Assets of Community Value (England) Regulations 2012
Baroness Hanham
That the Grand Committee do report to the House that is has considered the Assets of Community Value (England) Regulations 2012.
Relevant documents: 6th Report from the Joint Committee on Statutory Instruments, 7th Report from the Secondary Legislation Scrutiny Committee.
The Parliamentary Under-Secretary of State, Department for Communities and Local Government (Baroness Hanham)
My Lords, I thank the Committee for its indulgence and I apologise for having had to ask for an adjournment.
The Assets of Community Value (England) Regulations 2012 add the necessary detail to the assets of community value provisions in Part 5, Chapter 3 of the Localism Act 2011. Although these regulations are laid in draft for scrutiny under the affirmative procedure, only the enforcement provisions require this. The remaining powers in the Act are subject to a negative parliamentary procedure. However, it was felt that it would be difficult to consider the enforcement provisions by themselves, and preferable to look at all the details in the regulations together. That is why the decision was taken to combine them in one instrument. The principles of the policy were discussed in detail during the debates on the Localism Act and the Act reflects these. However, for context, I shall briefly recap the rationale for the assets of community value scheme before discussing some of the specific regulations that I am aware will be of interest to the Committee.
Over the past decade, many communities have lost local amenities and buildings that are of great importance to them. Whether it is a village or housing estate shop, pub, community centre or local hall, many assets have gone, often without anyone locally being able to do anything about it. As a result, many communities find themselves bereft of the assets that can help to contribute to the development of vibrant and active communities. However, on a more positive note, the past decade has also seen a significant rise in communities becoming more active and joining together to save and take over assets that are important to them. More than 200 communities have bought their village shop and a growing number have been successful in saving other assets, such as their pub, from closing. It is exactly this type of community-focused, locally led action that the asset of community value seeks to encourage.
The provisions require local authorities to maintain a list of public and private sites—buildings and other land—that are assets of community value, based on a nomination from their local community. The local authority will list the asset if it considers that it furthers the social well-being or social interests of the community, or has done so recently and it is reasonable to think that it will continue to do in the immediate future. The asset will remain on the list for up to five years. If the asset still meets the definition after five years, it can be renominated and relisted.
If the owner of a listed asset wants to sell it, he must notify the local authority. Community interest groups will then have six weeks to lodge a non-binding expression of interest, in which case a window of opportunity of a further four and a half months—making a total of six months—will come into effect. This will give communities more time to develop a bid and raise the necessary capital. They will then be in a better position to bid for the asset. During the window, the owner may market and pursue discussions about the sale of their asset but may not exchange contracts, with one important exception. The regulations provide that the owner may sell to a community interest group during the moratorium. At the end of the window, the owner will be free to sell to whoever they wish at the price they wish, and for a protected period will not again be subject to delay.
This scheme is not designed to force landowners wishing to sell to do so to some person or organisation they do not wish to sell to, nor will it force them to sell at an inferior price. There is no restriction on the freedom of landowners to sell to whomever they choose after the six months have expired and there is no right of first refusal for community groups.
However, these regulations do provide community groups with a much needed opportunity to prepare a business plan and raise the necessary funds to bid for the asset. I am aware that a number of the regulations within the assets of community value scheme will be of particular interest to the Committee. As such, I would now like to say a few words about some of the detail.
We have set it out in regulations that voluntary and community groups are able to nominate an asset for listing, in addition to the parish council for the area in which the land lies. For the purposes of this scheme, a voluntary or community body will be: a neighbouring parish council, an unincorporated group of 21 or more people on the local electoral register who have come together informally, a neighbourhood forum designated as such by the local planning authority, or a community interest group with a local connection. These are groups which have a formal structure. They can be: a charity, a company limited by guarantee that does not distribute profits among its members, an industrial and provident society, or a community interest company. However, only a community interest group, which includes the parish council for the area the land lies in, will be able to trigger the full moratorium period as well as nominate land for listing.
