Value added facts

May 26, 2011

The government’s proposals in relation to assets of community value are intended to help local groups buy much-loved amenities and buildings. Michael Mousdale and Colin Murray look at how the scheme will operate and assess its impact on local authorities.

As part of the Coalition Government's drive to restore power to local people it intends, in Chapter 4 of the Localism Bill, to introduce a new right to buy assets of community value in England and Wales. The purpose of the provisions are explained by the Minister for Decentralisation, Greg Clark:

"When important local amenities and buildings – such as community centres, town halls, village shops or pubs – come up for sale, communities will have extra time to prepare a bid to take them over, making it easier to keep much loved assets in public use and part of public life."

This is not a repeat of the previous Conservative Government's right to buy your Council home scheme. The Government have not simply re-engineered that policy to introduce a way for community groups to buy community assets. The current community right to buy proposals include both private and public sector land and/or buildings and its more accurate title, although admittedly slightly less catchy, would be "Eligible community groups right to bid to purchase community assets when the owner disposes of them". There is no guarantee that their bid will be successful and no discounts are offered.

What is land of community value?

No exact definition of land of community value is currently provided in the Bill. The Secretary of State intends to issue regulations to establish the matters which local authorities will need to have regard to when compiling their lists of assets of community value, albeit accepting that there might be different criteria applied even within an individual local authority area.

The current proposal is for the regulations to list certain types of land and buildings which do not constitute land of community value (e.g. residential properties which do not link with community assets) and also to give local authorities the discretion to determine what constitutes an asset of community value, in line with some criteria or factors for consideration. Examples, of criteria include whether the nominated land or building furthers the social, economic, or environmental wellbeing or interest of the local community; is currently used to deliver a community service; provokes a strong community feeling, current ownership of the land and whether the price of the land is likely to mean that it is within or beyond the realistic reach of a community organisation.

Who decides whether land is included on the list of community value?

Local authorities themselves can add assets to the list on their own initiative and assets can be added to the list in response to a community nomination. The community includes a parish council (in England) a community council (in Wales), and persons, as specified in regulations made by the Secretary of State. Whilst these regulations have yet to be published, the Government has expressed its wish to see this "right to nominate" left open to any person or group with a local connection (which is likely to depend on the facts of each case).

Local authorities will be required to maintain a list of land owned by the public and/or private sector in its area that is land of community value, and a separate list of land which has been nominated but which has not been accepted (giving reasons) as land of community value. They must consider each and every nomination and must accept a nomination if it is in the authority's area and satisfies the criteria set out in the regulations.

If land is included as land of a community value then the authority must provide written notice to the owner of the land, and the occupier if they are not the owner, and inform the person who made the community nomination. This notification must explain the consequences for the land and its owner of the inclusion of the land in the list and includes a right to ask for a review of the decision to include the land. The exact content and procedure for the service of this notice will be set out in regulations in due course.

What happens if the owner of the land disputes the nomination to go on to the list?

The owner of the land can ask the local authority to review its decision regarding whether land is to be included in the list. The current proposal for the deadline for owners to request an internal review is 28 days from the date that the local authority notifies the owner that the land has been listed.

The owners will be able to submit evidence setting out why it is their belief that the land should not be included in the list and an internal review should be completed within six weeks, by an officer in the local authority who is equal in rank, or more senior than, the officer who took the decision to list the asset and who was not involved in the original decision making. The regulations are likely to state the circumstances in which the owner of the land will be entitled to an oral hearing as part of the internal review and whether they may be represented, and by whom.

Owners may also be able to appeal against the decision of the local authority's internal review in order to ensure access to a fair and public hearing (as required by Article 6 of the Human Rights Act).

What does it mean if land is included on the list of community assets?

The owner of land will not be able to dispose of the land unless:

he has notified the local authority that he intends to do so; and
a moratorium period has ended without the local authority or the owner having received during that period, from any community group, a written request for the group to be treated as a potential bidder; and
the protected period (see below) has not ended.

