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Privacy statement - Terms and conditions

assets of community value

3 January 2013

When did these rules come into force?

September 2012.

Why are they important?

The ability of landowners and developers to enter into contracts or option agreements in relation to land could be delayed by up to six months and any disposals made in breach of the rules will be invalid.

What is an asset of community value?

This is defined as land or a building in a local authoritys area whose main use "furthers the social wellbeing or social interests of the local community and it is realistic to think that there can continue to be a [main use] of the building or other land which will further….the social wellbeing or social interests of the local community". The definition also includes land and buildings whose main use "in the recent past" satisfied that definition (where it is realistic to think that it may do again in the next five years). Certain land is excluded from this definition, the most important being a residence and land connected to that residence.

What must local authorities do?

They must maintain a list of assets of community value (e.g. community centres, village halls, local pubs, village shops etc).

How is an asset listed?

It needs to be nominated by the parish council or by a "voluntary or community body with a local connection". A voluntary or community body is an unincorporated group (with at least 21 local members and which does not distribute any surplus to its members), a neighbourhood forum, a charity, a community interest company, a company limited by guarantee (which does not distribute any surplus to its members) or an industrial and provident society (which does not distribute any surplus to its members).

What is the effect of listing?

An asset included on a list will remain there for five years and the fact of listing is registrable as a local land charge. The local authority must register a restriction against the title to the land to ensure that the land is not disposed of in breach of the rules.

What happens when an owner wishes to dispose of the asset?

Once listed, the local authority must be notified by the owner of its wish to dispose of the asset and the owner must then wait for an initial period of six weeks from the date of notice of its intended disposal. This initial moratorium period gives any "community interest group" an opportunity to express an interest in acquiring the asset. A community interest group comprises some of the organisations referred to in the section above on "How is an asset listed?"

What happens if no interest is expressed in this initial six week period?

The owner can dispose of the asset.

What happens if interest is expressed in this initial six week period?

A further moratorium period arises, meaning the owner cannot dispose of the asset to anyone (except the community interest group) for six months running from the date of the initial notice (this gives the community interest group time to put together a realistic bid for the asset).

So is this a right of first refusal for the community interest group?

No. Once the relevant moratorium periods have expired, the owner can sell the asset to whoever it wishes and at whatever price it wishes, but it must do so within 18 months running from the date of the initial notice (or else it will have to go through the same procedures again).

What is a "disposal" for the purposes of these rules?

Subject to certain exemptions, a freehold sale with vacant possession or the grant or assignment of a lease with vacant possession (where the lease was originally granted for at least 25 years). Sales of investment properties subject to leases are therefore not within the rules.

Can an owner exchange contracts or enter into an option agreement and then go through the procedures?

No. A disposal is deemed to be made when a binding agreement is entered into. An owner must go through these procedures first.

What is the point of all this?

The Government hopes to stimulate social, economic and environmental growth and regeneration through community asset ownership.

Whilst it is true that an owner can never be forced to dispose of its land to a community interest group, it still needs to be aware of the potential delay in transactions that will ensue whilst it complies with the rules.

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Our next in-house lawyers' sessions will give in-house lawyers the tools and strategies for dealing with some of the problems caused by recent changes to the law.

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The content on this page is provided for the purposes of general interest and information. It contains only brief summaries of aspects of the subject matter and does not provide comprehensive statements of the law. It does not constitute legal advice and does not provide a substitute for it.

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