With regard to enforcement, to give a strong incentive to owners to comply with the scheme, and to purchasers to make all possible checks, non-compliant sales will be ineffective. The effect of this will be that, regardless of the agreement between the parties and payment, ownership of the land will not have changed hands. The scheme provides a number of mechanisms intended to encourage compliance. These require local authorities when they list land to notify the owner that their land has been listed as an asset of community value and inform them of the implications, enter the fact that the land has been listed as an asset of community value in the local land charges register, and enter a restriction against the owner’s title on the land register where the listed land is already registered.
Local authorities will not be able to apply for a restriction in the land register against land that is not yet registered. However, a purchaser of listed land who applies for first registration will need to apply for the restriction against their own title. The wording of the restriction will mean that the Land Registry will require a certificate of compliance from a lawyer or professional conveyancer before it will register the land or a change of owner. The regulations also require that a new owner of listed land informs the local authority about a change of ownership, and that an owner informs them about first registration with the Land Registry. However as a protection to owners, the regulations provide that the disposal will not be ineffective if the owner did not know that the land was listed, despite making all reasonable efforts. This would be most likely to occur in circumstances where there was delay by the local authority, for instance in notifying the owner of the listing, entering new information on the list, or amending the local land charges register.
As to the compensation provisions in the regulations, they recognise that these provisions may have some financial impact on owners and provide a compensation scheme for private property owners. There is no restriction in the regulations on what type of loss or expense may be claimed, but they state in particular that this may include a claim arising from a delay in entering into a binding agreement to sell that is wholly caused by the interim or full moratorium period; and the regulations provide for legal expenses incurred in a successful appeal against the local authority’s decisions.
Where a local authority considers that compensation should be paid, it is left for the authority to determine how much compensation will be appropriate. The authority should decide how much compensation is fair and proportionate in relation both to loss and expenses, balancing individual rights with community benefit and taking into account all the particular facts of the case.
The Government understand the concerns that were raised by local authorities around this issue, particularly during the department’s consultation. However, when making decisions around the structure of the scheme, it was clearly important to take on board the opinions of all those affected by the policy, not just local authorities in isolation. It will be important that this scheme remains as locally focused as possible, and for this reason we wish to ensure that the operation of the compensation elements remains with local authorities.
As with other costs incurred by local authorities in meeting new requirements placed on them, we have reflected the estimated costs of compensation within the new burdens funding. The detail is set out in the impact assessment. Additionally, given the concerns raised about this issue, the Government will meet costs of compensation payments of more than £20,000 in a financial year, up to March 2015. This could occur through a local authority receiving either one large claim of more than £20,000 or a number of smaller claims in one financial year that add up to more than £20,000.
The Localism Act provides that owners will have the right to appeal against both the listing of an asset and compensation refusals or the amount of awards. The regulations set out the detail of how these will operate. An owner who disagrees with a listing decision, or an owner or former owner who has made a claim for compensation and is not satisfied with the local authority’s response, may request a review by the local authority of its decisions. The local authority must review its decision and notify the claimant of the result within eight weeks of receiving the request, or a longer period if agreed with the claimant, with reasons. The procedure for both types of review, in Schedule 2 to the regulations, is the same. In either case, if the owner is not content with the local authority’s review then the regulations provide that the owner may appeal to the First-tier Tribunal. The deadline for an appeal of this nature is 28 days from the date on which notice of the decision appealed against was sent to the owner. There is one difference: a compensation appeal may be made only by the person who requested the review, whereas a listing appeal may be made by the person who requested the review or by a subsequent owner. Both types of appeal will be to the General Regulatory Chamber of the First-tier Tribunal which will be able to consider points of both fact and law.
