From the magazine; Sweating your assets

When it comes to boosting the coffers, a little creativity is recommended. Alison Pearce is a real estate lawyer with Wright Hassall; here she shares her specialist experience in the education sector to impart some welcome advice on maximising school estates

The growing gap between funding and expenses requires those tasked with delivering education to adopt new and innovative approaches in order to maximise the income from their estate. To ensure outcomes are not negatively impacted for any student, every opportunity for a school to ‘sweat its assets’ must be considered – but only those which offer a suitable return on investment should make the ‘to-do’ list.

A distinction should be made between activities that generate additional income from existing resources and activities designed to save money through better use of those resources and increased efficiency. The latter includes energy saving measures like swapping to LED lighting or installing solar panels; you should note that, although solar currently enables schools to sell unused energy back to the grid under the FiT – the feed-in tariff – scheme, the Department for Business, Energy and Industrial Strategy is consulting on closing this scheme which means that any schools considering installing solar panels will need to apply before March 31, 2019. Here we look at using existing resources to increase income and, whilst some may baulk at the growing commercialisation of the sector, few will deny that pragmatism is required along with an understanding of the benefits on offer.

Generating revenue streams
When considering revenue streams school business leaders, headteachers and governing bodies must strike a balance between generating a regular income stream and one-off lump sums, raised by the sale of assets such as land or buildings.

School playing fields are a popular target for schools – and local authorities – needing to raise capital – particularly since 2012 when the government reduced the minimum amount of outdoor space schools have to provide for team games. Selling playing fields is an emotive issue and school management teams need to understand the legal implications and potential pitfalls of doing so – including the negative publicity likely to result from such a move. It’s essential to understand the legal interest the school and others have in the land and any buildings across the entire site; this will affect what can be done with the estate and whether what remains will be sufficient for the future needs of the school.

The nature of legal ownership
Establishing the nature of legal ownership – whether freehold or leasehold – for all parcels of land and buildings will require careful consideration; make no assumptions and research diligently. Other controlling interests, like charitable restrictions, particularly if a school has a religious character, will also need due consideration, with different types of organisations having different levels of control over the use of the land and buildings they occupy.

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The uninitiated could also, unwittingly, create a legal interest in their land or buildings for the benefit of another party – for example by allowing them to use the land or buildings without a suitable occupational agreement in place. It is critical that school management teams understand the terms under which they occupy their land and buildings, along with the powers, responsibilities and restrictions granted to them by those terms – however historic those terms may be.

Government guidance
The Department for Education and Education and Skills Funding Agency recognised the growing need for schools to raise income and launched guidelines in April 2018 to help schools keep costs down when managing estate.

The Good Estate Management for Schools (GEMS) guidance includes a set of questions to help headteachers, and those with responsibility for overseeing or managing the estate, understand what they are doing well and what they could do better but, again, it is largely about efficiencies and establishing good long-term estate management practices rather than new, creative approaches.

Recurring income for long-term gain
Selling off surplus land and buildings delivers an immediate cash injection but, to deliver improvements over the long-term, maximising rental income from the site could prove more beneficial. Schools – depending on the type of school – are already benefiting from revenue streams, including:

  • Residential assured shorthold tenancies (ASTs)
  • Service occupancy agreements (e.g. for caretakers)
  • Shared-usage agreements (e.g. of sporting facilities)
  • Other letting arrangements (e.g. holiday accommodation during school holidays, film set/catering locations)
  • Long-leases to sports providers (e.g. training and club facilities)
  • Accommodation for international students.

Successful futures require more risk
Schools must now accept that their future will involve greater risk-taking and investment in order to deliver long-term benefits – all supported by a detailed business plan; how to generate additional income from school assets will undoubtedly play a greater role in any decision-making about how a school is run. Typically, professional advice should be sought to help with business, legal and tax planning, as any mistakes at the beginning will only be magnified over time.

There is lot that can be done, but schools will have to adopt a more commercial mindset to ensure they have the funds to support their educational ambitions.

Access the Good Estate Management for Schools (GEMS) here: http://ow.ly/P1L530lAhRd

This article featured in the November issue of Education ExecutiveSubscribe now to keep up-to-date with the latest in school business management and leadership.

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