4B: Negotiating legal agreements

We would usually expect a transfer to involve change of ownership through the transfer of the freehold or the granting of a long lease of at least 25 years

Section 4 progress

However, in some cases, perhaps because of legal complications, such as a covenant or complex ownership, transfer may take the form of a long term management agreement, which transfers most responsibilities and rights over the site even though there is no actual transfer of ownership. 

As asset transfer is a legal process, it is essential that a copy of all relevant paperwork, emails, telephone conversations and communication records are kept securely

Whatever sort of agreement is being negotiated, it is very important that both parties are represented by legal advisors who can ensure that terms are reasonable and fair for both parties. 

Regular communication

However, it is equally important not to leave all of the legal negotiations to the legal advisors as this is going to prove very expensive and may result in legal agreements which are not fit for purpose. Many lawyers have no experience of this sort of transfer process and need a strong brief and regular communication and checks.

As asset transfer is a legal process, it is essential that a copy of all relevant paperwork, emails, telephone conversations and communication records are kept securely, irrespective of the format in which they have been created. 

Briefing your legal advisors

It is vital to check what powers and restrictions you have in your governing document when it comes to taking an interest or a legal stake in property or land.

Things to look out for in your governing document and to make your legal advisors aware of:

  • The governing document needs to include powers for the organisation to use its funds to acquire assets including entering into leases/licenses for any premises which are required to enable it to fulfil its community benefit aims. If these powers are not there, you will need to amend the governing document before you can proceed with the transaction and this can take some time
  • The way in which the organisation can use the asset will be determined by the other objects and powers in its governing document
  • Charitable organisations and Community Interest Companies are regulated by law with regard to the way in which they hold and dispose of their assets.

The ‘asset lock’ is a provision which ensures that a Charity/Community Interest Company/Community Benefit Society holds its assets for the benefit of the community. It means they can either dispose of their assets to other Community Interest Companies or charities at a discount or sell them for full market value so that they recoup the value of the asset to reinvest in charitable or community benefit.

The asset lock may affect your ability to take out a loan or mortgage on the asset but won’t prevent it.