The definition of assets of community value is set out in Section 88 of the Localism Act. The regulations allow for some exclusions from this definition. The principal exclusion from listing at all is residential property. This includes gardens, outbuildings and other associated land owned by a single owner. We have defined associated land widely to mean land in the same ownership that it is reasonable to consider as going with the residence, even where it is separated from the residence by, for example, a road, railway line, river or canal in different ownership. In this context, “same ownership” includes the situation where the land is held by different trusts but was settled by the same settler.
There is an exception to the general exclusion of residential property from listing, which is where an asset that could otherwise be listed contains integral residential quarters, such as accommodation as part of a pub or a caretaker’s flat. Completing the range of residential exclusions from listing are residential caravan sites licensed by local authorities, together with some similar sites that are exempted from licensing, for example those used by Gypsy communities or by travelling showmen. We have also exempted from listing operational land of statutory undertakers as defined in Section 263 of the Town and Country Planning Act 1990. This covers mainly transport networks such as railways and roads.
A number of exemptions from the assets of community value moratorium rules, including those which protect estates of settled land, are set out in Section 95(5) of the Localism Act. The regulations provide for a number of additional exemptions. To list all of the types of disposals that will be exempt from the moratorium requirements would take even more time than I am taking at the moment, and those in the Act have already been considered during the passage of the Bill, so instead I shall highlight those added by the regulations which are likely to be of most interest.
Earl Cathcart
My Lords, I am a farmer and a landowner. In the recent past I was a Norfolk councillor. I use the words recent past because I stopped being a councillor almost five years ago.
I thank my noble friend Lady Hanham for all the time and effort that she has spent on this issue. The Minister and her team have worked tirelessly to ensure that it hits the intended spot and has no unintended consequences. I am certain that the rural community is most grateful for all the hard work that they have done.
I have no problems with these regulations, but I had hoped that they would clarify two or three issues in the Act, all relating to Section 88. First, land in the existing use category is of community value,
“if in the opinion of the authority … the non-ancillary use furthers the social well-being or social interests of the local community and … it is realistic to think that there can continue to be non-ancillary use”
serving those objectives. This raises two questions, on which the regulations and the Act are silent. I had hoped that these regulations would clarify these matters. First, when is a use non-ancillary and, secondly, what evidence needs to be put before the local authority in determining whether in its opinion a relevant use is realistic?
The second category of land of community value is the land in past use. If in the opinion of the local authority, there is a time in the recent past when an actual non-ancillary use fulfilled the two objectives of furthering social well-being or social interests of the local community,
“and it is realistic to think that … in the next five years … there could be a non-ancillary use”
made that met either of these objectives, it is land of community value.
This “past use” category also raised my third question: what is the recent past? In September 2011, the Assets of Community Value—Policy Statement said that the Government’s view on the recent past,
“is that we will leave it to the local authority to decide, since ‘recent’ might be viewed differently in different circumstances”.
This will cause uncertainty for landowners as the recent past may be the past 10 or 15 years for one local authority and the past two or three years for another. Can the Minister provide more clarity on what is meant by “recent past” so that there is some consistency between local authorities?
If asked my opinion, I would say that up to five years would be a reasonable time, hence my saying, “In the recent past I was a local councillor”. I suggest five years for two reasons. First, the Act already says that,
“it is realistic to think that … in the next five years … there could be non-ancillary use”.
It already uses the five-year benchmark. Secondly, an asset drops off the register after five years anyway. Therefore, anything up to five years ago would be reasonable; anything later would be the distant past. I would be most grateful if the Minister would address those three issues.
Baroness Thornton
My Lords, I have a slight sense of déjà vu. Here we are again discussing this matter, with me supporting the Minister and congratulating her on bringing forward these regulations, as she promised in the course of the Localism Bill. I have one or two questions for clarification.
I agree with the noble Earl that these are quite complex regulations but I also accept what the Minister said. Having read the part about the Land Registry three times, I still do not really understand it and can see that there are some complex interests to balance—those of landowners and those of the legitimate aspirations of local community organisations. That is, as it were, where we came in. I think these regulations do that.
