Power to the people or an administrative hurdle?

Written on 24 Sep 2014

The Localism Act 2011 was launched by the coalition government with clear aims to achieve a significant shift in power away from central government towards local authorities and local people.

Many of the changes are well known, such as the abolition of regional strategies. However, one area that has only more recently started to come into the public arena is that of the obligation on every local authority to maintain a list of land or buildings of community value and the opportunities afforded to local groups to nominate land to be added to the list.

A listing will last for up to five years and imposes restrictions upon the landowner. It is not insignificant, but how difficult is it for a landowner and a potential buyer/developer? Are we going to witness a shift from the use of town and village green status to assets of community value by those that wish to block
development?

Part 5 of the Localism Act 2011

The new system relating to assets of community value was introduced by Part 5 of the Act. The provisions came into force on 21 September 2012, shortly followed by the Assets of Community Value (England) Regulations 2012. Together these make up the statutory framework. The Welsh government has not introduced equivalent regulations in Wales yet.

Nomination and designation

The Act provides that groups can nominate land or buildings with a current or past use that furthers the ‘social wellbeing or interests’ of the community and will continue to further such wellbeing or interests.

Groups

Groups can include:

  • a parish council (or a community council in Wales); or
  • a voluntary or community body with a local connection, such as a neighbour forum, an unincorporated body with at least 21 members, a charity, a not-for-profit company limited by guarantee, an industrial and provident society, or a community interest company.

Nominations cannot be made by individuals or by principal councils (such as a county council).

Current or past use

Section 88 of the Act provides that a building or other land in its area is land of community value if in the local authority’s opinion:

  • there is an actual current use which is not ancillary that furthers the social wellbeing or social interests of the local community; and
  • it is realistic to think that the use will continue.

Section 89 of the Act deals with perhaps the more difficult concept of past use. There must have been a time in the ‘recent past’ when the actual primary use of the
building or land furthered the social wellbeing or interests of the local community. In addition,
it has to be realistic to think that at some time in the next five years a community use could return.

A decision by Stroud District
Council to refuse a nomination was
based upon the fact that the building
in question had been demolished ‘some
time ago’ and in its view ‘recent past’ lent itself to a mothballing rather than abandonment. In its decision notice it stated that such mothballing could endure for a period of months only, perhaps up to one year. This can be distinguished from abandonment, which is characterised by the intent of never again resuming or reasserting the use.

In another decision made under s88 of the Act, the same local authority refused a nomination on the grounds that it had failed to identify sufficient
cultural, recreational or sporting value for the whole of the site.

Of interest is that the occasions on which nominations are made appear to vary enormously across the country. Each local authority is required to list all applications and the decisions. Stroud District Council had received 44 nominations as of 8 August 2014, whereas Mole
Valley District Council had received none.

The variety of the nominations is also interesting. Everything is covered from a cycle track and orchard to pubs, allotments, car parks, a post office and play areas. There are going to be clear examples of land that could be listed and
land that is going to fail to be listed; the difficult ones are those that fall somewhere in the middle.

Procedure

Once a nomination is received the local authority should make its decision within eight weeks. 

Local authority data suggests that those authorities with a large number of nominations are struggling to make decisions within the eight-week period required. 

If land or buildings are added to the list, the landowner has eight weeks in which to appeal; first to the local authority to review its decision and then to the First Tier Tribunal (previously known as the Lands Tribunal). The First Tier Tribunal will consider whether the land should have been added to the list and costs are normally recoverable by the successful party in the tribunal. 

The asset remains listed during
the appeal process. If the owner is successful, the asset must be moved to the list of unsuccessful nominations. The regulations do not state how long unsuccessful nominations must remain on the list.

Exceptions

A residence cannot be added to the community asset list, but this does not include:

  • land which has the benefit of planning permission for residential development;
  • land on which the construction of a residence or residences is not yet complete;or
  • land which was used as a residence, but for which a change of use is intended, or for which planning permission has been granted.

In addition, a building in which there is, for example, a caretaker’s flat but which is primarily not for residential use will be capable of being listed if it otherwise qualifies.

Impact of listing

Once a community asset is listed then the owner must comply with the following process:

Intention to make a ‘relevant disposal’

If the landowner wishes to make a relevant disposal, they must notify the local authority in writing (see s95(2) of the Act). 

The local authority will then update the list to show that notice under s95(2) has been received, the
date on which it was received and the end dates of the two moratorium periods. The local authority must also notify the original applicant who nominated the land as an asset of
community value and publicise these matters locally.

Relevant disposal

A relevant disposal is:

  • a freehold sale with vacant possession;
  • a grant or assignment of a lease for more than 25 years with vacant possession; or
  • a binding agreement in relation to either of the above.

