A developer proposing to acquire any building or land which furthers the social wellbeing or interests of the local community will, before exchange of contracts, need to check whether or not it has been listed as an Asset of Community Value (ACV) pursuant to the Localism Act 2011.
Policy background – community ownership and the Localism Act
One of the key policy goals of the Localism Act 2011 was to empower communities to become involved in the way local services are delivered by promoting community asset ownership to counter the damage that can be done to communities and services when buildings or other amenities are closed or sold.
One of the ways this policy goal has been implemented is through the introduction of a right to bid for and buy local land and/or buildings considered to have community value, such as, for example, a pub, a village shop, a sports field or allotments.
ACV listing – how assets of community value are nominated
A local authority can include land in its ACV List only:
- In response to a community nomination; or
- Where permitted to do so by regulations made by the Secretary of State.
A community nomination for land and/or buildings to be included in a local authority's ACV list can be made by either:
- A parish council in respect of land/ buildings within the council's area; or
- A person on behalf of a voluntary or community body with a local connection with land/ buildings in the local authority's area.
Every local authority is required to maintain two lists in relation to ACV in its area:
- A list of land and buildings of community value (ACV List); and
- A list unsuccessfully nominated land and buildings for inclusion on the ACV List.
Both lists must be available for free inspection, and a local authority must provide a free copy of the lists if requested to do so.
A local authority must amend or remove an entry on its ACV List to:
- Note receipt of any notice by an owner of a desire to enter into a relevant disposal, the date of receipt of that notice, and the ends of the interim moratorium period, the full moratorium period and the protected period;
- Exclude any land/ buildings that, after being included on the list, have been the subject of a relevant disposal;
- Exclude any land/ buildings that, following a successful appeal against listing, are no longer to be considered as an ACV; and
- Exclude any land/ buildings that it considers to be no longer of community value.
Moratorium Requirements – impact on disposal
Under section 95 of the Localism Act 2011 the owner of an ACV must notify the local authority in writing of the desire to dispose of the ACV.
That written notification triggers a six- week interim moratorium period during which the owner of the ACV can only dispose of it to a community interest group.
During the interim moratorium period, a community interest group may give written notice to the local authority that it wants to be treated as a potential bidder in relation to the ACV. If no such request is made, then the owner is free to dispose of the ACV at the expiry of the six-week period, and no further moratorium will apply for the duration of the protected period which runs for 18 months from the date on which the local authority received notification of the proposed disposal. The protected period is intended to protect an owner from repeated attempts by a community interest group to frustrate a disposal.
If during the interim moratorium period, a community interest group does give written notice to the local authority that it wants to be treated as a potential bidder in relation to the ACV then the local authority must inform the owner that this request has been received and then the full six-month moratorium period will apply. During the full moratorium period, an owner can continue to market the ACV but cannot exchange contracts or enter into a binding contract to exchange contacts, except to a community interest group.
After the expiry of the full moratorium period, the owner can dispose of the ACV to whoever they choose at whatever price and on whatever terms they choose within the protected period.
If an owner does not dispose of the ACV within the protected period, but subsequently decides to put it up for sale for a second time, this will re-trigger the moratorium period process and a new protected period will begin to run.
Implications of ACV listing for developers
The provisions of the Localism Act relating to ACV came into force on 21 September 2012.
Key implications for developers include:
- No restriction on price or buyer: Owners can sell to anyone, at any price, once moratorium requirements are met.
- No right of first refusal: Community groups do not automatically gain priority to purchase.
- Mandatory compliance with moratorium: A sale made without following the moratorium process will be legally ineffective.
- Delays to acquisitions: Developers must factor in potential delays of up to six months while community groups prepare bids.
The moratorium periods are intended to give the communities sufficient time to arrange finance and to proceed with the acquisition.
Conclusion
For developers, the key risk with acquiring an Asset of Community Value is delay. While the legislation does not restrict the ultimate sale price or impose a first refusal right, it does require compliance with the moratorium periods.
Before exchanging contracts, developers should always check whether land or buildings are listed as ACVs to avoid ineffective disposals and costly project delays.
The information provided in this article is provided for general information purposes only, and does not provide definitive advice. It does not amount to legal or other professional advice and so you should not rely on any information contained here as if it were such advice.
Wright Hassall does not accept any responsibility for any loss which may arise from reliance on any information published here. Definitive advice can only be given with full knowledge of all relevant facts. If you need such advice please contact a member of our professional staff.
The information published across our Knowledge Base is correct at the time of going to press.
