Assets of a community value in a nutshell

The Localism Act 2011 introduced a new jurisdiction to list a building or other land as an asset of community value (ACV). In broad outline, ACVs are buildings or other land nominated by a local voluntary or community group or a parish council and listed by the local authority because their use is considered to benefit the social wellbeing or social interests of the local community.

The relevant provisions are contained in sections 87 to 108 of the Act and in the accompanying Assets of Community Value (England) Regulations 2012 (the Regulations). ACVs can include such things as pubs, shops, village halls, libraries, open spaces, or football stadia, to name but a few. The legislation was introduced because of mounting concern that assets benefiting local communities were being lost to the community. More than 3,000 assets up and down the country have been listed so far and the number is constantly increasing.

Local authorities administer this new regime and keep a public list of ACVs. The relevant local authorities include district councils, county councils for areas where there are no district councils, and London boroughs.

ACVs are in some respects benign but in a number of respects they can have significant adverse effects on landowners. Not only that, but these look likely to get greater in the future. The wording of the legislation also raises some difficult issues. There is an emerging body of case law from the First-tier Tribunal (FTT), Upper Tribunal, and the courts as to the interpretation of the provisions. Over 50 appeals have been decided so far.

Legal requirements

In order for a building or other land to be listed as an ACV, the relevant statutory requirements need to be satisfied. These requirements can be satisfied in either of two ways:

• The first test is set out in section 88(1). It requires that two conditions are met. First, there must be an actual current use of the building or other land that is not an ancillary use and which furthers the social wellbeing or social interests of the local community (the so-called ‘present condition’). Second, it must be realistic to think that there can continue to be non-ancillary use of the building or other land which will further (whether or not in the same way) the social wellbeing or social interests of the local community (the so-called ‘future condition’).

• The second test is set out in section 88(2). This second test only falls to be considered if the first test is not satisfied. Again, there are two conditions which need to be met for the second test to be satisfied. First, there must have been a time in the recent past when an actual use of the building or other land that was not an ancillary use furthered the social wellbeing or interests of the local community (the so-called ‘past condition’). Second, it must be realistic to think that there is a time in the next five years when there could be non-ancillary use of the building or other land that would further (whether or not in the same way as before) the social wellbeing or social interests of the local community.

A number of terms used in these statutory definitions are not defined. For example, there is no definition of what is meant by ‘ancillary’ and ‘non-ancillary’ use, there is only a limited definition of what is meant by the ‘social wellbeing or social interests of the local community’, no definition of what is meant by the ‘local community’, no definition of what is meant by ‘realistic to think’ that the future use of the land can take place, and no definition of what is meant by ‘in the recent past’.

Fortunately, a number of the tribunal cases have considered these requirements (and others) and have helped to shed some light on their meaning, so it is important to take account of the recent case law when advising on the provisions.

There are several types of buildings or other land which are excluded from listing. They include a residence (which has a broad technical definition to include a hotel, a holiday dwelling, and others), caravan sites, and land used for statutory undertakings (such as transport networks, for example). There is also an important ‘exception to the exception’, under which land can still be listed if an otherwise eligible building is partly used as a residence in a way which is integral to the use of the building as a whole, such as a pub manager’s flat or a caretaker’s flat.

Nominating and listing ACVs

Not just anyone can nominate an asset for inclusion in the list of ACVs. Only certain specified types of nominators can do so. For example, nominations cannot be made by an individual or by the principal local authorities. There is a list of eligible nominators set out in the Regulations. Only certain voluntary or community groups with a local connection, or parish councils, can nominate, and there are additional requirements in order for each of the specified types of nominators to qualify.

The required contents of a nomination are set out in the Regulations. The nomination must include a description of the nominated land, details of the current owners and occupiers of the land, the nominator’s reasons for thinking that the local authority should conclude that the land is of community value, and evidence that the nominator is eligible to make a nomination. Some nominations are quite brief whereas others go into considerable detail in relation to these requirements. One or two of the cases have grappled with the important question of what the consequences are if a particular nomination fails to include all of the required information.

