Community Asset Transfer
Contents
What is a Community Asset Transfer (CAT)
A CAT occurs when a Public Sector body, usually a Local Authority, passes on the management and / or ownership of facility to a to a Community / Town Council, Community Group / third sector organisation.
Local Authorities have the general power to dispose of land in any way it wishes, (sections 123 (1)/127 (1) Local Government Act 1972) although there is a general legal requirement that the authority must achieve the best price for the site, also known as ‘best consideration’ or ‘best value’.
However, Central Government has recognised that there may be circumstances where it is appropriate for a Local Authority to dispose of land at below best consideration and has therefore given Local Government the power under the General Disposal Consent (Wales) 2003 to dispose of land at an undervalue of up to £2m without Welsh Government consent provided that the disposal is likely to contribute to the promotion of social, economic or environmental well-being in its area.
A disposal for less than best consideration using these “well-being powers” is what fundamentally constitutes a ‘Community Asset Transfer’.
In general Pembrokeshire County Council (PCC) will only consider CAT’s for service continuation purposes, that is where it might be appropriate for a Town / Community Council or third sector organisation to take over an asset in order to continue, improve and sustain an existing service that is currently provided by PCC. For example, public conveniences, play areas, parks / gardens, allotments, green spaces or libraries etc.
In almost all circumstances if a property is identified as surplus and is able to be disposed of for a capital receipt or at a rent then it will not be available for a CAT and will be disposed of on the open market for best consideration.
In limited circumstances disposals for less than best consideration which are not for service continuation can still take place, but the decision-making process outlined in this document should still be followed.
It is important to recognise that Local authorities are not obliged to undertake CAT’s but many do as they recognise that in some situations transferring assets to the third sector is likely to increase the investment and sustainability of that asset given the current lack of capital and revenue funding available to Local Authorities.
Given PCC’s current financial position and need for substantial savings to be made over the next few years the effective outsourcing of some services to the Town / Community Councils or third sector may be the only way of keeping that service operational.
CAT’s have been around for some time, at least on a case-by-case basis, and this ad hoc approach should continue but against the current financial backdrop the implementation of a wider strategic policy approach may be necessary
When might a Community Asset Transfer be considered?
A CAT will be considered for assets which are currently being used for service delivery purposes where it is proposed these services will continue to be delivered by the interested group and PCC would like to see these services remain in order to meet its corporate objectives.
This situation can present an opportunity for more efficient and sustainable Town / Community Council / third sector delivery against a backdrop of reducing council budgets. Opportunities might be identified via an approach by a relevant organisation or via the Council seeking out an appropriate tenant to sustain service delivery in an alternative way.
Terms of Transfer
Generally, a long-term lease up to a maximum of 125 years at a peppercorn rent with the tenant responsible for all upgrades, repairs and insurance will be the most appropriate method of transfer.
The use of the property along with the appropriate standard of repair will be clearly and tightly defined and if the tenant fails to comply or ceases to exist then the asset will return to PCC or if the building ceases to be used for the purpose for which it was transferred. Lease lengths and structures may vary depending on the situation. It is important to note that in general freehold transfers will not be considered unless there is a compelling reason to do so.
The main goal of a CAT is to create a mutual benefit for PCC and the Community. The most appropriate method of disposal and terms will be selected to enable this. A compelling justification will be needed in order to vary from the above structure which is considered to be the standard.
There will likely be situations where the group wanting the transfer would like for the asset to be improved prior to handover or for the Council to continue to provide certain services like bins / refuse collection or tree maintenance for example.
This may be possible in rare circumstances, but the default position is that the asset is to be taken in its current condition with the tenant taking on responsibility for everything unless the Council can be paid for continuing some services. Ultimately a CAT is sought because the Council doesn’t have the desired level of revenue or capital to continue the service to an appropriate level. As such the only way it can assist is by transferring an asset to appropriate community group at nil rent.
Due Diligence
It is essential that proposals are properly scrutinised to ensure commercial viability / sustainability is realistic, that the organisation proposing to run the project is properly constituted and has sufficient competent people willing and available to ensure its effective and sustained operation.
Therefore, transfers cannot proceed without a PCC supporting department (Head of Service and Cabinet Member) who has knowledge of the existing service provision taking the lead. This department will drive the transfer forward and carry out the appropriate level of due diligence which will vary from case to case.
This will include identifying the most appropriate groups, identifying if there is a need to widely advertise the opportunity, ensuring that the group understand the responsibility they are taking on and that they are capable of sustainably managing it.
The supporting department will need to put a report, outlining the well-being benefits, to Cabinet for approval. Property Services will highlight the level of undervalue and offer support and advice throughout the leasing process. The supporting department will be responsible for monitoring the organisation following the transfer and will be responsible for the asset if the transfer fails and is handed back to PCC.
There may be competing groups interested in the same asset. In such cases the Authority will expect community groups to work together and organise themselves in such a way that sharing and use of the asset is optimised between them. If a joint approach is not agreed, the Authority will balance the merits of the different organisations’ proposals and decide to which group (if any) the asset should be transferred to. Failure of community organisations to collaborate on a joint approach may make it less likely that any acceptable proposal for asset transfer will be achievable. Town or Community Councils may have a role in such cases to take the lead in managing the asset on behalf of a number of users.
