House of Commons - Community Rights - Communities and Local Government Committee

Community Rights - Communities and Local Government Committee Contents

2 The Community Right to Bid

Background

5. The Community Right to Bid came into operation in September 2012. The Plain English Guide to the Localism Act explained the reasons behind its introduction:

The Right to Bid was designed to provide people with that time and involves the following process:

· a community group can nominate a local building or land for listing by the local authority as an Asset of Community Value (ACV);[8]

· if the local authority decides to list it, the asset sits on a register for five years;[9]

· listing gives local people an opportunity to bid for the ACV if the owner decides to sell, as this usually triggers a six-month moratorium, during which time the asset cannot be sold except to a community bidder;

· the six-month period includes an initial six-week window in which local groups, if they wish to bid, must express an interest;[10]

· local groups then have the remainder of the six-month period to organise the bid;

· at the end of the six months, the owner may sell, but they do not have to sell to a community bidder.

If the sale begins before the asset is listed, the moratorium does not apply, even if the property is subsequently listed.[11]

Evidence of awareness and use

6. According to Locality, which provides support to groups interested in the Community Rights, the Community Right to Bid "has gained rapid momentum. Its implementation resulted in an immediate and broad range of enquiries [...] which continues to grow".[12] We heard that the nomination paper to list an asset was "not particularly onerous" to complete; and use of the Right had been higher than that of others, because the "process is simpler, the risk of not using the power is high and the rewards of using the power to buy time to save an asset of community value is significant".[13] According to the Department for Communities and Local Government (DCLG), since the Right came into operation in September 2012, more than 1,800 assets have been listed as ACVs; 122 groups showed an intention to bid by triggering the six-month moratoriums; and nine assets have been bought by community groups.[14] Further research by Simon Danczuk MP, a member of our Committee, has, however, yielded more information on these results. Based on freedom of information requests to local authorities it appears that of the 122 groups that triggered a moratorium, 60 were unsuccessful in their bid, 27 bids are outstanding and only 11—admittedly two more than DCLG's figures[15]—have so far resulted in a community buyout.[16] Civic Voice said community ownership of properties should not be the measure of the policy's success: "What should be recognised and emphasised is that people are coming together to demonstrate civic pride and what they care about in their communities."[17] The Campaign for Real Ale (CAMRA) provided us with the most recent breakdown of listed ACVs.[18]

Type of asset Proportion of total listed

Pub 31%

Other 12%

Community centre 8%

Playing field 5%

Church 4%

Community shop, library, car park, allotment, school, sports ground, park 3% each

Post office, other public space, land, village green 1% each

7. The Community Right to Bid process has achieved some success because the first phase, listing local land or property as an Asset of Community Value (ACV), is relatively straightforward. It brings people together and gives them the opportunity to have a say in what happens to valued pubs, shops or community centres if they are put up for sale. But if, as it appears, almost 50% of attempts to buy ACVs are unsuccessful, there must be scope for enhancing people's chances of success with the second and most important—bidding—phase of the Right.

Reforming the Right

8. Witnesses suggested a range of ways in which the listing and sales processes of the Right to Bid could be improved:

· change permitted development rights in relation to ACVs;

· make ACV status a material consideration in planning applications;

· give nominators a right of appeal against local authority refusal to list an asset;

· extend the moratorium on a sale; and

· change the regulations on selling ACVs as a 'going concern'.

PERMITTED DEVELOPMENT RIGHTS

9. Listing a building such as a pub as an ACV does not prevent its change of use under permitted development (PD) rights to a shop, estate agent or restaurant—or indeed its demolition.[19] The Plunkett Foundation said that there "have been a number of examples where pubs have been registered as assets of community value, but been converted into supermarkets or other uses through permitted development rights". It said that, if a property is listed as an ACV, its PD rights should be automatically removed: "This would ensure that communities could take action to save their local pub".[20] CAMRA said the removal of PD rights could add "significant weight" to the legislation, and explained there had been "several cases" where the Right to Bid had been undermined by "planning loopholes".[21] It cited The George IV public house in Brixton, which despite its listing as an ACV was converted to a supermarket. The George IV was, however, listed after its sale to a retailer. The community did not therefore have the chance to bid for the pub, in order to stop the retailer acquiring it and, hence, being able to convert it. CAMRA pointed out that two pubs every week were converted to supermarkets between January 2012 and January 2014. (We assume that most will have been through a sale process first, rather than have been converted by the brewery or pubco owner.) The Plunkett Foundation acknowledged that communities needed to "see the value in registering Assets of Community Value before there is a crisis […] Until then, communities will always be on the back foot when attempting to save assets of community value".[22]

10. Community groups need to register prized local buildings and land as Assets of Community Value before they are sold. If they do, they will have the opportunity to bid for assets if they are then put up for sale. That is one way of potentially preventing such assets being acquired by developers and converted to other uses or demolished. To protect valued community facilities in this way, local people need to be more aware of the Community Rights, including the Right to Bid. We discuss in chapter 6 how awareness might be improved.