There remains some uncertainty as to whether a conditional contract would be a ‘binding agreement’. Case law such as John D Wood & Co
(Residential & Agricultural Ltd) v Craze
[2007] suggests that a conditional contract would only become a binding agreement when the conditions are
satisfied.

Moratorium periods

No relevant disposal can be made by the landowner for six weeks after the notification to the local authority, during which time any
community interest group can make a request in writing to the local authority that they be considered as a potential bidder. This is an
expression of interest only and is not a commitment by the community interest group. 

If there is such an expression of interest, the full moratorium period of six months applies. This period runs from the date of the original
notice of the intention to make a relevant disposal ie including the six-week interim period. 

The community interest group
may make a bid to purchase the land from the owner at any time during the full moratorium period.

The bid

The impact of the bid is interesting. There remains no commitment on the part of the community interest group or the owner. The community interest group does not enjoy a right of first refusal. There is no obligation
on the owner to sell to the community interest group and nothing to stop the owner selling to whomever they choose and at whatever price
once the moratorium comes to an end. The owner is also free to negotiate a sale with a preferred buyer during the moratorium
period, but the sale cannot be a ‘binding agreement’ or otherwise concluded during that period. 

The ‘power’ provided by the Act is quite simply to be given an opportunity to make a bid.

Local land charge and Land Registry entries

Section 100 of the Act provides that if land is listed, the fact that it has been listed will be recorded as a local land charge. 

The Regulations make changes to the Land Registration Rules.
They provide that in relation to unregistered land, an owner of listed land who applies for first registration must at the same time apply for entry of a restriction in Form QQ. In relation to registered land, the Regulations provide that an application for a restriction must be made as soon as practicable
after a listing. 

It will become very evident to
anyone with whom the owner might wish to negotiate a sale that the land is listed.

Planning

A listing can be a material consideration in the determination of any planning application. This
has the potential of impacting on contracts that are conditional upon planning as it might be sufficient to persuade a local planning authority
that a proposed redevelopment or change of use may not be appropriate.

Review and removal from the list

The list should be reviewed by each local authority every two years to ensure it remains current. The local authority is required to
remove an asset from the list as soon as practicable:

  • after a relevant disposal;
  • after a successful appeal against listing;
  • once the asset is no longer of community value; andin any event no later than five years from the date of the original listing.

For example, land with planning permission for development can be listed, but once houses are built (not under construction, but actually built) then the land on which the houses are
located should be removed from the listing. 

Removal of the local land charge and restriction on the registered title should also follow. It is noteworthy, however, that there is no mandatory process or timescale for achieving this. Consequently local authorities may apply the Act and the Regulations differently and deal with the process in various ways. It will be important to take account of a local authority’s track record (if it has one) when considering timescales in a contract.

Compensation

There remains some question as to whether the value of assets listed are adversely affected, but nevertheless owners of land listed as assets of community value may claim compensation if they can demonstrate its value has been reduced. The owner may also request a review of any decision relating to compensation with an appeal to the First Tier Tribunal. A claim for loss resulting from a delay in sale caused by the moratorium periods may be valid under the Regulations. Legal expenses incurred in a successful appeal to the tribunal may be
claimed.

Summary

The application of the Act and the Regulations in relation to community assets is largely untested. Local authorities are finding their way both in terms of resource and understanding. Some are receiving no nominations, others plenty. In time, some clearer guidance on some of the difficult areas, such as ‘past use’, will no doubt emerge. Stroud District Council may be right that the concept of ‘mothballing’ is the relevant test. But on the other hand they may not be. 

Time may also bring more clarity in relation to the extent to which a local planning authority will treat a listing as a material planning consideration, the weight that they might give that consideration and the effect that this might have over time on the outcome of planning applications. This does have the potential for making for an awkward situation: a contract conditional on planning that is over land which is listed has a reduced prospect of obtaining planning because of the listing, yet if planning permission is obtained, the owner would simply follow the statutory process, wait the six weeks or six months as required and then sell to its intended buyer. 

While the process to be followed is fairly benign, the uncertainty as
to what and when land might be nominated, the potential delay in the decision-making process and the uncertainty about the impact on planning will impact upon the sale of land that can be identified ‘at risk’.

One final thought

If you are engaging or thinking of engaging in negotiations to sell or buy land you should consider this legislation. If the land concerned is of the nature that it might be at risk of a successful nomination then factor in the process into your contract documentation,
allow for the extra time that will be needed and ensure that you are compliant with the Act. For housebuilders, take on board that the Act may become relevant even after you have acquired the site and if necessary manage your plot sales appropriately.

This publication was first published in the Property Law Journal, September 2014.