Community value - It's our asset and we'll bid if we want to

The Assets of Community Value (England) Regulations 2012 are now in force, with far-ranging implications for all English local authorities except shire county councils. The regulations bring in important detail for local authorities regarding the Community Right to Bid, setting out the processes and the steps which they will need to have in place. They also prescribethe compensation arrangements, for which authorities will need to prepare.

25/09/2012

The Assets of Community Value (England) Regulations 2012 (SI 2012/2421) came into force on 21 September 2012, bringing in another major piece of legislation around community empowerment. 

The regulations have far-ranging implications for all English local authorities except shire county councils. The main principles of the Right to Bid as set out in the Localism Act 2011 remain unchanged, but the regulations bring in important detail for local authorities about the processes and steps which they will need to have in place and provide some details about the compensation arrangements for which authorities will need to prepare.

Community Right to Bid

This legislation was introduced as part of the Government’s policy to assist local community groups in preserving those buildings or lands which they consider to be important to their community’s social well-being.  It aims to give those in the local community early warning of the intention to sell such assets and to enable them to delay sales by six months to provide time for them to put together a bid to buy the asset.  The proposals do not require the landowner to dispose of the asset to a community group nor force any sale, but are intended to facilitate the transfer into community ownership of property assets felt to have local social value. 

The rights apply to public and privately owned land unless the land is exempt from listing.  The regulations now define exempted land – as anticipated the exemptions from  listing are very limited, with only residential land (including "land connected with that residence"), caravan sites and operational land (as defined in s.263 of the Town and Country Planning Act 1990) being exempt.  All other land is capable of being listed, provided it falls within the definitions set out in the Act.

The process

The local authority will have to make provision to administer the list of assets of community value.  The regulations envisage that decision making will be carried out by officers but given the potential implications, local authorities may wish to have some member involvement.  The regulations do not specify whether or not this is a Council or an executive function, so the normal rules will apply and it will be an executive function.

The basis of the legislation relating to Assets of Community Value is set out in Part 5 Chapter 3 of the Localism Act 2011 (ss.87 – 102), with the regulations adding the detail.  Briefly, a community group (either a parish council or a "voluntary or community body with a local connection") may make a "community nomination" to a local authority, by which they nominate land in that local authority's area for inclusion in the authority's list of assets of community value.  The regulations define what is a local connection, and the bodies that may make nominations.  A public or local authority other than the parish council may not be a voluntary or community body and so may not make a nomination.

Community nominations have to comply with certain requirements: they must describe the authority, the ownership details the nominator has and the nominator's reasons for thinking that the responsible authority should conclude that the land is of community value, as well as evidence that the nominator is entitled to make a community nomination.  Upon receiving such a nomination the council has eight weeks to decide whether or not the land should be included in the list. 

Listing review

Local authorities therefore have to decide which officer is going to make the decision as to whether or not the land nominated is land of community value with the meaning of s.88 of the Act.  This means that the decision maker within the council will have to apply their mind to the nomination and consider what the evidence is to justify (or not) putting the land on the register.  This is particularly important if the decision is to list, because the owner of the land, once notified by the local authority of their decision to list the land, can request that the local authority carry out a listing review following the procedure set out in Sch.2 to the regulations.  This provides that a request must be made within eight weeks of the day on which notice was given by the council (or a longer time as they may allow) and provides for an officer who did not take part in making the original listing decision to carry out the review and make the review decision. 

The owner may appoint a representative (legally qualified or not) to act on their behalf, request an oral hearing and make representations orally or in writing, thus opening up the possibility of a lengthy hearing. 

If the decision was to not list the land, the community group could challenge that decision through judicial review.  This requires a second process to be put in place, appointing the reviewing officer and setting up the hearing process. 

If the owner is not satisfied by the review, they can also appeal to the First Tier Tribunal against the local authority’s decision on a listing review. As listing can also lead to a claim against the council for compensation,  this must not be treated as a box ticking exercise, and records must be kept of the decisions at each stage and the reasoning behind them.

Effect of listing

The impact of land being listed is felt when the owner wishes to dispose of the land (by either a sale of the freehold or a lease of over 25 years), when they must inform the local authority of their intention to do so.  They are then not able to dispose of the land until the interim six week moratorium period has ended without any community interest group making a written request to be treated as a potential bidder in relation to the land.  Where such a request is made within the six week period, the owner is prohibited from disposing of the land (save in certain specific circumstances) for a further six months.  Any disposal by an owner during this period (apart from a few exceptions listed in s.95(5)) is ineffective. 

