Love you to death?

A watershed moment for community empowerment, or another bureaucratic burden for local authorities and landowners? Six months on after its introduction, Bill Chandler assesses the Community Right to Bid.

On 21 September 2012, the Community Right to Bid for Assets of Community Value came into force in England. The government anticipates that the CRB will be implemented in Wales in due course, whilst Scotland has enjoyed a Community Right to Buy in rural areas for several years. The CRB has wide-reaching implications for local authorities, both as administrator of the scheme and as landowner.

With the government estimating that 300 pubs and 400 village shops close every year, the CRB is designed to give community groups an opportunity to take over – and hence preserve – essential facilities and services. It does this by imposing a moratorium on disposal, thereby giving communities a breathing space and time to organise themselves, formulate a plan and raise the necessary funds.

Given those aims, it will come as no surprise to learn that the CRB derives from the Localism Act 2011, where it can be found within Part 5, ‘Community Empowerment’.

Assets of Community Value

Assets of Community Value are defined in section 88 of the Act as “a building or other land” which “furthers the social wellbeing or social interests of the local community”. “Social interests” are defined as including “cultural interests, recreational interest and sporting interests”.

If the building or land does not currently meet the test, it is sufficient if it has been so used ‘in the recent past’ and it is realistic to think that it could be used again for a qualifying purpose within the next five years.

The definition is therefore very wide and could include a large and varied range of properties, both public and private sector. Obvious examples include not only publicly-run schools, libraries and sports facilities, but also private sector shops, banks and pubs.

Purely residential property is however specifically excluded, as are most caravan sites and ‘operational land’ such as utilities and transport infrastructure.

Nomination

A range of community groups, including parish councils, may nominate assets for possible inclusion on the List of Assets of Community Value which each local authority is obliged to maintain. Local authorities themselves are not allowed to nominate assets for listing.

The authority then has eight weeks to make a decision and must list the asset if it satisfies the definition. The authority must also maintain a list of unsuccessful nominations. Once listed, the asset will generally stay on the list for five years.

There is no specific right of appeal against an authority’s refusal to list a property, although judicial review of the authority’s decision is a theoretical risk. However, a landowner who is aggrieved by the authority’s decision to list his property has eight weeks to request an internal Listing Review, which must be conducted within eight weeks of request by a senior officer who was not involved in the original decision. If still not satisfied, the landowner may appeal to the First Tier Tribunal.

Listing as an ACV constitutes a local land charge against the property. The authority is also obliged to register a restriction (in standard form QQ) on the Land Registry title to the property, preventing registration of a disposal without a conveyancer’s certificate that the CRB procedure has been complied with.

Implications

It is significant that, unlike the various other Community Rights which affect only public sector land and services, the CRB affects the private sector too, placing significant restrictions on both public and private landowners’ freedom to deal with their property assets.

Planners are entitled to regard the listing of a property as an ACV as a material consideration if a planning application is submitted for the property, but the main consequence of listing is on disposal.

If the landowner wishes to make a disposal of the property, it must first notify the local authority. The authority will note this on the list, notify the group which originally nominated the property and also publicise the proposed disposal. Notification of intended disposal triggers a six week moratorium during which the landowner may not proceed, which gives the community time to consider whether they wish to consider making a bid for the property.

If a Community Interest Group registers an interest within the six week period, the moratorium is extended to six months from the original notification. The CIG need not demonstrate that it has a definite plan or has any realistic prospect of raising funding, since the whole point is to give it time to explore the possibilities. This delay in being able to complete an intended disposal may have significant implications for a landowner.

If the six week moratorium expires without any expression of interest from a CIG, or upon expiry of the six month moratorium, the landowner is free to dispose of the property as he wishes, although the buyer must notify the local authority that the disposal has taken place. However, if the disposal does not occur within the ‘protected period’ of 18 months from the original notification, the whole process must be repeated.

It is important for community groups and landowners to appreciate that the CRB is not a right to buy and the landowner may choose to sit out the moratorium period and then complete a disposal to whoever he chooses, at any price and on any terms.

However, if the landowner ignores the moratorium and makes a disposal during the moratorium period, that disposal is void. The only exception is that the landowner may dispose to a CIG during the moratorium, which could be a significant negotiating benefit for community groups.

