Community Empowerment (Scotland) Act 2015: asset transfer guidance for community transfer bodies

Guidance for community bodies on the statutory asset transfer scheme.

12. Obtaining a joint valuation of the asset


12.1. The Act does not say how much should be paid to rent or purchase an asset, and there is no requirement to obtain a valuation for the purposes of the Act. However, both the relevant authority and the community transfer body are likely to need to understand the "market value" of the asset, for accounting, borrowing or funding purposes, and to ensure transparency about the amount of any reduction from market value. A market value is also required for Best Value and State Aid assessments.

12.2. To reduce overall costs and provide a common starting point, we would encourage the relevant authority and community transfer body to obtain a joint valuation, and to agree that this will give the figure on which discussions will be based. If at any stage the relevant authority and the community transfer body are unable to agree on the approach, they may need to obtain separate valuations instead. This would then lead to negotiations on the value to be used as a basis for any consideration of discount.

What is "market value"?

12.3. Market value is an important measure which is used widely for financial accounting purposes as well as in property transactions. The concept is set out in International Valuation Standards and incorporated into the professional standards set out by the professional bodies governing valuers, such as the Royal Institution of Chartered Surveyors (RICS) Valuation - Professional Standards (known as "the Red Book"). Valuers who are suitably qualified to practice in Scotland are required to comply with these professional standards.

12.4. Market Value is currently defined in the Red Book as "the estimated amount for which an asset or liability should exchange on the valuation date between a willing buyer and a willing seller in an arm's length transaction, after proper marketing and where the parties had each acted knowledgeably, prudently and without compulsion."

12.5. Market Rent is currently defined in the Red Book as "The estimated amount for which an interest in real property should be leased on the valuation date between a willing lessor and a willing lessee on appropriate lease terms in an arm's-length transaction after proper marketing where the parties had each acted knowledgeably, prudently and without compulsion".

12.6. These definitions may be revised from time to time. The most up-to-date version should always be used.

When should the valuation be undertaken?

12.7. There are two points within the process where discussion on the value of the property are needed:

  • Stage 1 - initial enquiry. When the community transfer body requests information about the property, if an approximate indication of the market value is known to the relevant authority this should be made available to the community body. This should be caveated to the extent that it is an indicative value only, and it may be given as a range of values. This would be very helpful to community bodies, particularly where they are considering options across more than one property.
  • Stage 2 - confirmed proposals. Once the community transfer body has confirmed their interest and the property has been clearly defined, then the formal assessment of market value should be instructed. This is likely to be prior to the date of the Asset Transfer Request, during pre-application discussions. If the valuation takes place after the request is received, the community transfer body may wish to revise their offered price on that basis, or a revised price may be included in the decision notice.

12.8. The formal valuation can be undertaken when the relevant information about the property has been assembled. This includes defining the exact boundaries, layout plans, information about the property, legal rights and burdens, etc. In the event that material information is unavailable when the valuation is undertaken then it may require to be re-valued at a future date. Where that is the case, where possible, this should be made clear to both parties and the valuer at that stage.

12.9. The valuation report will qualify how long the valuation is valid. This may be only at the date of the report, or may be for some time (typically six months) unless market circumstances change or further information comes to light which would cause a revised opinion of value. Despite this, when agreeing to instruct a valuation jointly, the relevant authority and the community transfer body should agree the time period within which they are able, or are prepared, to proceed to conclude the transaction at a price based upon the valuation to be obtained, taking into account the time required to process an asset transfer request. Any such agreement will nonetheless be subject to any material change within the agreed time period which may affect the valuation and require a revaluation. The community transfer body should also consider the requirements of funders or other organisations involved, in relation to the date of the valuation.

Who should value the property?