11. The Government has said that the ACV scheme is not a planning policy to protect against change of use and that local authorities can use their local plan or an Article 4 direction to do that.[23] When we raised the possibility of a blanket exemption from PD rights for all ACVs, the Minister, Stephen Williams MP, told us it would be a "much bigger step" to suspend PD rights altogether, because some pubs may no longer be viable due to changes in demographics.[24] The Government has also previously said that "disproportionate restrictions on change of use [...] might result in more empty buildings, spoiling the local environment and holding back economic development."[25] The change being called for is, however, the removal of PD rights from ACVs, not from all pubs. There are currently about 1,800 ACVs, of which 500 are pubs, and this compares with 48,000 pubs last year in the UK.[26] A property's ACV listing lapses when it is sold, and, if there was any linked restrictions on PD right, they would lapse then, too. In contrast, under an Article 4 direction, which is a separate process, planning permission is still required to change the property's use after its sale, and the Article 4 process makes provision for owners to claim compensation in certain circumstances.[27]

12. The Government has consistently said that removing permitted development (PD) rights in respect of change of use from all pubs would amount to a disproportionate change in planning regulations that could blight town centres and prevent development. Removing PD rights from only the relatively small number of assets listed as Assets of Community Value (ACVs) would not be disproportionate, however, and their ACV listing would suggest they may have a viable future under community ownership. In our view what does appear disproportionate is to require local people and local authorities to nominate and list an asset as an ACV and then to go through an Article 4 direction process to remove PD rights from that same asset. It would be more efficient to integrate the Article 4 process into the ACV process. We recommend that the Government consult on removing PD rights in respect of change of use from ACVs for the duration of the listing or for five years, whichever is the longer. The issue of any compensation for owners should also be considered.

13. Before leaving this topic we must comment on the use of Article 4 directions, particularly if the Government persists with the Article 4 route over the change we suggest. One reason why local authorities have not used these directions is fear of being liable for compensation.[28] Mike Perry, from the Plunkett Foundation, said something was needed to "de-risk" the Article 4 process and noted the Government's compensation fund to support councils facing claims by property owners for losses due to their property's listing as an ACV.[29] Compensation in respect of Article 4 directions is payable if a local planning authority refuses planning permission for development which would otherwise have been permitted development or grants planning permission subject to more limiting conditions than the general permitted development order. Compensation is payable only within 12 months of an Article 4 direction being issued.[30] In January 2014 the Government said, although there were no centrally held statistics, it was unaware of any successful claims for compensation.[31] And in relation to pubs, Stephen Williams MP told us he had no evidence of a brewery or pubco successfully mounting a legal challenge against a local authority that had "considered" putting an Article 4 direction on pubs.[32] Our further investigation has yielded references to compensation paid in relation only to Article 4 directions restricting car boot sales, Sunday markets and motor racing.[33]

14. The Government has not been amenable to the automatic removal of PD rights from ACVs. It prefers the targeted use of Article 4 directions to remove PD rights from specific buildings. To underpin this approach, however, local authorities need more reassurance that imposing an Article 4 direction will not mean costly compensation payments to affected property owners. If the Government's preferred approach to the removal of PD rights continues to be the use of Article 4 directions, we recommend that it consider establishing a fund—similar to that for compensation payments relating to properties listed as ACVs—for compensation claims in relation to Article 4 directions.