Key Principles
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Any transfer must create a mutual benefit to both PCC and the Community.
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More often than not there should be an initial element of financial benefit to PCC even if it is in kind.
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The proposal must be supported by a Head of Service and Cabinet Member whose department will present a Report to Cabinet to outline the well-being benefits if necessary.
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PCC is not obliged to undertake CAT’s.
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The basic terms of any transfer will generally be non-negotiable. The organisation the asset is being transferred to will take full responsibility for that asset and it will be transferred in its current condition.
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The supporting department has an on-going obligation to monitor the organisation that the asset has been transferred to. It is not a closed book once the asset has been transferred.
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If an independent valuation is required, the applicant will be responsible for the fee.
Who can apply?
Expressions of interest (see Appendix 1) are welcome from individuals, community and voluntary sector groups or Town / Community Councils. Ideally interested parties should meet the following criteria:
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They should be community-led, with strong links with the local community and local people must be able to control the organisation’s decision-making processes.
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Their primary purpose must be to enhance service provision to the local community.
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The organisation and key individuals managing the asset and associated project have appropriate skills, knowledge and expertise to sustain the project in the long term.
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They must be open to and demonstrate an inclusive approach to members of the wider community.
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They must not duplicate activities, services or facilities already provided in the local community.
Process
The process the Authority will follow where an asset transfer request has been made or an opportunity is identified.
Stage
Expression of interest submitted to Property Services for consideration
Requirements/Process
The application form is available on request by contacting property.helpdesk@pembrokeshire.gov.uk
Action required by/ Estimated Timescale
Third Sector Group
Stage
Appropriate body identified by PCC and approached with the opportunity. completion of the expression of interest form my not be necessary in these circumstances
Requirements/Process
zero
Action Required by/Estimated Timescale
PCC - Supporting Service
Stage
Application form/Proposal appraised and recommendations made.
Requirements/Process
If the request for service continuation, then Property Services will liaise with the operating department to see if they support the proposal. if yes, then we can move to the due diligence stage. If the proposal is not for service continuation purposes or relates to a surplus asset Property Services will present the expression to Corporate Asset Management Board to see if there is any internal support. If not, then the application will be rejected.
Action Required by / Estimated Timescale
PCC – property services / supporting service. 1-2 months
Stage
Business plan submitted (if deemed necessary and requested by PCC)
Requirements/Process
Guidance to community group available from supporting department about what is required if needed
Action Required by / Estimated Timescale
Third Sector Group 1-2 months
Stage
Appraisal of business plan (if deemed necessary)
Requirements/Process
Supporting department to consider the proposal in conjunction with property services. Further questions asked of interested group if necessary
Action required by / Estimated Timescale
PCC - supporting service 1-2 months
Stage
Decision on whether to proceed with transfer (with Cabinet/Local Member involvement as necessary)
Requirements/Process
Internal informal officer/member consultation undertaken to decide if transfer can proceed to next stage
Action Required by/ Timescale
Up to 1 month
Stage
If approved Heads of Terms will be provided to interested party
Requirements/ Process
zero
Action Required by / Estimated Timescale
PCC - Property Services up to 1 month
Stage
Heads of Terms approved by interested party
Requirements/ Process
some negotiation from general principles may be possible and discussed at this stage. Once agreed move to next stage
Action Required by / Estimated Timescale
Third Sector Group. Up to 1 month
Stage
Supporting Department to present a report to Cabinet to approve the disposal
Requirements/ Process
Supporting department to outline the well-being benefits of the proposal and Property Services to identify the level of undervalue and any potential subsidy control issues. Recommendation will usually be for Cabinet to approve the proposed disposal at an undervalue with authority delegated to property services in conjunction with legal services to complete the appropriate agreement
Action Required by / Estimated Timescale
PCC - supporting service/Property Services. 1-2 months
Stage
If approved by Cabinet Property Services instruct legal to draft and complete the relevant lease agreement
Requirements/ Process
It is recommended that the proposed tenants procure their own legal representation to enable the completion of the lease
Action Required by / Estimated Timescale
PCC - Property Services and Third Sector Group3-6 months (longer if a complex lease).
Total Timescale 10 to 17 months
We will endeavour to achieve the above-mentioned timescales, however, practically the process can take much longer. In some cases, a number of years is not unusual. Although the aim is to complete the process as quickly as possible the reality is that CAT’s can be a complex time-consuming process. It may be frustrating at time for all parties, but it is important that that any transfer is done properly and thoroughly to ensure best possible chance of success and sustainability.
Appendix 1
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Please ensure you use the application form for any request or expression of interest for the transfer of a community asset. The application form is available on request by contacting property.helpdesk@pembrokeshire.gov.uk
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Please complete the form in as much detail as possible and ensure all questions have been answered. If you are unable to provide an answer or the evidence requested, please explain why.
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All community asset transfers will need to be supported by a Council Head of Service and a Cabinet Member. Your completed form will be forwarded to the relevant Head of Service to be assessed. In most cases it will be necessary for that Head of Service to submit a report for Cabinet approval.
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The Council may need to request further information from you to enable a decision to be reached.
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In some cases, a business plan may be requested to show the on-going viability of your proposal.
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Please remember that we are looking for proposals that present a mutual benefit for both the community and the Council.