4C: Types of tenure

This section helps you explore which is the right tenure option for your organisation

Section 4 progress

Tenure means the conditions under which land or buildings are held or occupied.

The main characteristics of the types of tenure used in asset transfer are set out in the document ‘Overview of tenure options’, together with a summary of the advantages and disadvantages both for local authorities and community groups.

This is one of the ways of managing the risks associated with asset transfer and the type of tenure will determine the legal responsibilities and liabilities for the site. The options can vary but for most transfers where external funding is required to develop the asset, community asset transfer is usually taken to mean a long lease, of at least 25 years or a freehold.

Asset lock

An asset lock is a legal mechanism, usually in a governing document, to protect any public or community assets that are transferred to ensure that there can be no private benefit in the event of any sale or development of the asset. This includes ensuring that all profits are reinvested into the organisation running the asset and in the event of any sale or dissolution any funds are given to another similar organisation.

By definition, all charities and Community Interest Companies have asset locks, while Community Benefit Societies can also apply an asset lock to their rules.

Insurance

If taking a lease it is important to be clear on responsibilities for arranging insurance on the building and where the organisation stands if the premises are damaged by an uninsured risk. Does the tenant have to repair even though it may not be their fault?

In asset transfer it is very common for leases to contain a “full” repairing obligation requiring the tenant to put the premises into good and substantial repair (often at great expense), even if they are in a relatively poor condition at the start of the lease.

This is a major risk factor and seeking professional advice in this area is strongly recommended.

Locality legal toolkit

As part of its work in making the process of asset transfer more effective, Locality’s Asset Transfer Unit commissioned Anthony Collins Solicitors to prepare some model guidance and documents for community organisations and Local Authorities.

The aim has been to produce a set of documents to genuinely assist in each stage of the transfer ‘journey’, which strike the right balance between the interests of Local Authorities and those of community based organisations.

The toolkit includes sample Heads of Terms and leases, notes on procurement, State Aid, TUPE and construction contracts, and a wealth of other legal advice.

The full suite of legal documents can accessed at Locality’s website here.

For an overview of tenure options, including freehold, lease and license see the document below.

A club or community organisation should never enter into any substantial contracts for the use of assets without obtaining legal advice on the terms, as mistakes can be very costly.

Community: Are you satisfied that the asset can be secured on the right terms and conditions? Have heads of terms been agreed before leases are drafted?
Community: Are any constraints on the use of the asset in relation to the lease terms going to prevent it being used flexibly in the future?
Community: Do you fully understand the implications of the management/ownership agreement associated with the transfer? E.g. are the repair and maintenance obligations reasonable? Are requirements of the lease in relation to sub-letting flexible?
Local authority: Have you been fair and proportionate in the conditions applied in any contracts or leases? Have you considered the needs of the club/community organization in making the asset viable?
Local authority: Have lawyers been instructed accurately to avoid time-wasting?