New Academy Conversions – the Valuation Requirements
Both before and after conversion valuations of buildings and school contents are required. This short paper fills in the knowledge gaps which may exist.
The Important Questions:
- Why are valuations required?
- What sort of valuations do we need?
- What will the valuations cost?
- Who can provide the valuations?
- What is the process and how long will it take?
- What valuation documents will be provided?
- What should happen next?
Why are valuations required?
At the time of conversion, the new academy will take over from the local authority responsibility for its own financial accounting system and insurance of the academy’s assets, such as land, school buildings, contents and IT. It is a requirement placed on the new academy, under legal agreements, that adequate insurance and financial accounting procedures are in place.
What sort of valuations do we need?
As mentioned above the academy will need a valuation for financial statements which will give the business manager and the academy’s accountants balance sheet figures for land, buildings, academy contents and IT for inclusion in the annual accounts. This valuation would be completed after conversion.
In addition, a valuation of the buildings, school contents and IT will be required for insurance purposes so that an appropriate insurance policy can be bought which provides the academy with full protection in the unfortunate event that the assets in question are destroyed by fire. The correct basis of insurance cover is “reinstatement cost” which briefly means that the cover provides replacement with a new asset for something older. This valuation would be completed shortly before conversion so that insurance cover can be in place on the date of conversion.
What will the valuations cost?
For a small primary school the cost to prepare both valuations will be in the region of £2,000 plus VAT in total but we will provide a fee quotation based on the particular circumstances of each academy taking into any special circumstances including location which could increase the cost.
Who can provide the valuations?
Chartered valuation surveyors like us have the necessary qualifications to prepare the valuations required but the surveyor needs to be an RICS Registered Valuer who is subject to the mandatory regulations imposed by The Royal Institution of Chartered Surveyors for what are “regulated purpose” valuations. The valuer also needs to be familiar not only with valuations of land and buildings but also academy contents and IT which not all valuation surveyors deal with.
What is the process and how long will it take?
The valuations can only be done after an inspection of the assets to be valued. This entails an inspection of each building and the land on which the buildings stand and land dedicated to sports and playing fields. The academy contents valuation is carried out after the preparation of a brief inventory of the assets in each room. Once the work at the academy premises has been completed, the process of research and valuation, supported by external documentation provided by solicitors and others, is carried out.
Dependent on workload, it would normally be possible to complete a valuation of a small primary school within two weeks from formal instructions. Larger schools will take longer but we endeavour to meet timescales of our clients where possible.
What valuation documents will be provided?
At the end of the valuation project you will receive two valuation reports; one will be a valuation for insurance report and the other a valuation for financial statements report. If you have asked us to value the contents of the academy, we will send you either a separate inventory or integrate it into each of the two reports referred to here.
What should happen next?
If you have a requirement for valuations for insurance or financial statements or both types please contact us so that we can discuss the matter with you in detail. We will then send you a fixed fee quotation and also a terms of engagement letter, a mandatory requirement of The Royal Institution of Chartered Surveyors, which sets out what we will do for you, how we will do it and confirms the fee arrangement.
Arthur Broadhurst FRICS
RICS Registered Valuer