ACV AS A MATERIAL PLANNING CONSIDERATION

15. The Government's guidance to local authorities on the Right to Bid states, "it is open to the Local Planning Authority to decide whether listing as an asset of community value is a material consideration if an application for change of use is submitted, considering all the circumstances of the case".[34] Civic Voice cited examples of councils that had and had not taken listing into consideration and said that "it seems bizarre that some communities can have the confidence to know that their local authority will consider an ACV as a material consideration, while others will not". It recommended new guidance clarifying "any property that is registered as an Asset of Community Value is treated as a material planning consideration".[35] The British Property Federation (BPF) shared some of these concerns: "The extra delay and confusion surrounding whether the listing is a material consideration discourages investors and hinders economic development." While the BPF accepted that in reality an ACV listing was often treated as a material consideration, it thought the guidance would benefit from further elaboration and called for a "proportionate response to listing. For example, an application for a minor material amendment should not trigger a consideration of the ACV listing".[36] In two cases taken up by former DCLG Ministers, pubs sold and then listed as ACVs have had planning permission refused, with their ACV status cited by both planning authorities in their decisions.[37]

16. Community groups, developers and property owners would welcome greater certainty about the status accorded to ACV listing when planning authorities are considering planning applications. If developers knew ACV status would be considered, they would have greater certainty about the process that might take place after they had acquired an ACV and submitted a planning application, including for change of use. Equally, such certainty would provide community groups with the knowledge that registration provided them with a further potential protection against what they saw as unwanted development. Obliging local authorities to consider ACV status would not mean the inevitable refusal of planning permission, and ACV status should not be a mandatory material consideration in applications for minor changes to property. We recommend that the Government, as part of its review of Community Rights later in 2015, consult on a proposal to amend its guidance so that ACV listing is a material consideration for local authorities in all planning applications other than those for minor works.

THE MORATORIUM

17. Listing property as an ACV and bidding for it when it is put on the market does not guarantee a community's success in buying it. We heard that one way to assist communities would be to extend the current six-month moratorium on the sale of a listed property. Advocating an increase, Action with Communities in Rural England (ACRE) said: "The development of business plans and budgets, exploring funding options, preparing applications and ensuring sufficient funds are available is a time consuming process without the added pressure of a six month deadline."[38] According to a Plunkett Foundation survey, the average community pub acquisition takes 10 months.[39] Tom Stainer, from CAMRA, called for a 10-month moratorium and said it would not slow down developers where the property was no longer wanted, as the initial six-week moratorium—the first six weeks of the overall six-month moratorium—would demonstrate whether anyone was interested in bidding. If there was interest, he said, communities would "need to know they have the time to put together what can be very complex legal community buyout schemes".[40]

18. In this context, the issue of disadvantaged communities' access to the Rights was raised, and those providing advice and grants to community groups favoured a 12-month moratorium.[41] Locality pointed out that the concern with the current six-month limit had been "particularly acute where either the project demands high levels of capital and/or the community gets caught up in lengthy funding application cycles". It added that this "particularly impacts on deprived communities".[42] ACRE said that, if the challenge of putting together a group, reaching a consensus, making applications and generating funding was not recognised, there was a risk of "favouring those communities with articulate retired people who are able to dedicate the time to it and disadvantaging communities that do not have those people there".[43] DCLG said its new package of support for 2015-16 aimed to address the concern that deprived communities might find accessing the rights a greater challenge.[44] When we visited The Ivy House pub in Nunhead, we heard how its Grade II listed status meant the buyout team, including a solicitor, a chartered surveyor and a town planner, had been able to apply for and secure a £500,000 loan from the Architectural Heritage Fund to finance its bid. Tessa Blunden, from the team, told us that making the bid had been a full-time job—on top of her full-time job.

19. From the developers' perspective, however, the BPF said the moratorium was a drag on economic activity and deterred investors; there had been "many examples" where six months had worked; and, in the case of someone who wanted to sell because they needed the money, it would be unfair to make them wait "just under a year" to do so.[45] As we have noted at paragraph 14, however, owners are able to apply for compensation in relation to their asset being listed. They may claim for loss or expense which they would not have incurred if the asset had not been listed and for loss resulting from a delay in sale caused by the moratorium.[46] Civic Voice thought nine months would strike the correct balance between the rights of the owner and of the community.[47]

20. Bidding for an Asset of Community Value (ACV) is a complicated process requiring time, organisation, effort and resources to put together business plans and find funding. This burden may have a particular impact on disadvantaged communities, whom the Government, rightly, wants to target to make the Rights more accessible. Extending the moratorium on a sale to nine months would strike a better balance between the rights of the community and of property owners. Owners would still be entitled to lodge a compensation claim for any loss they believed they had incurred due to a delay in the sale. We recommend that the Government extend the moratorium on the sale of an ACV to nine months.

