However, in more recent times, community ownership and management of land and property has been given fresh momentum as a result of influential reports, Government policy and the work of community based organisations.
Asset transfer in its simplest form
At its simplest level, asset transfer is a shift in management and/or ownership of land or buildings (‘assets’), from public bodies, (most commonly local authorities), to communities, (community and voluntary sector groups, community enterprises, social enterprises, etc.).
There are various options, but in most cases Community Asset Transfer is taken to mean a long lease or freehold transfer of the facilities to the club or community organisation.
The length of lease is variable but in most cases, where grants or loans are required for capital development, the length of tenure will need to be long enough to secure external investment, which usually means a lease of at least 25 years. But leases can often be for as long as 99 or 125 years and this provides better security and incentives to invest.
At its simplest level, asset transfer is a shift in management and/or ownership of land or buildings (‘assets’) from public bodies to communities
Established sports clubs, community organisations and new groups who believe that they have the capacity and enthusiasm to put unused or underutilised sport facilities and public assets to better use can all request a Community Asset Transfer from their Local Authority.
Local authorities are not obliged to undertake Community Asset Transfer but increasingly many are, as they recognise that transferring assets to another owner is likely to increase the investment and sustainability of that asset and provide benefits which offset the loss of rental income or a capital windfall.
What powers do public bodies have to transfer assets?
All local authorities have the general power to dispose of land and buildings in any way they wish, including the sale of a freehold interest and granting a lease.
As a general rule, the expectation is that the authority should achieve the best price possible for the site, also known as ‘best consideration’.
However, the government has recognised that there may be circumstances where it is appropriate for a local authority to dispose of land ‘under value’ to secure community benefit and improvement in economic, social and environmental wellbeing. This is called the General Disposal Consent. Disposing of an asset at less than the market value is known as ‘less than best consideration’.
Currently, Secretary of State approval is only required if the asset undervalue is greater than £2m.
Click here for further information.
In general, a Community Asset Transfer usually implies rental or sale at less than commercial value.
A ‘peppercorn’ rent is the mechanism often used – which means an annual rent of only £1 or sometimes literally, a peppercorn. This is an old legal tradition which came about because in a contract between two parties, each side must give something so that ‘consideration’ exists for each party, otherwise there is no actual contract in place.
However, other arrangements can include the sale of a long lease, sale of the freehold at a subsidised price, or a below market rental agreement.
When dealing with outdoor space, metropolitan open land or public open space, normal practice and professional advice is to retain the freehold interest in the site so that a level of control is maintained. However, the length of lease can be up to 125 years, effectively meaning a disposal for commercial and investment purposes.
Local authorities do not have to undertake a tendering process within the General Disposal Consent. However, there is a general requirement to follow "normal and prudent commercial practices". As long as a local authority has established a robust business case for asset transfer, there is no requirement to 'market test' a transfer proposal to meet the General Disposal Consent.
However, even if there is no competitive process, groups will normally be expected to submit a ‘bid’ which includes a business case and management plan for the asset in question.
The disposal or transfer of an asset held in charitable trust (where the local authority is the Holding Trustee) is subject to the charity law framework. Therefore, it is vital that local authorities identify those assets held on charitable trust at an early stage to ensure relevant statutory procedures are followed and charity law advice is taken.
A charitable asset can usually only be transferred to another charity or another ‘asset-locked’ organisation.
The Charity Commission provides guidance on the disposal of charity land and Trustees’ responsibilities.
Local authorities are the only public bodies which have a General Disposal Consent. Other public bodies (for example NHS and MOD) are more likely to need Ministerial agreement before being transferred at less than market value. There are as yet few examples of such assets being transferred but that doesn’t mean that Community Asset Transfer is ruled out.
All public bodies need to demonstrate that they have complied with the European Commission's State Aid rules, although it is very unlikely that a community sports facility transfer will have any effect on trade between EU Member States as community sports provision tends to be a very local market.
Further details on State Aid and asset transfer can be found here.
What do local authorities need to do to justify a transfer at less than the market value?
To justify agreeing a Community Asset Transfer, local authorities will need to:
- Identify which community benefits will be realised and how the interests of local people will be better served through transfer
- Demonstrate how it fits with any relevant strategy and policy, including any Community Asset Transfer policy
- Follow "normal and prudent commercial practices", obtaining the view of a professionally qualified valuer so that the likely amount of the undervalue can be assessed
- Ensure that the group wanting to receive the asset is genuinely community-owned and not-for-profit and that private individuals will not financially benefit from the transfer
- Scrutinise the business plan and financial viability of the community based organisation’s plans
- Check the State Aid implications.
Locality has produced model transfer strategy, policies and procedures to support local authorities in preparing their decision making frameworks. Click here for more.
What do clubs and community groups need to do to secure an asset transfer?
Opportunities to transfer an asset are best taken forward when most of these things are present:
- Substantial community support and enthusiasm
- A local authority which communicates openly and involves the community in negotiations as an equal partner
- Popular facilities and services are threatened with closure, (without an alternative being contemplated)
- Enough time to develop a bid
- The terms of the CAT offer between the parties (LA and community) are mutually beneficial
- A club or organisation is growing and has strong plans for the future or enough people in the community are willing and able to start a new club or organisation
- An offer of substantial funding to improve the facilities which requires the transfer of ownership to the community
- The club or organisation has a genuine commitment to widen involvement and participation in sport not just to increase competitiveness and elite coaching.