A disposal of land will take place when an owner either sells the freehold or grants or assigns a lease granted for at least 25 years (or surrenders the lease to the landlord).

The time periods to be adopted for the interim and full moratorium, and protected periods, will be set out in the regulations in due course. The Government currently propose a six-week interim moratorium period to allow eligible community groups the opportunity to express an interest in purchasing the land (if no expression of interest is submitted then the land can be disposed). If an eligible community group express an interest, then the full moratorium period will apply. The Government are currently consulting on the length of this period and have indicated that this is likely to be three months or six months after the interim period.

The final time period is the protected period, which will be calculated from the date that the owner notifies the local authority that he intends to enter into a relevant disposal of his land, but will only become effective once the interim and full moratorium periods have come to an end. If the owner does not sell his land at the end of the interim or full moratorium period then he will have until the end of the protected period (which it is currently proposed will be 18 months following notice to the local authority of their intention to dispose of the land) to sell his land without triggering another delay.

Regulations and uncertainties

The Bill contains a lot of information on how the new community right to buy will work, but many of the practical details have not yet been finalised and these are only likely to emerge over time through regulations made by the Secretary of State. There are a number of key issues which are as yet not clear, such as:

what assets will be excluded from the list e.g. exercise of a pre-existing option, nomination right, pre-emption right or right of first refusal, operational land required to complete statutory duties?
rights of land owners will need to be considered, as will compensation for land owners for loss or expenses in complying with the procedural requirements of the community right to buy legislation. The regulations will set out who will be entitled to compensation, when it will be payable, the heads of recovery, the procedure for claims (including time limits) and whether decisions should be subject to review;
how will the provisions of the Act be enforced? Will damages for disposal without complying with the Act and regulations be enough or will transactions need to be set-aside, rendering them ineffective? Within what time limits can claims be brought and who can bring claims?
how might this community right to buy cut across existing town centre regeneration, Local Asset Backed Vehicle or other regeneration schemes?
how will this new right to bid for community assets interact with existing provisions in the Local Government Act 1972 General Disposal Consent (England) 2003 which already allows local authorities to transfer assets to community ownership at less than market value (up to an undervalue of £2m) to further local social, economic and environmental wellbeing, without seeking the Secretary of State's consents.

Key issues

The Act and regulations, when in force, could lead to a number of impacts which will need to considered:

local authorities will have to actively manage the implementation and ongoing maintenance of these provisions. Will local authorities have the resources to manage these new obligations e.g. retain lists of land, keep the lists up to date and deal with nominations from community groups and possible rebuttals from the owners, internal reviews, monitoring time periods and ensuring enforcement?
how does this new duty on local authorities fit with the Government's review of all local government duties and intended "Bonfire of the Duties"?
do community groups need this new right, do they want to purchase these assets and/or land and can they afford to do so?
the right is not equivalent to a community group right to CPO land. It is a right of pre-emption to bid in a competitive open market against third party purchasers. There is no right to purchase the land and/or buildings and the decision as to who the land is sold to will be made by the owner.
will the community right to challenge introduce short term blight on properties? Will a two-tier valuation occur distinguishing between those properties on lists and those which are not? This will be highlighted if two neighbouring local authorities take different views on what is land of community value.
how will the new proposals deal with financial loss incurred by an owner as a result of complying with the Act and the regulations? How will it deal with material shifts in price which occur during the extended disposal time periods?

Next steps?

Local authorities will be in the vanguard of making this new right to buy community assets a success and will want to prepare for its eventual implementation. The few clauses within the Bill contain a lot of information but also leave a number of key matters to be dealt with by the Secretary of State in regulations which have not yet been published. Subject to Parliamentary approval, it is expected that the provisions will commence from either April or October 2012.

Michael Mousdale is a partner and Colin Murray is a solicitor in the Public Sector Commercial team at Trowers & Hamlins. Michael can be contacted on 0161 838 2027 or by email at This email address is being protected from spambots. You need JavaScript enabled to view it.. Colin can be contacted on 0161 838 2061 or by email at This email address is being protected from spambots. You need JavaScript enabled to view it..