My concern, if I have one, is whether it is too complicated for community organisations to access easily. We will not know that until the whole thing is rolled out and starts to work, or not. Therefore, I ask the Minister whether there is any intention to monitor—in, say, two years’ time—the effectiveness of this legislation and what the issues are for landowners and community organisations.
My second question is on a point of clarification. The Explanatory Notes outline the characteristics of community organisations. I read the Explanatory Notes first because they were more accessible than the regulations. They go into how you recognise what different community interest groups are. Therefore, do the regulations take account of unincorporated organisations? The regulations say that unincorporated community organisations can bid for community assets, which is exactly as it should be. However, if the Explanatory Notes say one thing and the regulations say something else, it is very important that local authorities and those whose land or property is in question are completely clear that unincorporated community organisations have the right to claim an interest in the community asset. It is really a question of clarification, which I am sure can quite easily be resolved. I am assuming that the reasons for which this instrument was drawn to our attention in terms of public policy issues relate to the amount of resources and time that local authorities are expected to put into it. The noble Baroness gave an explanation for that.
Lord Gardiner of Kimble
My Lords, first, I declare my interests as a farmer and landowner as detailed on the register. I echo the comments of my noble friend Lord Cathcart as to the energy and hard work that has been put into ensuring that sense prevails with these regulations following many discussions.
I raise three minor but important points which I hope my noble friend the Minister will help the Grand Committee with. They relate, first, in paragraph 14, to compensation regulation. Owners of listed assets are subject to time limits throughout the assets-of-community-value process; indeed, that is enforceable in law. Yet the local authority is currently under no timetable-limited obligation to respond with a written reason. I wonder whether it would not be reasonable that there should be some understanding that the local authority should be responding in reasonable time; I put that at about six weeks. There may be procedures whereby a local authority should respond, but I would welcome clarification from my noble friend.
The other questions relate to relevant disposals in Schedule 3 and the Crichel Down rules. It gets perhaps rather too technical for me, but my understanding is that, in order to conform with the Crichel Down rules, there should be in the regulation an inclusion of land acquired under threat of compulsory purchase. Can my noble friend clarify that point?
Finally, I am concerned as to the definition of “undertaking”, and how restrictive that may be, particularly the suitability in terms of transfer between related companies, which particularly relates to farms and estates. I would like my noble friend to assure us that this matter will be kept under review to see whether what I understand is a rather restrictive interpretation of this matter might be addressed in future years if there was a problem, particularly in the rural sector.
Lord Reay
My Lords, I declare my interest as a landowner, and associate myself with what my noble friends Lord Cathcart and Lord Gardiner have said—in particular my noble friend Lord Cathcart in calling for clarification on what is meant by the “recent past”. As my noble friend has pointed out, we debated this at great length during the passage of the Localism Act. The Government listened to the objections that were made at Second Reading and subsequently introduced substantial modifications to the original proposal. This was welcome, and my noble friend made great efforts on our behalf.
We understood where the Government were coming from politically. However, to draw up, maintain and manage a list of community assets is still a substantial bureaucratic requirement for local authorities, with inevitable costs. We wondered whether all of that was necessary in order to provide a right to bid for a local body or group whenever a well loved pub, shop or other amenity was threatened with disappearance. Anyway, that is the system that we have now got in place. At least the eligibility of assets for inclusion was narrowed down to a much more acceptable level from the original proposal. That was a development which we much welcomed, and I thank the Minister again for that.
Lord Shipley
I shall follow on from the contribution of the noble Baroness, Lady Thornton, on the rights of voluntary and community bodies not just to nominate assets for listing but to convert themselves into a community interest group. My understanding of the regulations—the Minister explained this very clearly—is that voluntary and community bodies can nominate assets for listing and that those bodies will include parish councils and can include unincorporated local organisations with at least 21 individual members who are on the local electoral register.
