How does Community Right to Bid affect my property sale?

Q. I am selling a property that has been classed as an ‘asset of community value’. What are the implications of this and will it delay the disposal of the property. 

Community Right to Bid was one of the key features of the Localism Act 2011 which was designed to give more power to local people and communities.It offers the right for local community groups to bid to purchase local property.

The legislation is, of course, well intended, as its designed to counter the damage that can be done to communities and community services when property and other amenities are closed or sold.

However, from a property owner’s point of view it can delay, restrict or prevent an owner from disposing of its property to a third party. 

Who decides if a property is an asset of community value?

Local authorities are obliged to keep a register of assets which have value to their community.Qualifying community groups can make nominations to the local authority for land and buildings to be included on the register. 

To be considered an asset of community value (ACV) the local authority must be satisfied that the property (land or buildings) have, or have recently, had a use which assisted with the social well being or cultural, recreational or sporting interests of the local community. 

Any property which the relevant local authority deems has met the criteria and can be an asset to the local community in the future (in some cases even for a different use) could be included on the register and therefore become subject to the right to bid.

Although there are specific exclusions as to what may qualify, an ACV could potentially include village halls, community centres, pubs and clubs and sporting or recreational land and buildings. Once included on the local authority’s register as an ACV the property should be removed after five years.

What obligations does this place on the property owner?

If the owner of a property registered as an ACV wants to make a ‘relevant disposal’ of its interest, it must notify the local authority who must then notify the community group which nominated the property. 

The community group then has six weeks to decide whether or not it wishes to make an offer to acquire this asset and, if it does, it will have six months to make a formal offer. While the owner is not bound to accept this offer, it is not allowed to enter into any contract to dispose of the property except from a contract with the community group until this six-month period has expired. 

A ‘relevant disposal’ is a sale of the freehold or the assignment or grant of a lease (for a term which, when granted, had at least 25 years to run). However, there are some significant exclusions.

The right to bid process could cost owners (and sometimes occupiers) six months in a sale process and limit them to only being able to dispose of the property to a third party for a 12 months thereafter without having to repeat the notification process.

Therefore it is likely most will try to resist nominations to designate their property as an ACV. The Act provides that the local authority is obliged to notify the owner if their property is nominated as an ACV, keep them informed, and provide written notice of the decision whether to include the property as an ACV. 

The Act allows owners to appeal the decision of a local authority to list property as an ACV and also makes provision for the payment of compensation to landowners for losses incurred as a result of complying with the new procedure, although there are strict timescales for making appeals and claiming compensation.

For more advice on this, or any other commercial property law matter, please contact Simon England on 01772 258321 or Simon.England@harrison-drury.com