The Localism Act and the 'Right to Bid for Community Assets'

The Local Government Information Unit (LGiU) has produced a briefing on the 'Right to Bid' and how it may or may not work. This article is based on their conclusions:

From 12 October 2012 parish councils and local voluntary and community organisations will be able to nominate land or buildings to be included in lists of community assets maintained by local authorities. In the event of a proposed sale, a process will be triggered that allows a community interest group to express an interest in bidding to purchase the property.

The process, already outlined in the Act, has been fleshed out by draft regulations, introduced in late June 2012.

Specialist support is being made available for those taking part in application processes in both England and Wales. Web-based information outlines the possibilities and covers all the community rights provided under the Act, providing information on meeting the various requirements. The government has also created a community rights website. Grants of up to £10,000 are available for feasibility work, for organisations to build their internal capacity to prepare to take receipt of an asset transfer or to bid to buy land and buildings of community value.

A local authority will have 8 weeks from receiving an application to decide whether a property must be listed, according to a number of criteria. A property will qualify where its current primary use furthers the social wellbeing or social interests of the local community, and where it is realistic to think that this use will continue. A property will also qualify when it has been in such use in the recent past, and this may realistically recur within the next five years (whether or not in the same way as before). Social interests include culture, recreation and sport.

In addition to providing information on the land, voluntary and community sector applicants will have to demonstrate a local connection by showing that their activities are wholly or partly concerned with the local authority area or that of a neighbouring authority, and that any surplus they make is wholly or partly applied for the benefit of that area.

They will also have a charitable or other not-for-profit status, or if unincorporated, must demonstrate a membership of at least 21 local government electors. Listing applications may also be made by neighbourhood forums set up under the planning provisions of the Localism Act.

The effect of a property's inclusion on the list will be to require the owner of the property to notify the local authority when intending to dispose of it, so triggering a moratorium period during which community interest groups can apply to be treated as potential bidders. At this stage groups must show a local connection and must have a legal status - unincorporated organisations and neighbourhood forums are excluded.

The owner will be able to begin the sale process after an interim period of six weeks if no bidder has come forward; if a written intention to bid is received in that time then the full six month moratorium period will apply. The sale itself takes place under normal market conditions.

Properties will be listed for five years. Councils will be responsible for notifying owners and occupiers of listings and receipt of notices, and for publicising the possible sale of a listed asset. Councils will also need to maintain lists of properties where nominations have failed.

Certain buildings or land are excluded - primarily land attached to residential property, with some nuances where property includes partial residential property. Sites covered by the Caravan Sites Act and land used by public utilities are also excluded. Nor will the rules apply to a wide range of non-commercial disposals of the land, for example on inheritance.

The proposal inevitably involves considerable interference in private rights. These are protected to some degree by the owner of a listed property being able to request a review of the listing, and by the introduction of an interim moratorium period. A property will only remain on a list for five years, when a further application would need to be made. Listing will be recorded on the Land Registry. The Act provides rights of review and appeal on the listing of a property, and makes provision for compensation to be paid to landowners for losses arising from being involved in a lengthier sale period. Compensation covers both additional expenses and loss in value incurred as a result of a sale being delayed. A new jurisdiction is being created for tribunals to hear compensation appeals.

The rationale for the scheme is explained in the most recent impact assessment (IA), as creating the basis for models of asset management and service provision that are not available to the public and private sectors. The process, which will apply to both public and private property, is in addition to existing opportunities for the transfer of public assets to community organisations, principally under the General Disposal Consent Order 2003, at less than market value.

Here, organisations will have to find the skills and resources to identify and succeed in listing a property, and they will need to raise the market price for the property in a competitive bidding process. The IA recognises that lack of capacity and expertise and access to finance are considerable hurdles, even where awareness and knowledge of the opportunities are present, and that there is a risk of disillusionment if a bid fails. A further risk is the failure of a community based organisation to maintain a property after a successful purchase.

The implications of the scheme are difficult to assess, and the DCLG has been recommended to undertake a post implementation review within 3-6 years.

The provision of support and funding will of course encourage many to make applications to list pubs, shops, community centres, and libraries, but a certain amount of caution is necessary on the likely take-up of the right to bid for community assets. Even where organisations have the skills and knowledge to start the process, raising funds to buy a property at market rates will be a considerable challenge.

Councils will benefit from planning ahead for the implementation of these new provisions. It will be a particular challenge to manage expectations: the realities of competing locally to provide services or taking steps to protect a local social asset are likely to be less certain than suggested by the rhetoric which is accompanying the promotion of the Act. LGiU has recommended that every council should be producing a simple guide to the Localism Act for its residents and stakeholders, which sets out what is possible in the context of the detail (much of which is as yet unspecified) of what will be involved . The national website may fulfil this function, or may supplement material produced by individual authorities.

There is a democratic and pragmatic role for local authorities in communicating information. For example, a community may wish to take over a closed post office building, thinking they can do so and so save the service, and believing this is possible using the Localism Act. In reality this will be much harder to achieve, and there will be a risk that the council appears uncooperative, rather than the legislation failing to meet expectations. It will be important that councils are not perceived as obstructing these opportunities, but can provide a basis that will enable local organisations to use the new provisions in a constructive rather than adversarial way.