The regulations require a community interest group which can bid to be a charity, a company limited by guarantee that does not distribute profits, an industrial and provident society or a community interest company. Voluntary community groups are going to have to convert themselves into community interest groups to bid and sometimes the timescale could be very tight. I wonder what help the Government plan to give, or to advise local authorities to give, to enable the regulations and the principles behind the Localism Act to happen reasonably easily and to make it more straightforward than it otherwise would be for a voluntary or community group to bid successfully and to manage the outcome of that successful bid.
I noticed in the regulations that it is estimated that some 700 assets will be listed each year and that 94 assets may be bid for each year. It is not clear where those numbers came from, but they clearly have some credibility. I understand that where there is a parish council, there is a structure in place. My concern is where there is not a parish council or where the body that wants to bid is not the parish council but is another voluntary or community group. How do we make sure that people are enabled to make a success of this legislation when there is an extra hurdle from nominating a building or a piece of land to an asset register to the point where that group can then take over the running of that building?
Lord True
My Lords, my noble friend anticipates one of the things that I was going to ask in relation to non-parished areas. I was not intending to intervene. I endorse what was said by my noble friend Lord Gardiner and other colleagues. I welcome the efforts that my noble friend Lady Hanham has made to reduce some of the worst threats, as some of us perceived them in the debates on the Localism Bill. The stripping down of the proposal to the essentials, at least in terms of those assets to which it might apply, is very welcome. None the less, declaring an interest as leader of a local authority, in some circumstances, local authorities could find themselves as piggy in the middle in operating this process with a community group on one side and the landowner on the other. We simply do not know how onerous these duties are going to be. Some local authorities find it hard to determine planning applications in eight weeks. There are figures of eight weeks and six weeks in here.
We are adjured to make further major savings in local government spending—we are debating this on the Local Government Finance Bill—to which I have no objection, but as we go forward I hope my noble friend will give a firm assurance that she will be careful of the burdens that are imposed on local authorities in administering the system because the paradox we are living with is that in the planning system we have had a massive simplification, in theory, of the planning system nationwide but on the other hand we are creating extraordinarily complex structures, such as some of those coming out of the Localism Act. In these quite complex regulations, we are having regulations to decomplicate them and take some of the other things out. This world will take a little time to settle down. I think we will all try to make it work. Localism is important, and we do want to protect assets of local importance, but I hope that my noble friend will resist the blandishments of the noble Lord, Lord Gardiner, to tighten up even further the requirements on local authorities to respond.
One has to live with the art of the possible. Local authorities will, within the resources available, try to make this work, but in some circumstances, all the appeals systems, the registers and all the things that have to be done will take time and it may even require the recruiting of new local authority staff in some areas where this thing takes off. With that rider, I associate myself with the remarks of other noble Lords and thank my noble friend for the time and attention she has given to avoiding some of the potential abuses of the system as originally designed.
Lord McKenzie of Luton
My Lords, I thank the Minister for her very full explanation of these regulations. They relate to legislation that we support, as my noble friend Lady Thornton said, and we wish them to work effectively. A policy to assist local community groups and to preserve buildings or land of importance to their communities and social well-being is clearly important. It is of course not a right to buy, nor is there any obligation on the owner to sell.
As my noble friend and other noble Lords have said, this is a very complex piece of primary legislation, as are the regulations before us. It is to be hoped that that complexity will not deter engagement. There will inevitably be complexity around issues relating to land law and charity law. To a certain extent that is unavoidable, but I hope that some simplified guidance will come out. The noble Lord, Lord True, said it is quite difficult to gauge how onerous the duties on local authorities will be in practice.
A number of noble Lords posed a series of specific questions, and I await the Minister’s answers with some interest. In fact, I wanted to ask some questions myself. The first relates to the right to nominate. The regulations and the Explanatory Memorandum state that a neighbourhood forum is included among those who can nominate. Does that right extend to a neighbourhood forum that is designated as a business area?
