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Property: Aquisition, Disposal & Management

PROPERTY: ACQUISITION, DISPOSAL AND MANAGEMENT

Contents:

Scope

Key Points  

Background

General Principles

Requirement to seek professional advice

Asset Registers

Disposal of Assets

Requirement for internal advertising of surplus land and property assets

Disposal of plant and equipment assets

Transfer of functions

Public Private Partnerships

Property Transactions and Financial Accounting

Requirement to Notify Property Controls Team

Additional Guidance and Support

Appendix: Specific Exceptions to Scope

Scope

1. This section gives guidance on procedures and safeguards required when handling acquisition, management and disposal of land, buildings and other rights in property. The guidance in this section is also applicable to plant, equipment, machinery and vehicles. It is aimed at all organisations to which the Scottish Public Finance Manual is directly applicable.

2. The principles in the Guidance should also be applied, so far as appropriate, by all organisations to which the SPFM is directly applicable in cases where they have an interest in a disposal by a third party e.g. where funding is being provided as part of a financial package involving proceeds from a disposal. There are specific exceptions to this scope (see appendix).

Key Points  

  • Property holdings should be kept to the minimum required to meet current and planned needs.
  • The decision to acquire or dispose of property should be part of an overall strategic plan for the organisation’s needs.
  • Public bodies should consider the disposal of assets at less than Market Value to achieve wider public benefits consistent with the principles of Best Value. This includes considering the acquisition of assets by community bodies, where appropriate.
  • Guidance and support is available to ensure asset disposal options appraisals are comprehensive and the appropriate accounting and reporting is undertaken.
  • Accountable Officers have a duty to ensure that the assets for which they are responsible are properly recorded and well managed.

Background

3. Assets are either non-current or current assets and can be defined as a resource controlled by an organisation as a result of past events and from which future economic benefits are expected to flow to the organisation:

  • Non-current assets – property, plant and equipment, intangible or financial assets (investments) – are assets with an expected life of more than one year.
  • Current assets are cash or other assets which can reasonably be expected to become cash in the normal course of business, including stocks, debtors, accrued income and payments in advance.

4. The acquisition of property usually necessitates an initial capital outlay but normally also leads to longer term financial commitment. There is scope for substantial financial loss if such transactions are not handled properly.

5. Ministers remain clear that, in considering future office accommodation needs, the presumption should be in favour of suitable solutions from within the Government estate.

6. Accountable Officers have a duty to ensure that the assets for which they are responsible such as land, buildings or other property – including stores and equipment – are properly and well managed. Robust systems should be put in place to ensure that the accuracy and integrity of information held on registers, databases and inventories is safeguarded and readily available for inspection.

7. The Financial Reporting Unit within the SG Finance Directorate maintains the asset register for the SG but relevant business areas are responsible for the management of their assets and for providing information to ensure that the register is accurate and up to date. Relevant business areas are also responsible for maintaining local asset and investment registers, records of attractive items and systems for the management of stores and equipment.

General Principles

8. The Scottish Ministers’ policy is that property holdings should be kept to a minimum. The decision to acquire a property should be part of an overall strategic plan for the organisations’ needs. Property commitments, whether purchases or leases can be very expensive to reverse. Before acquiring any additional property, options for satisfying the requirement from within the Government estate must be considered.

9. Holdings of property, plant and equipment should be kept under regular review, using the organisation’s asset register or electronic Property Information Mapping System (ePIMS) as appropriate. Once surplus assets have been identified they should be sold as quickly as possible, subject to value for money considerations.

10. To achieve value for money for surplus assets organisations should either:

  1. obtain the best possible price on the open market, or
  2. dispose of an asset at less than Market Value to deliver wider public benefits consistent with the principles of Best Value, or
  3. transfer under the Guidelines for the Transfer of Property within the Scottish Public Sector.

11. To ensure that value for money is achieved and that high standards of propriety and transparency are maintained, staff and advisers must be carefully supervised and clear separation of responsibilities kept between the valuation and disposal processes. When evaluating options for the treatment of surplus assets, consideration of the disposal of assets to community bodies should be included, where appropriate. This consideration should be consistent with the principles of Best Value, where wider public benefits may be achieved.

12. All assets (property, plant and equipment) are to be properly recorded using ePIMS (or other robust property asset management system used by the business area) and are to be properly and well managed.

Requirement to seek professional advice

13. Business areas within the core SG, Crown Office and Procurator Fiscal Service, SG Executive Agencies and non-ministerial departments must seek advice from Property Division at the earliest opportunity when an acquisition or disposal of property or interest in a property is being considered. Other organisations to which the SPFM is directly applicable may seek advice from Property Division on a voluntary basis or, in the case of bodies sponsored by the SG, where required to do so under the terms of their framework document.

14. Scottish Government Legal Directorate (SGLD) does not undertake conveyancing work. External solicitors must, therefore, be appointed to deal with any disposals, except in the case of Transport Scotland and such other bodies as have their own arrangements. In all cases, suitably qualified and experienced solicitors must be used.

15. It is important to obtain professional advice covering planning, marketing and negotiation of sales or acquisitions from suitably qualified and experienced specialists.

16. Valuation advice must be obtained from a suitably qualified Valuer who has sufficient current local and national knowledge of the particular market, and the skills and understanding to undertake the valuation competently. Valuation advice can be obtained from a private sector valuer or the Valuation Office Agency or, where an SG body employs internal valuers, they may undertake work on behalf of their own organisation so long as there is no conflict of interest. In all cases, the Valuer used must be a professional member of an appropriate body, such as the Royal Institution of Chartered Surveyors or the Institute of Revenues Rating and Valuation.