Once a nomination is made, the local authority is obliged to notify the landowner that the nomination has been submitted, and must then determine the nomination within eight weeks. If the local authority concludes that the statutory requirements are satisfied, it must list the asset as an ACV – it is not a discretionary matter. If the application is successful, the ACV will in principle remain on the list for five years, unless removed sooner because it ceases to meet the definition. At the end of the five-year period, it could be re-nominated and re-listed subject to local interest and continued compliance with the definition of an ACV. There could therefore in principle be repeated nominations every five years indefinitely (if the asset continued to qualify as an ACV).

The Act and the Regulations also contain provisions for a listing decision (or compensation decision) to be challenged by the landowner if the land is listed: first, by way of an internal review by the local authority of its own decision, and subsequently (if needed) by way of a right of appeal to the FTT. While the owner of an asset which is listed may require a review of the decision and can appeal to the FTT, a failed nominator cannot and is instead limited to an application for judicial review.

Consequences of listing

There are three main consequences of a building or other land being listed as an ACV: (a) there is a moratorium on certain disposals of the land; (b) there are planning implications; and (c) the owner can in some circumstances seek compensation.

(a) Moratorium on disposals

Once an ACV has been listed, there is no restriction imposed on its disposition unless and until the owner decides to dispose of it through a ‘relevant disposal’. This is defined as a freehold sale or the grant or assignment of a qualifying lease (being a lease originally granted for at least 25 years), in either case with vacant possession.

If the landowner wishes to enter into a relevant disposal, he must notify the local authority, who will in turn publicise this and in certain circumstances notify the nominator. If there is no expression of interest within six weeks (the ‘interim moratorium period’), the disposal can proceed. But if in the six-week period a local community group (as defined in the legislation) states that it wishes to be treated as a potential bidder, the landowner will have to wait a total of six months (starting with the date on which he served the notice on the local authority) before he can enter into any binding agreement to dispose of the land (the ‘full moratorium period’).

The landowner will also need to ensure that the disposal is made within an overall period of 18 months running from the date of his notice to the local authority (the ‘protected period’) or he will have to start the notification process again.The right conferred by the legislation is not a right to buy: it is right to bid. There is no right of first refusal or any preferential pricing, and at the end of the moratorium period the owner can sell to whomever he wishes at whatever price he wishes. Nevertheless, the enforced moratorium could prove inconvenient or financially damaging to a number of landowners. There are also enforcement provisions designed to give the moratorium real bite, including the registration of a restriction at the Land Registry, the registration of a local land charge, and the fact that a disposal of listed land is deemed ineffective if it contravenes the moratorium.

There is a long list of exempted disposals which are not subject to the moratorium. Some of these are set out in the Act and some in the Regulations. They include (among others) gifts, disposals on death, sales resulting from the enforcement of security, disposals between group companies, disposals pursuant to a section 106 agreement, disposals as a going concern, disposals pursuant to an option entered into before the asset was listed, and part-listed disposals. It is important to consult the full list.

(b) Planning implications

The status of land as an ACV can be a material consideration in any planning application to redevelop the land or for a change of use. The relevance (if any) of the listing is to be determined by the local planning authority: the matter is not mentioned in legislation. There are several examples of applications for a change of use being rejected with the local planning authority citing listing as an ACV as a factor.

In addition, the Town and Country Planning (General Permitted Development) (England) Order 2015 suspends certain permitted development rights for any pub (or other class A4 drinking establishment) which has been listed as an ACV or even merely nominated as such. Planning permission would therefore be needed to change its use class instead of being able to do so under permitted development rights. This was intended to address situations where owners of pubs which had been listed as ACVs sought to convert them to other uses and then sell them.

(c) Compensation

A private landowner may be entitled to compensation from the local authority if he has incurred loss or expense in relation to the land at a time when it was listed, which it is likely would not have been incurred if the land had not been listed. There are strict time limits set out in the Regulations for making a claim. There are a significant number of issues which will need to be worked out in due course in relation to the precise scope of this right to compensation, which have not so far been determined by the FTT.

Conclusions

The statutory jurisdiction relating to ACVs is new and there are a number of substantive, practical, and procedural points which are still in the course of being worked out. It is important to consider the recent case law when advising in this area.

Simon Adamyk is a barrister at New Square Chambers and is the author of Assets of Community Value: Law and Practice, the first book dedicated to dealing in detail with this area of law

@NewSqChambers www.newsquarechambers.co.uk