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16 March 2012

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How do I choose a RICS-approved surveyor who is experienced in valuing my surgery at the correct level?

Question in full:

How do I choose a Royal Institute of Chartered Surveyors (RICS) approved surveyor who is experienced in valuing my surgery at the correct level? We are looking to repurchase our premises after a move to a new scheme fell through when the housing market collapsed and made alternative use of our existing premises unviable. 

A: This is an interesting question that highlights a number of points and issues.

First, in respect of choosing an appropriately qualified and experienced surveyor, the RICS recently introduced a new designation of RICS Registered Valuer; this is a designation you should be looking for in your enquiries. As primary care is such a niche market, it is essential that you use an appropriately experienced valuer, well versed with the sector in terms of rental levels and yields, and who is fully familiar with the rent reimbursement system. Don’t hesitate to ask pertinent questions about the valuer’s track record and understanding of the sector. You can make enquiries with the RICS, who may provide you with a list of appropriate firms, but I suggest you also speak with your bank as they will have an approved panel of valuers who you can be confident would have the necessary expertise and experience to assist.

When you refer to needing a surveyor to value at the “correct level”, I assume you are referring to the need for the valuation to be accurate? The valuer will consider the property and assess market value, taking an independent and arms-length view. This will be with regard to all the issues at hand, such as the size and condition of the building, notional rent and development potential. The basis of valuation may be in part dictated by the partnership deed, which can specify that alternative uses are to be disregarded – meaning the property must be valued according to its existing medical use. If that is the case, but you also need a view on alternative uses, the instructions would need to be widened to include this.

You state you are looking to repurchase the premises. I infer that, like many other practices, the partners undertook a sale and leaseback? This is an increasingly common solution to securing new premises, with the landlord taking on the responsibility for procuring alternative premises. However, with the economic downturn and the slowdown in approvals for new developments by primary care trusts, many such schemes have faltered. It may be that the tenant has either taken a short-term lease, with an option to buy back at the end of this, or a longer lease with a break clause exercisable in the event that terms for new premises are not concluded within a specified time limit. In both cases the lease will set out the basis of repurchasing the premises.

Typically, this may be at the original sale price, in which case it may be unattractive to you if market values have fallen significantly since that time. On the other hand, if it specifies the right to buy in at current market value this may be more favourable to you. Be sure to adhere to any timeframes for service of option notices, as these can be time critical. Also, you should carefully check the VAT position as, if the property has been subject to a sale and leaseback, it is possible VAT would be applied to any repurchase price. Depending on your partnership structure, this could be non-recoverable, which would potentially make the buy-in unviable for you.

I think the overall message is to ensure you appoint a RICS registered valuer with an appropriate track record and experience, who is able to understand the issues at hand and provide independent and commercially minded advice.