For those community groups who successfully take advantage of the CRB, the real challenge will undoubtedly come after the asset has been secured, and the thrill of the chase is replaced with the everyday challenge of making a success of a facility that has failed in the hands of the professionals. It is therefore vital that community groups take advantage of all the advice and funding which is being made available to support the scheme, such as the mycommunityrights.org.uk website.

Disposal

However, many typical property transactions will not trigger the moratorium at all. For the purposes of the CRB, a ‘disposal’ is the sale of a freehold, the grant of a new lease for at least 25 years or the assignment of a lease which was originally granted for at least 25 years, but in each case only if made with vacant possession.

Therefore, the grant of a typical occupational lease of 5 or 10 years is not a ‘disposal’ for these purposes, nor is the sale by an investor of their reversionary interest in a tenanted property. There are also a wide range of exemptions, including transfers of a going concern, sales by mortgagees and disposals in connection with death, divorce and changes of partners or trustees.

The requirement for a ‘disposal’ also means that there is nothing the community can do if the landowner simply decides to change, restrict or even close down the operation conducted from the property.

Compensation

Many landowners will suffer financially as a result of their property being listed as an ACV. This may result from a lost sale or a loss in value as a result of the moratorium, or increased expenses ranging from maintenance and security to empty rates.

Landowners may claim compensation from the local authority for such losses and expenses, so this is an area of genuine financial risk for authorities. The authority determines the amount of the compensation but, as with the decision to list, the landowner may request an internal ‘Compensation Review’ if he is not satisfied and can then take the matter to the First Tier Tribunal.

Claims must however be made within 13 weeks of the loss or expense being incurred, so if a landowner waits until the disposal has been completed instead of submitting claims during the moratorium period, the authority may be able to reject some elements of the landowner’s compensation claim for being out of time.

Based on the Scottish experience, the Government expects there to be one successful compensation claim, averaging £2,000, for every 4-5 completed transfers.

Local authorities

The CRB raises several difficult issues for local authorities.

Authorities find themselves with a new scheme to implement and manage, at a time when their resources and finances are already stretched to breaking point. Every listed ACV also represents a financial risk to local authorities in terms of possible compensation claims.

Central government is promising, in the short term at least, to meet the administrative costs through ‘new burdens’ payments and to pay compensation claims above £20,000, but will that fully cover the authority in practice?

The regime also appears to present local authorities with at least three conflicts of interest:

1. many nominations will relate to land owned by the authority, so the authority will be deciding whether or not to add its own land to the list, knowing the potential implications for future disposal that listing entails.
2. in all other cases, where the authority is considering a nomination of land of which the authority is not the landowner, the authority will be aware that every decision it makes to list an asset will increase the authority’s potential exposure to compensation claims.
3. when those compensation claims materialise, the authority is not only the payer of compensation to landowners, but also gets to decide the amount of that compensation.

Local authorities also need to consider the 'non-statutory advice note' on the CRB published by the Department for Communities and Local Government, although beware that it does contain some significant errors and inaccuracies.

Impact

Six months after implementation, most local authorities have so far listed only a handful of assets at most, but that will undoubtedly change as communities get to grips with the new scheme. Many local authorities are publishing their lists online which, whilst not compulsory, is to be encouraged.

The most proactive community the author is aware of is Uttlesford in Essex, where no fewer than 180 local assets have been nominated, with over 160 accepted onto the list by the District Council. The Uttlesford list is an illuminating example of the types of asset that communities may value, ranging from schools, churches and pubs to playing fields, allotments and car parks and also street furniture like fountains, phone boxes and the war memorial.

The Government anticipates that communities will bid for around a thousand assets each year, leading to the transfer of somewhere between 94 and 136 assets to community groups. Most of those will presumably be private sector properties, since the transfer of public sector land to community groups is already facilitated by schemes such as Community Asset Transfer and a survey in 2009 found that 80% of local authorities were already engaged in undervalue transfers to support communities.

That may seem precious little return given the potential impact the CRB regime will have on local authorities and landowners, but the Government considers that to be worthwhile and communities who successfully use the new procedures to preserve local facilities will no doubt agree.

Bill Chandler is a Legal Director at Hill Dickinson LLP.  He can be contacted on 0151 600 8725 or by This email address is being protected from spambots. You need JavaScript enabled to view it..