preparation of the Economic Appraisal.

1.02Land/Property Acquired by the Association ‘at risk’ – Associations are free to use their own resources to acquire land/property ‘at risk’, i.e. to acquire prior to Project Approval stage. For Grant purposes - subject to the scheme meeting normal scheme approval criteria - the maximum eligible acquisition cost will be the current ‘open market’ value as confirmed by an independent qualified valuer and not the historic cost of the land/property to the Association (see also Appendix: 3 to Part 2, Para 4.07 ‘Historic Land and Property Purchases’).

(i) There is no time limit on an Association from when it acquires land/property ‘at risk’ until it decides to bid for a ‘slot’ in the Social Housing Development Programme (SHDP);

(ii) It should be noted that the NIHE(DPG) is under no obligation to include in the Programme any land/property bought ‘at risk’ unless it meets normal scheme approval criteria; and

2 Valuation Requirements

2.01Valuation Basis – any valuation should be based on the valuation and reporting requirements laid down in the Royal Institute of Chartered Surveyors (RICS) ‘Red Book’. The main valuation situations are described below:

a. ‘Market Value’ – is a figure that a willing buyer and seller would agree upon having marketed land or property accordingly. The market value figure may require to be clarified by stating exactly what is being valued and any assumptions that are inherent to the valuation e.g., any restrictions by the Vendor/others on the density likely to be achieved. Market value will apply to all property types whether residential or commercial. Market value can also include any element of “hope value” where it is assumed planning permission will be forthcoming, and ignores any mortages, debentures or other charges over the property. Assumptions related to the value may cover such elements as title, condition of land/buildings, services, site access and planning conditions, contamination and hazardous substances and environmental factors. These assumptions must be stated in any report.

Any constraints on development such as the need to divert or move water mains, electric or telecommunications cables, wayleaves, overhead electric cables, badger setts, trees, ground features including possible archaeological digs, dealing with contaminated ground, demolition or site clearance etc, will only be reflected in the value if any willing buyer considers these to be constraints. Any such constraints must be notified to the valuer, if known, at the time of instructing the valuer. If such information comes to light at a later stage the valuer should be informed and asked whether he/she would like to amend the current valuation in light of the new facts.

Market Value will apply to land/property that is being bought from the private sector or transferred from a Government Department or Non-Departmental Public Body such as the Northern Ireland Housing Executive (NIHE). Market value of land is generally on the basis of ‘no incumberances’, and vacant possession for dwellings acquired for demolition, rehabilitation, or letting as Existing Satisfactory Purchases (ESPs) or Off-the-Shelf purchases. Associations need to ensure that the Valuer is made aware of any development constraints that could affect or restrict the proposed use of the land/property. This is to allow such constraints to be fully reflected in the valuation, if appropriate.

b. ‘Commercial’ Valuations – the value of land is dependent on demand and planning permission. If land or property has commercial planning use and there is demand for such use in the locality an Association may be required to pay the “going rate” which reflects the commercial use of the site. If there is either no demand or no existing, planned or historic planning use, residental value may be more appropriate in the circumstances. The Association should request the valuer to indicate in his estimate of value whether the value achieved reflects any use other than residential. In such cases, the NIHE (DPG) expects Associations to negotiate for the lowest possible price, and would only accept a ‘higher valuation’ where, for example, the site has to be acquired by the Association as a ‘going concern’.

c. ‘Sitting Tenant’ Valuation – this is the value of a property taking account of the existing tenancy and tenant and reflects the value that a willing buyer would pay to aquire this property with the current tenancy and its income. There may be an element of hope value to reflect the ability to gain vacant possession. This normally applies to situations where a dwelling or dwellings being acquired or transferred will come with a sitting-tenant, and where the Association will become responsibility for their housing/re-housing needs. This can apply to dwellings transferred from Public Sector bodies, dwellings acquired from the private rented market or – exceptionally - to private owners.

2.02Valuations - where the Association is required by the HA Guide to provide a valuation undertaken by an independent qualified valuer, the Association may employ either the District Valuer - of the Valuation and Lands Agency (VLA) - or an independent qualified valuer.

2.03District Valuer (VLA) - undertakes valuation and estate agency work and provides advice on valuation matters to Government Departments, Non-Departmental Public Bodies and other organisations receiving public funding. Each District Valuer is responsible for a defined geographical area within the Valuation and Lands Agency network which includes all of Northern Ireland. District Valuers can:

All valuers employed in Valuation and Lands Agency are members of the Royal Institution of Chartered Surveyors and valuations provided by the District Valuer carry the approval of the DSD. A list of District Valuers, addresses and telephone numbers of the Valuation and Lands Agency district offices and the City/District Council areas which they cover is included at Annex A.

2.05Use of Valuers - if the Association uses independent valuers it will be expected to employ a reasonable diversity (subject to availability), selected on the grounds of competence, performance, local knowledge and best value. Special arrangements exist for Associations to use Claremont Valuation Services (formerly BIH Valuation Services) on a regular basis. Whichever valuer is used it is important to ensure that the Valuer is briefed on the task required and that any relevant information concerning the land/property is made known to the valuer prior to valuation (See Para 2.07 below).

2.06Submission Requirements - The Association should refer to Appendix: 3 to Part 2 of the Guide for specific scheme requirements on the need for a valuation. Associations are reminded of the Standard Conditions of Project Approval (see Appendix: 3 to Part 2, Annex T) which includes that the valuation should be be no more than 12 months old at the date of execution of the contract.

