The sale-ready audit

Rachel Stott and Tim Smithers from Veale Wasbrough Vizards LLP, tell us more about preparing land for disposable development

As universities strive for that competitive edge in attracting students, staff and opportunities for research, partnering and investment, estates teams face the challenge of delivering the best academic and student facilities allowed by stretched resources.

A strategic review of the portfolio may identify ageing, inefficient and inflexible spaces with high operational costs. The outcome may be a decision to sell a building or land to generate capital for future investment.

At this stage the legal and estates teams should undertake a sale-ready audit to ensure that all necessary information is available to prospective buyers and their professional advisers. It is important to identify and assess any risks before marketing the property, otherwise the sale may be jeopardised by a fundamental point arising once the process is under way. It is more cost effective to resolve an issue early on, avoiding deadlines or adverse publicity.

This article suggests a methodology for undertaking a sale-ready audit and preparing the sale data pack for a site with redevelopment opportunities, and offers advice on managing risks. 

Land to be audited
In addition to the sale site this includes land:
✥over which long-term rights are required, eg for realignment of highways, pedestrian and vehicular access, visibility splays or services.
✥where temporary rights are required, eg for site compounds, access, scaffolding or crane oversailing.
If the sale includes joint arrangements with neighbours, it is important to review their title too.

The mindset
Put yourself in the mindset of the developer and the buyer or tenant of the completed scheme. They seek a clean title, with no constraints on development or future use. Visit the site to verify boundaries and identify third-party rights not apparent on the title (eg a gate giving vehicular access to neighbours). Undertake a full suite of conveyancing searches to establish the information in the public domain.

Title registration
If the land is unregistered, there are benefits to voluntary registration at Land Registry. This may address inadequate plans, and eliminate land rights or covenants where common ownership of benefiting and burdened land can be shown. 

Issues to watch out for:

✥Boundaries: do the legal boundaries reflect physical boundaries?

✥Access and services: does the site touch an adopted highway, or does it rely on private rights? Is there sufficient land for new accesses, including highway realignment? Will existing services require diversion? Is their capacity adequate?

✥Vacant possession: are physical boundaries secure? Does the university occupy the entire site? If not, what are the obstacles to delivering – and timescales for achieving – vacant possession? Are there squatters, or a risk of squatters between exchange and completion?

✥Third-party leases: if any, are they protected under business, agricultural or residential tenancy legislation? Do termination dates and procedures affect timescales?

✥Telecoms: is there any apparatus which may have protection under the Telecoms Code? If so, consider discussion with the operator to achieve its relocation or removal.

✥Easements and covenants: is the land burdened by third-party easements or covenants? Consider how to assess the risk and prioritise any action. [See Box].

✥Charity law constraints: Check that the university has the relevant powers of sale in its constitution and identify any procedural requirements to facilitate the sale, and factor their resolution into timescales.

✥Other ownership constraints: was the land originally acquired by a local authority or government department under statutory powers – eg CPO? There may be additional procedures to follow before sale.

✥Planning constraints: review existing planning permissions and statutory agreements; identify listed buildings/features. Is the property in a conservation area? Are there tree preservation orders?

And more….

✥Rights of light: might the development infringe a third party’s right to light? Can it be designed to respect the right without loss of value?

✥Chancel repair: is there latent liability? Can it be insured?

✥Party walls: are works to party walls required, including works within 3m of neighbouring structures, or 6m depending on foundation depth?

✥Public highways/rights of way: consider the need for stopping-up or diversion.

✥Nature conservation: are there protected plant or animal species, eg bats?

✥Underground unknowns: are there potential contamination, flooding, ground stability or archaeological issues? Is there a risk of underground structures, apparatus or voids which mean additional cost and delay?

✥Town or Village Green: is there a risk of registration? The underlying legislation is a powerful weapon for those seeking to delay development.

✥Excluded mines and minerals: what is the conveyancing history? Is this a constraint to development?

Preparing the sale data pack
An essential part of the process of engaging with bidders and maximising competition is ensuring the availability of and easy access to comprehensive information about the site and constraints on development. Information should be made available in a variety of formats to suit bidders – hard copy, on disc or via a secure electronic data room. See the inset for recommended components of the pack. 

The broader picture
The decision to sell is only the start of the process. Decisions are also needed about the timing, terms and method of disposal, issues of governance, finance and VAT, and compliance with charity and procurement law. The more the university can reduce uncertainty and risk in relation to the site, the greater the prospect of engaging bidders and maximising value.

Contents of the sale data pack
✥All title information and documents, with a summary.
✥Current searches and replies to standard enquiries.
✥Summary of planning history; copies of planning permissions, listed building consents, planning and infrastructure agreements, building control certificates.
✥Studies prepared for the development appraisal/planning application, eg traffic generation, ecological studies.
✥Environmental reports (eg asbestos) and a desktop report.
✥Draft letters of reliance on reports which are available to the buyer.
✥Energy performance certificate.
✥Draft sale documentation
– contract, conditional provisions, overage deed (and security), and transfer form.

Rachel Stott, Senior Associate and Tim Smithers, Consultant Solicitor are from leading education law firm Veale Wasbrough Vizards. Rachel can be contacted on 0117 314 5284 or at rstott@vwv.co.uk. Tim can be contacted on 0117 314 5311 or at tsmithers@vwv.co.uk.

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