21. On the issue of making property owners wait to sell their asset, we considered what should happen if at any point during the moratorium a community group were to abandon its bid. Should the owner or other bidder(s) have to wait until the six months were up before they could get on with their transaction? Witnesses representing community groups and property owners agreed it should be possible to stop the process if this became apparent.[48]

22. If it becomes clear during the moratorium that a community group bid has been abandoned, it should be possible to end the moratorium immediately so the owner can proceed with the sale. This will ensure owners do not incur any unnecessary delay in selling their asset, and local authorities are not subject to excessive compensation claims due to unwarranted delays in sales. We recommend that the Government ensure the moratorium on a sale can be brought to an immediate end if a community group bid has been abandoned.

23. One particularly potent change suggested to us was to convert the Right to Bid into a right to buy.[49] We asked various panellists about this but found it difficult to conclude how a 'market-level' price would be determined.[50] In lieu of a right to buy, Seb Elsworth from Social Investment Business (SIB) suggested the potential to assign preferred-bidder status to a community group: if it were not outbid, the group would automatically have a right to buy.[51]

24. Determining the market price for an asset without putting it on the open market is problematic. A property can be valued, but it is always an estimate, and owners have a right to achieve the selling price they want by testing the market. In our view an extension to the sales moratorium to give communities greater opportunity to raise money to bid against a commercial competitor or developer is sufficient. Communities might also seek to achieve preferred-bidder status with the property owner so that, as long they are not outbid, they have first refusal on an asset—and, in effect, a proxy for a right to buy.

NOMINATORS' RIGHT OF APPEAL

25. Currently owners have the right to ask a local authority to review its decision to list their property as an ACV. If they disagree with the local authority's decision on review, they may appeal to the First-tier Tribunal—Property Chamber (Residential Property).[52] Some witnesses called for the right of appeal to extend to nominators if the council decided not to list the property. Nominators wishing specifically to challenge a decision have recourse only to the courts and judicial review, which CAMRA described as "time consuming and very costly".[53] The Theatres Trust said applicants found it hard to know how much detail to provide in support of their nomination. It said an appeal should be possible "if the situation materially changes and/or they [the nominator] can provide additional relevant evidence".[54] The legislation does not, however, prohibit re-nomination of the same asset, although some councils have introduced their own limits.[55] CAMRA said the lack of an appeal mechanism meant communities were "powerless", even if they felt the council had not correctly applied the statutory test when deciding whether to list an asset.[56] It cited examples of what it considered to be local authorities' failure to apply the test properly, including one authority that rejected a nomination, stating "potential is specifically excluded from the criteria". CAMRA pointed out, however, that this was "clearly not the case as potential community value is specifically included in the criteria".[57] Civic Voice similarly called for a right of appeal local authority decisions, while accepting it should include "safeguards against repeated appeal requests and should specify clearly the grounds upon which an appeal could be made".[58] The Minister, on the other hand, said the listing process meant potentially holding up a sale and interfering in owners' property rights. He was therefore "not sure" whether the owners' right of appeal, against what he described as "a limitation on their free will", should extend to nominators.[59]

26. Owners have the right to ask a local authority to review its decision to list their property as an Asset of Community Value (ACV) and, if necessary, the right to appeal against that review to the First-tier Tribunal¯Property Chamber (Residential Property). If a community group wishes to challenge their council's decision not to list an asset, the best course, where new and material information comes to light, is to submit a fresh application for nomination. If new evidence comes to light or the situation materially changes all groups should be able to re-nominate immediately. If they wish to challenge a decision, however, including if they believe the authority has not applied the statutory test correctly, they should be able to appeal to an independent tribunal. We recommend that the Government consult on (i) allowing for immediate re-nomination where new and material information arises and (ii) the introduction of a nominator's right to appeal against a local authority's decision not to list an asset as an ACV.

'GOING CONCERN'

27. CAMRA highlighted what it saw as a "loophole" in the legislation. It said that ACV status could be ignored if an asset was sold as a 'going concern' "even if the buyer is clearly a developer with no intention of retaining the pub".[60] Locality called for owners using such practices to have to prove their sale was excluded from the moratorium process.[61] The Minister, Stephen Williams MP, said such examples were "very helpful" and added, "as people test the legislation to its limits, we will have to consider whether either a Localism Act mark 2 or power by regulation will need to be taken up in 2015".[62]

28. We recommend that the Government, as part of its review of Community Rights later in 2015, bring forward proposals to close the loophole in the current legislation which allows an Asset of Community Value to be sold as a going concern when the buyer has no intention of retaining it in its current use.