2.07Information required for a Land/Property Valuation – along with a location plan indicating the boundaries of the land/property in question, Associations need to provide the Valuer with information on the site/property, including existing conditions,constraints and general development proposals. The following – in checklist form – lists the typical information, where relevant, that should accompany any request for a valuation:

2.08The Valuers Report to the Association – must be in the form and detail specified in Appendix 5.1 of the RICS ‘Red Book’ and requires the valuer to include in the valuation report:

a. The identity of the client;
b. The purpose of the valuation;
c. The subject of the valuation;
d. The interest to be valued;
e. The type of property and how it is used;
f. The basis of valuation, e.g., market value;
g. The date of the valuation, including any time-limit on the validity of the valuation;
h. Any conflict of interest;
i. Any assumptions that have been made;
j. The extent to which the valuer has investigated any information received;
k. What information is being relied upon;
l. Any restrictions on publication of the valuation figure;
m. Any limits on disclosure to parties other than the client;
n. The opinion of value in figures and words; and
o. Signature of the Valuer and the date of the report.

2.09Audit requirements for Valuations – for Audit purposes, the valuation report from the Valuer on the site/property valued must:
a. Clearly identify the site/property valued on an accompanying plan and endorsed by the Valuer;
b. State the method of valuation, the valuation date, and the account taken of any relevant factors affecting the site/property and its development;
c. Be no more than 12 months old at the date of exchange of the purchase contract; and
d. Identify the Valuer and carry the Valuer’s original signature

Associations are reminded that the valuation report containing the above must be on official headed paper and must be retained in the Association’s scheme file – an e-mailed valuation is not acceptable.

3 Acquisition of Land/Property from various sources

3.01Donated Land/Property – if land/property has been donated to an Association without charge, the Association cannot claim Grant from the NIHE (DPG) on this element. Where land/property is partly gifted to an Association, i.e. sold to an Association at below market value, the value of the gift needs to be assessed by a Valuer and any Grant from the NIHE (DPG) will be based on the element that the Association purchased.

3.02Land/property available from Government Departments and Non-Departmental Public Bodies (NDPB) – land/property suitable for housing use may be available from a number of sources, including - Department for Social Development (DSD), Northern Ireland Housing Executive (NIHE), Roads Service (DRD), Water Service (DRD), Department of Health, Social Services and Public Safety (DHSSPS), Health Boards/Trusts etc.

3.03Transfer of surplus land/property from Public Sector Bodies - there are specific procedures to be followed by Public Sector Bodies in selling off or transferring surplus land or property. However, one important exception is the ability to transfer the land/property to another Public Sector Body - or to another suitable body such as a Housing Association - acting on behalf of the Public Sector Body. The Public Sector Body receiving the land/property, or ‘sponsoring’ the transfer to another suitable body, must:

a. Have proven strong and exceptional reasons of public interest for the transfer;
b. Be able to demonstrate immediate need e.g. included in the Social Housing Development Programme (SHDP); and
c. Have compulsory acquisition powers for the purposes for which the land is required.

The transfer of Public Sector land/property to Housing Associations for the provision of social housing for rent is considered to be within the guidelines. Associations should note that the land can only be used for the purposes agreed at the outset and restrictions exist on other uses or the transfer of any or all of the land/property to others (Note: the exception to this being the Right to Buy).

Generally the transfer of surplus land must comply with the Stormont Regulation and Government Property Act (NI) 1993, which states that any sale, exchange or lease of land must be ‘at the best price…’ Further information on the process used to transfer land from a Public Sector Body etc, is contained in a document titled ‘Disposal of Surplus Land and Buildings by Public Sector Bodies’, available at www.vla.nics.gov.uk (Note: click on Agency’s publications; then Disposal of Surplus Land; and then click on the document).

3.04 Disposal of land held for planning purposes – this is not surplus land/property, but land/property acquired by Government Departments under the Planning and Compensation Order 1991 (SI 1991 No 1220). This land is disposed in order to secure the best use of the land/property and to ensure the proper planning of the area in which the land is situated. Normal Government rules for the disposal of surplus land/property do not apply to any land disposed under this Order.

3.05Compulsory acquisition of land/property for Housing Association Schemes – arrangements have been in place since March 1994, for the Northern Ireland Housing Executive (NIHE) to be responsible for any vesting of land/property for Housing Association schemes (see Annex C).

3.06Land/Property acquired from a Public Sector Body – generally, Public Bodies in Northern Ireland are not permitted to donate land, and any land/property must be sold or transferred at the market value. In some cases special arrangements exist to allow such land to be transferred without the Association having to make direct payment and for the NIHE (DPG) to deduct the cost as a Public Subsidy from any Grant due to the Association (see Appendix: 3 to Part 2, Annex R).

3.07Land/Property acquired from another Housing Association – although the transfer of land and property between Associations is a relatively rare occurrence there is precedent for such transfers. Associations should discuss any proposed transfer with the NIHE (DPG).

4 Disposal of Land/Property by Associations

4.01Disposal of land/property by an Association – Housing Associations are empowered to acquire and dispose of land for certain purposes under Article 5 of the Housing (Northern Ireland) Order 1992 (1992 Order). As a general principle when an Association is disposing of land or property it should ensure it is acting prudently and in accordance with legislation and its governing instrument. The Association will also be expected to obtain the “best return” it can, which usually means a sale at market value. Associations are reminded that a disposal may be a relevant event for the purpose of Article 35(1) of the 1992 Order and this could lead to the recovery of Housing Association Grant by the NIHE (DPG).

Housing Association Guide Part 4 - Appendix 1

Acquisition of land and property

Contents

1 Introduction

2 Valuation Requirements

3 Acquisition of Land/Property from various sources

4 Disposal of Land/Property by Associations