Protecting legacy income from property sales: guidance for legacy officers

With a property often being the major asset in an estate, and the reliance on residuary estates to support the £3.9bn currently left to charities in the UK, what has been the impact of the recent financial turmoil and cost of living crisis on this vital element of a legacy's value to the charities that rely on these special gifts so much.

Research released by Legacy Foresight in July 2023 suggests that the drop in house prices is driving average legacy values downwards, which has a real time impact on legacy income. Legacy Foresight suggests that the value of the average house in the UK has fallen by around £7,000 (2.4%) between the peak in September 2022 and April 2023. There's a further suggestion that prices could fall by a further 3-7%.

What are we seeing in practice - some recent examples

  • A sale about to exchange where buyers asked to reduce the price by more than 10% with the cost of living given as the reason.
  • In a recent legacy case, the buyers of the legacy property had been asked for a £20,000 reduction from their purchasers, so in turn they asked the charities for a £10,000 reduction on the estate property to offset their own loss.

What should legacy officers do for the best?

Legacy officers are used to balancing a number of factors when they consider what offers to accept on properties to optimise value, but also to ensure cash flows through their organisations. But regardless of that experience, none of us is going to know what is happening in that local market at that moment in time.  

  • Is it worth continuing with the sale you have already agreed to? At least it is a sale and can be converted into cash sooner than if it is remarketed.
  • Is the request to reduce a try-on? What happens if you push back, and the buyers call your bluff – will it be worse in the coming months?
  • Is there a middle ground ? Can you negotiate to achieve a sale? What wriggle room is there for the purchasers?
  • Does an agent just want the property off their books, and will they push for the existing sale at the reduction?
  • Is there really a slump on property prices? Has the market lost confidence? Or is it just that it's harder and more expensive for purchasers to obtain financial support to buy their dream property?

Our hints and tips

Here's some positive actions we'd recommend that legacy officers can take to support great decision making.

  1. As always, take a case-by-case approach. Legacy properties can present great opportunities – interesting or special properties are still likely to get good interest and are holding their value.
  2. Don't just make a quick decision. Take time to go over what you know about the property – look at the marketing literature and and talk to your co-beneficiaries.
  3. If you had a S119 report, take another look and contact your surveyor for their thoughts before agreeing to any reduction.
  4. Has probate been granted already – can a sale go ahead anyway? Do you have a bit of time to decide?
  5. Have a look at comparable sales on Rightmove or Zoopla to gauge the current situation in that area.
  6. Ask for a recommendation from the agent but get them to describe the local market position.
  7. If you are concerned, check in with your charity's property lawyers for a quick view.

This is a hot topic at the moment and the better-informed legacy officers are the greater the opportunity to protect vital legacy income.

We are happy to help anyone wrestling with this issue, please contact Helen Hoare or Anna Phillips below if you'd like to discuss a particular challenge.