12.10. Stage 1 valuations are likely to be provided by an in-house Estate Management team, or retained advisers. The valuation should be provided by the relevant authority with no costs charged to the community transfer body, provided the requests are reasonable in nature. This value should be provided from existing information, where appropriate information is available, and should not require a valuation to be instructed. It may be provided on the basis of a range of values

12.11. Stage 2 valuations should be provided by either

a) the Valuation Office Agency (VOA) (the "District Valuer"), or

b) a suitably qualified and experienced independent valuer, registered with an appropriate professional body (such as RICS).

12.12. For Stage 2 valuation, if the relevant authority and the community transfer body agree to obtain a joint valuation, they must first agree who will be asked to determine the market value. Either party may provide additional information to the valuer if they consider it relevant to the assessment of market value, and this information must be disclosed to the other party.. However, it is for the valuer, acting as an independent expert, to determine what information is pertinent in their assessment of value and they may choose to disregard any such submissions, if they deem it appropriate.

How should the valuation be instructed?

12.13. If a joint valuation is to be obtained, the parties should issue a joint letter of instruction to the valuer. This must state clearly the basis of valuation and the extent of the property. The wording of the letter is to be agreed between the parties. A suggested template letter is provided below, based on the information required under Terms of Engagement in the Red Book. The draft letter is a guide only and its use is not mandatory.

12.14. The parties may instruct the valuer to make special assumptions in relation to the valuation. If the valuation is for lease, they should set out the main terms of lease required, or provide sufficient information to enable the valuer to form an opinion on the nature of the rental market relating to that type of property in that area.

12.15. The parties should share the cost of a joint valuation equally.

The basis of value

12.16. The basis of value in most cases will be the market value as defined in the Red Book. This valuation should include any development potential and any rights or burdens that run with the land/property as well as any reduction in the value of any remaining land as a result of the fact that only part of the land is being acquired by the community body.

12.17. Whilst it is expected that the vast majority of valuations will be on the basis of market value, in some situations it may not be appropriate to use the market value of an asset but instead to use a different basis of value. The situations where alternative bases of valuation would be used are likely to be very specific, possibly where a specialist building for which no market would otherwise exist, is to be transferred subject to a restriction on use which prevents it from being used for another purpose. The parties must agree the most appropriate basis in order to instruct the valuer.

12.18. Whatever basis of valuation is used to assess the value it must be one of the recognised bases set out in the Red Book.

Suggested Template for joint letter of instruction to assess value of asset subject to Asset Transfer

Dear Sir,

[Name of Relevant Authority]

[Name of Community Transfer Body]

The above parties wish to jointly appoint you to provide a valuation of the property [description of property], shown in heavy black outline on the attached plan ref xx. The valuation is required to assess the value of the property for its possible sale to [Name of Community Transfer Body].

The valuation should be carried out in accordance with the RICS Valuation Professional Standards (The 'Red Book'). The basis of value will be [market value]/[market rent valuation]/[other agreed basis of valuation] as defined in The 'Red Book'.

This valuation should include any development potential, any rights or burdens that run with the land/property (as provided by [Name of relevant authority] and such other agreed facts as are set out. Please set out clearly details of your assumptions.

[ (for lease) The lease terms to be assumed should be those that reflect current practice in the market in which the property is situated. Please set out clearly the principal lease terms assumed when providing your opinion of market rent. ]

When writing to confirm this instruction, please advise the fee for undertaking this work.

In order to arrange access to the property please contact [contact name], Tel [phone number]. We confirm that the parties are to be equally responsible for the valuation fees and request that you forward an invoice in respect of half those fees to our office, and the other half to [contact details of other party].

Annex 1 - Joint statement of Agreed Facts (this should include items such as area / lease terms / condition report / planning situation / burdens / restrictions on title / handling of fixtures and fittings.)

Annex 2 - Further information provided by the RA (not forming part of the agreed facts)

Annex 3 - Further information provided by the community body (not forming part of the agreed facts)


Email: Jean Waddie

Phone: 0300 244 4000 – Central Enquiry Unit

The Scottish Government
St Andrew's House
Regent Road

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