Paragraph 7.14 of the Explanatory Memorandum refers to the powers relating to the fact that non-community nominations have not been used. Perhaps the Minister can remind us of what the intent of including such a possibility in the legislation was and why it is not being taken up.
I should also like to understand a little better the exemptions for disposals by one body corporate to another. Specifically, is a disposal of the shareholding of a group company into which an asset has been transferred a relevant disposal for the purpose of these provisions? Clearly if that was not the case, there is a gaping hole in the legislation.
A number of noble Lords touched upon compensation issues. It is clear that the claim for compensation is rightly limited to delay wholly caused by delay under the Act, but if there are joint causes for the delay, assuming that one can apportion the effect of those joint causes, is the part attributable to the delay caused by the Act still capable of compensation; or would the fact that there is another contributory factor, even if the value of it can be stripped out, deny that compensation?
I want also to make sure that I understood what happens as regards the difference between a freeholder and a leaseholder. As I understand it, if there is a freeholder and a leaseholder, the ownership of a lease that was originally granted for 25 years would be deemed to be that of the leaseholder, because one would look to have one owner for the purposes of the operation of these provisions. If that is right, what would be the position on the grant of a new 25-year lease at the point of expiry of the original lease? Would that be a disposal? How does that work under these provisions?
The Secondary Legislation Scrutiny Committee recites the one-off and ongoing costs, and other noble Lords have referred to that. We have an assurance that those costs are going to be met by DCLG, at least during the course of this spending review. I do not know whether that means that it definitely will not under the new spending review or whether we simply have to wait and see what that review entails. I will be interested in the Minister’s answer on that point.
This is something that we want to see work and we are supportive of the Government in seeking that, but there are a number of technical issues here on which we need to be satisfied that we are not opening up easy routes out of the application of this legislation that the wise, or at least the well advised, will take every opportunity to use.
Baroness Hanham
My Lords, I thank noble Lords for their interest in the regulations. I am particularly grateful for the kind remarks that have been made about them; the Localism Act is certainly one that I will recall for many years as one where we made as much difference in this House as was made anywhere.
There have been a number of quite technical questions, so let me see if I can deal with at least some of them. The costs of the referendums will be new burdens, so until 2015 they will be supported by the Government. The Government are committed to meeting the new burdens on local authorities, and have set aside up to £50 million to 2015 to meet those costs. It is right that we ensure that those referendums take place. I beg the Committee’s pardon, that is wrong; I shall start again.
Regarding my noble friend Lord Cathcart’s question about the use of “non-ancillary”, we talked about this quite a lot during the process of the Act. It has been decided that it is up to the local authority to determine whether the use of building land is non-ancillary. It is the local authority’s job to put these regulations into effect and to be the guiding light. The local authority knows its own area, its own people and its own tensions so we believe that it should do this, and of course first it has to establish whether the building or other land meets the definition of an asset of community value.
On his question about what is meant by “recent past”—here we go. This could be a very interesting and long discussion. Once again, this is something that we discussed during the process of the Act. How long is a piece of string? My definition of “recent past” would be reasonably short and my definition of “not recent past” quite lengthy. However, I am not defining this; local authorities once again are going to be in the position of defining it. Any normal logic would suggest that “recent” would not be 20 years or, probably, even 10 years, but further than that I will not go; I am not going to be committed in future to having said that it was five years, because I have not done so. I see the rationale behind what my noble friend was trying to adduce, but I do not think that we can give a definition of that. However, anyone who looks up “recent” in the dictionary will quickly get an answer to what “recent” is meant to be.
Lord McKenzie of Luton
Will the Minister deal with the issue around intergroup transfers and the extent to which parcelling an asset in a company and selling the shares is caught as a relevant disposal?
Baroness Hanham
That is pretty technical. May I write to the noble Lord about it? It is more technical than I can deal with today.
Lord McKenzie of Luton
I am very happy to have a letter, although I think that we touched on this during the passage of the Bill.