Fortunately the local authority is under no duty to participate in any discussion between the community and the landowners, nor to facilitate attempts by the community group or parish council to obtain the land.  The Government is providing plenty of support and encouragement by itself.

Compensation

The provisions which may well have the greatest impact upon councils relate to compensation.  When the proposals for assets of community value were first published in the Localism Bill, there was considerable concern that they could contravene ECHR rights because of the significant implications for interference with private property rights.  The early consultation papers suggested that compensation would only be payable in limited circumstances, restricted to matters such as extra security costs arising from where the property could not be disposed of within the moratorium period.  However, the eventual wording in the Act did not limit compensation to such circumstances, and nor do the regulations.

The wording of the regulations relating to compensation payable is extremely wide, and no limit is set upon the amount of compensation that could be requested provided the owner can show that they have incurred the loss from delay directly due to the listing. 

Regulation 14 provides that an owner or former owner of listed land or previously listed land is entitled to compensation from the local authority, "of such amount as the authority may determine" in the circumstances where the person making the claim has "incurred loss or expense in relation to the land which would be likely not to have been incurred if the land had not been listed".  The regulation goes on to say that for the avoidance of doubt and without prejudice to other types of claim, the following claims may be made: 

  • claims arising from any period of delay in entering into a binding agreement to sell the land which is wholly caused by relevant disposals of the land being prohibited during the interim moratorium or full moratorium periods; and 
  • claims for reasonable legal expenses incurred in a successful appeal to the first tier tribunal against the council’s decisions to list the land, to refuse to pay compensations or with regard to the amount of compensation offered or paid. 

Claims for compensation must be made to the council within 13 weeks of the loss or expense being incurred. They must state the amount of compensation claimed with supporting evidence.  The council is required to give the claimant written reasons for its decisions.

Further guidance as to the breadth of these provisions appears in the Explanatory Memorandum to the regulations, which states that "there was a significant level of support in the consultation responses in favour of allowing compensation for loss of value of an asset due to listing, especially any delay in sale due to the interim or full moratorium.  Debate in Parliament also gave rise to government assurances that the regulations would include private landowners being able to claim for loss as well as expenses". 

These provisions therefore are intentionally wide and the payments are made at the discretion of the authority.  Because of this we suggest that authorities should agree a policy on payment of compensation, covering both what they have to pay for and the amount, which the officer will apply in respect of any claims.  Without an agreed policy, decisions about claims are left wide open and officers are put in a potentially very difficult position.

The process for dealing with compensation claims mirrors the requirements for the listing of such assets. Authorities must identify an appropriate officer to decide whether or not compensation should be payable and if so at what amount. Just as with the listing process, a claimant may ask for a review by the local authority of the compensation decision both in respect of whether the compensation should be paid and if so the amount payable and, once again, an officer of appropriate seniority who did not take any part in making the decision to be reviewed must carry out the review. The same provisions apply regarding representatives and oral hearings.  The person who requested the review may also appeal to the First Tier Tribunal against the review decision, but it is unclear whether the intent is for the First Tier Tribunal to consider the matter afresh, or to review the reasonableness of the authority's decision.

Conclusion

The impact of the compensation provisions alone could cause significant problems for local authorities.  The Government estimates that on average 700 assets will be nominated and listed and that the moratorium will be triggered to buy 94 assets per year.  Assistance and guidance is readily available to community groups with the Government making £16m of funding available to assist such groups with obtaining assets. 

Local authorities who have not already done should report to their Cabinet on the introduction of these regulations as soon as possible. They need to ensure that they have in place detailed provisions setting out how they will deal with requests for listing, notification, review processes, compensation and review processes for compensation.  Where authorities have already taken steps to put in place these processes, they should re-examine them in the light of the regulations, as in most cases they will need to update it with regard to the compensation provisions, and should adopt a policy towards the payment of compensation. 

In practice, the number of nominations for listing and claims for review and compensation which each council will face may turn out to be relatively small, although anecdotal evidence from discussions with local authorities over the last year has indicated that there is a considerable amount of interest from community groups already and the funding available from the Government tends to suggest this view.   However, this is very much a situation where it is much better to be prepared beforehand, by putting in place the provisions we suggest.

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