NATURE OF SUPPORT FOR COMMUNITIES

29. Communities have other means than the Community Right to Bid of taking over local assets, and as part of this inquiry we were urged to reflect on how to support them. In 2007 the then Government set up an Asset Transfer Unit to support the process of Community Asset Transfer. Under this, public bodies can voluntarily hand over the ownership and management of their land and buildings to local communities at less than full market value.[63] The National Association for Voluntary and Community Action said that, since the passing of the Localism Act in 2011, local authorities had been forced to make considerable budget cuts and, as a result, many assets were being "thrown at the voluntary sector in desperation by local authorities". It felt the focus on helping local communities take over ACVs, such as pubs, was no longer right; community organisations needed support to understand whether the asset they were being offered was a community asset "or really a community liability". In particular they required support "to build up local expertise in running sustainable community spaces".[64] The Joseph Rowntree Foundation has made similar points, concluding that community groups taking on assets need good business plans, support and an awareness of the asset's maintenance and running costs.[65]

30. Locality explained that help for communities to take over ACVs, specifically, was still required: the Right to Bid was a welcome tool in areas with high land values, where discounted asset transfer was unlikely, and in relation to private assets.[66] The Plunkett Foundation also noted that the assets it dealt with, in small rural communities, were either community or privately owned.[67] Locality drew our attention to the pre-planning, feasibility and business planning support that was already a "key part" of its Community Rights contract[68]. Seb Elsworth, from SIB, which awards grants to community groups, said its pre-feasibility and feasibility grants were similarly focused on developing business acumen at an early stage.[69] He added that investing a "modest grant" in community groups to help them figure out whether they were taking on a liability was "a good part of the process".[70]

31. In terms of support after acquisition, Tony Armstrong from Locality drew attention to its "lifeboat fund", for members struggling to manage their assets. He added that Locality used to manage the Asset Transfer Unit, which provided similar "ongoing support", and he "strongly" recommended that any new Government money should support "that kind of asset management and transfer".[71] DCLG has agreed a £15.2 million package of funding for community rights in 2015-16.[72]

32. Communities will continue to require support as they seek to acquire Assets of Community Value from community and private owners, and from public bodies in areas of high land value. But public bodies facing spending reductions, or those in areas with lower land values, may look voluntarily to transfer more public assets to local people. If more community groups are offered assets, more support may be required to ensure they have sound business plans in place and are aware of the costs of running the asset. If, as a result of that process, the group decides it is not equipped or the asset is in fact a liability, the time and money should not be considered wasted; it may in fact prevent waste. Resources should be directed at preparation for transfer and prevention of problems, but there may also be a case for setting aside a small amount as a safety net for groups struggling to maintain community assets. We recommend that Government consider whether a greater proportion of overall funding to support Community Rights be directed to ensure local people are adequately prepared to take on the public assets they are offered.

7 Cited in Assets of Community Value, Standard Note, SN0636, House of Commons Library, August 2013, p 3 Back

8 Assets of Community Value, Standard Note, SN0636, House of Commons Library, August 2013, p 3. A number of community organisations can nominate land and buildings for inclusion on the list: parish councils, neighbourhood forums (as defined in Neighbourhood Planning regulations), unconstituted community groups of at least 21 members, not-for-private-profit organisations (e.g. charities). Back

9 To qualify as an asset of community value the asset must have a connection with the wellbeing of the local community or have done so in the recent past. Domestic property cannot be listed, and owners have the right of appeal against their property's listing. Back

10 If there is no expression of interest, the owner can sell at the end of the six-week window. Back

11 Assets of Community Value, Standard Note, SN0636, House of Commons Library, August 2013, p 4 Back

12 Locality (CRS 040), para 3.2 Back

13 North Norfolk District Council (CRS 028), para 2.5; The Plunkett Foundation, (CRS 011), para 12 Back

14 Department for Communities and Local Government, (CRS 046), p 1. We discuss in the final chapter the need for improved data collection by the Government. Back

15 We examine and comment on the lack of adequate data on the use of Community Rights in chapter 6. Back

16 Summary table of results supplied by Simon Danczuk MP. Back

17 Civic Voice (CRS 026), paras 14, 15 Back

18 CAMRA (CRS 006), para 3.1. DCLG provided CAMRA with these figures, based on 1,268 identified ACVs in June 2014. Since then CAMRA has identified more listed pubs. Back