Disposal of Assets

17. Where there are wider public benefits, consistent with the principles of Best Value, to be gained from a transaction, disposing bodies should consider disposal of assets at less than Market Value. This includes supporting the acquisition of assets by community bodies, where appropriate. Otherwise, assets are to be disposed of at Market Value, as defined in the International Valuation Standards (as used in the Royal Institution of Chartered Surveyors Valuation Professional Standards) but reflecting any special value and the effect of any voluntary conditions imposed by the seller.

18. Public bodies are encouraged to make use of the enabling facilities set out in the SPFM around disposing of assets at less than Market Value where the wider public benefit of doing so can be demonstrated.

19. Guidance and support is available to ensure options appraisals are comprehensive and appropriate budgetary provision is in place. When an asset is being sold at less than Market Value it must be approved in advance by Ministers, taking into account advice from the SG’s Finance Directorate/Health Finance, SG’s State Aid Unit and, where appropriate, the SG’s Property Division. SG will assist with examining any affordability issues, accounting and reporting requirements where a disposal may constitute a Gift, and any potential State Aid implications.

Asset Registers

20. Under resource accounting and budgeting, asset registers are a key part of financial management systems and must be capable of meeting the accounting requirements of the Government Financial Reporting Manual. The registers should contain details of all assets owned (both current and non-current), whose value or original purchase price is over the organisation's capitalisation threshold. Asset registers should normally be computerised and the widespread use of commercial asset management software packages means that the structure and detail held will be dictated by the software but, as a minimum, information held should cover:

  • purchase price and date;
  • asset accounting code;
  • a physical description of the asset (where appropriate) together with details of serial or registration number;
  • regular evidence of physical verification of the asset's existence; and
  • a depreciation profile.

21. Business areas within the Scottish Administration should ensure that Property Division is made aware of all acquisitions of property, whether for accommodation or for other purposes.

22. Records of "attractive" items (e.g. those vulnerable to theft) whose value falls below the capitalisation threshold should also be maintained by the holding body. Inventories of works of art should be kept in accordance with advice provided by the Government Art Collection

Requirement for internal advertising of surplus land and property assets

23. Prior to offering land and property assets for sale elsewhere, all disposing bodies to which the SPFM or NHS Property Transaction Handbook is applicable, including bodies sponsored by the SG, must notify Property Division of the surplus asset in order that it may be internally advertised; a process known as The Trawl.

24. This procedure provides a mechanism for the transfer, at Market Value, of property held within the Scottish public sector. Where another body which is party to The Trawl expresses an interest to acquire the asset, the transfer should be undertaken following the Guidelines for the Transfer of Property within the Scottish Public Sector. The Trawl takes one month and must be completed before commencing marketing or entering into a commitment to sell elsewhere.

25. Detailed information is available in the appendix or from Property Division.

Disposal of plant and equipment assets

26. Plant and equipment assets which are surplus to requirements should normally be sold by public auction or tender. Payment should normally be required to be made before goods are released for collection or delivery. The law implies that any goods sold are of merchantable quality and fit for the purpose for which they are sold. If there is any reason to believe that goods may be faulty or sub-standard, it should be made clear that they are sold “as seen” and without any implied warranties as to quality or fitness.

Transfer of functions

27. Where assets are transferred without charge from one part of the public sector to another – including local authorities – as a result of a merger or transfer of function (Machinery of Government changes) the assets should be transferred at net book value. Transfers between parties within the SG’s resource budgeting boundary should include provision to cover depreciation. If it is necessary to amend legislation in order to enable a public body to undertake a function previously undertaken by another public body then the amending legislation should cover the arrangements for the transfer of any associated assets. Any such changes should be agreed by Ministers, either specifically in legislation or on a case by case basis.

Public Private Partnerships

28. The investment appraisal for a Public Private Partnership (PPP) project may suggest that the option offering best overall value for money involves disposing of an operational asset (i.e. an asset which will form part of the project facility) at less than market value. However, if the value of the operational asset is fully reflected in reduced rental or service payments the question of a Gift does not arise.

29. Detailed guidance on PPP related disposals is available from Property Division and the Scottish Futures Trust.

Property Transactions and Financial Accounting

30. There are rigorous financial accounting processes which must be adhered to when undertaking the disposal or acquisition of property. It is the responsibility of those undertaking any property transaction to ensure that all procedures have been properly followed. Further advice available from Finance Directorate.

Requirement to Notify Property Controls Team

31. Any decision to dispose of property is not made in isolation and there are a number of related matters which must also be considered. Property Controls Team is a partnership between SPCD: Property Division and Scottish Futures Trust to promote and embed good practice in property asset management. It should be contacted on propertycontrolsteam@scotland.gsi.gov.uk.

  • well in advance of any lease expiry, break option or rent review – preferably at least two years prior;
  • if you are considering transferring property between public bodies or within different parts of the same public body (even if no transfer cost is envisaged)
  • if you are considering any other leasehold discussions with landlords, tenants, MOTO occupants or subtenants;
  • when you are updating your asset management plans;
  • when you are recording accommodation property performance, environmental and cost information;
  • if you are considering significant refurbishments or reconfigurations of existing property holdings;
  • if you are thinking about appointing external advisors on property issues
  • before declaring any property surplus.

32. This engagement is an essential element of the approval process for property transactions, as is engaging with your SG Finance Business Partner on developing the economic and financial case for change.

33. The Property Controls Team will engage proactively with organisations to provide support and challenge in the development of local asset management plans; to encourage good practice in asset use; and to develop a strategic forward plan for the acquisition, transfer and disposal of property across the central estate.

Additional Guidance and Support

 

Page Published October 2014