Practical Law

In the light of a recent report published by the House of Commons Communities and Local Government Committee on community rights (HOC report) and a number of Ask queries we have had from subscribers, we thought it would be timely to look at some of the issues arising from the right to bid for assets of community value (ACV) introduced under the Localism Act 2011 (LA 2011) (see Practice note, Localism Act 2011: assets of community value). As well as the community right to bid, the HOC report also looked at the community rights to build, challenge and reclaim land (see Practice note, Localism Act 2011: community right to challenge).

Lack of appeal rights for an unsuccessful nominator

Practical Law Public Sector subscribers have asked us a number of questions about the issue of appeals and the right to appeal.

What is clear is that the appeal rights under the LA 2011 and the Assets of Community Value (England) Regulations 2012 (SI 2012/2421) do not encourage collaboration or discussion between the parties; an owner has a right to appeal against listing and to seek compensation but the nominating community group is not involved in this and as for the right of a community group to appeal against an unsuccessful nomination – there simply isn’t one.

The government’s non-statutory guidance repeats section 88(1) of the Localism Act 2011, namely that the decision to list a piece of land or building will only occur where “in the opinion” of the local authority it meets the relevant statutory criteria set out in section 88. This is by nature subjective and therefore one would have expected there to have been a mechanism in the regime to challenge an unfair, unreasonable or unlawful decision. However, at present the only means by which a community group can challenge a decision not to list appears to be judicial review (see Practice note, Judicial review: an introduction).

Introducing an appeal mechanism for community groups in such situations should make it easier for flawed decisions to be examined and could force an authority to re-examine a listing decision. However, such a mechanism could mean an authority potentially facing an appeal in every instance of unsuccessful listing and having to dedicate additional resource to dealing with such claims even where it is highly likely that the same decision would be reached on appeal.

Re-nomination following a decision not to list

At present some community groups appear to deal with a decision not to list by re-nominating the same piece of land or building. Re-nomination is not dealt with in the legislation although it appears that a number of authorities, when administering their ACV lists, prohibit re-nomination or limit the number of times that a building/piece of land can be re-nominated following an initial unsuccessful nomination.

The HOC report recommends that the government consider introducing a mechanism where a piece of land or a building can only be re-nominated where a community group is able to demonstrate that something material has changed which would likely make the second listing decision successful. A mechanism of this type would introduce some flexibility into the regime, but again, authorities would still need to dedicate resource to looking at revised applications and deciding what would and would not amount to a material change sufficient to alter the original unsuccessful listing decision.

Planning issues: permitted development rights and making ACV status a material consideration in planning applications

The HOC report cited a number of examples where ACVs had been listed, but as a result of permitted development rights, have been converted and their use changed post-listing, for example, where a pub had originally been listed but was subsequently converted to a supermarket by the owner using their permitted planning development rights. Community groups have criticised this loophole as it appears to undermine the right to bid.

The government has stated that it does not intend to change its existing policy to remove permitted development rights in relation to ACVs stating that it would amount to a disproportionate change in planning regulations and local authorities are able to use their local plans or Article 4 directions to protect ACVs from change of use (see Practice note, Article 4 directions and the restriction of permitted development rights). However, it has relaxed its stance specifically in relation to pubs, see Legal update, Certain permitted development rights removed from drinking establishments listed as Assets of Community Value). The HOC Committee disagreed with the government’s view stating that:

 “Removing PD rights from only the relatively small number of assets listed as Assets of Community Value (ACVs) would not be disproportionate, however, and their ACV listing would suggest they may have a viable future under community ownership. In our view what does appear disproportionate is to require local people and local authorities to nominate and list an asset as an ACV and then to go through an Article 4 direction process to remove PD rights from that same asset. It would be more efficient to integrate the Article 4 process into the ACV process.”

The HOC report recommended that the government consult on:

• Removing permitted development rights in respect of change of use from ACVs for the duration of listing or five years (whichever is longer).
•  Compensation for owners, if the government refused to remove permitted development rights and instead continued to prefer local authorities to issue targeted Article 4 directions. The HOC report noted that at present many authorities were wary of using such directions because they could potentially be liable for compensation payments to owners affected by them. This difficulty could be overcome if the government established a fund for compensation claims in relation to Article 4 directions.

The HOC report also commented on the inconsistency between how local authorities consider ACVs when looking at change of use planning applications. The non-statutory guidance as it currently stands leaves it up to the individual local authority as to whether they consider ACV listing to be a “material consideration” in a change of use application. The HOC report recommends that this be altered to state that ACV listing will always be a material consideration for local authorities in all planning applications other than those for minor works. If this change were made it would certainly clarify the position for local authority planning committees, community groups, developers and property owners and ensure consistency between authorities.

Funding and expertise issues faced by community groups in exercising the right to bid

One of the issues raised by the HOC report in relation to community rights generally were the difficulties faced by community groups seeking to exercise their community right to bid and whether the current right to bid regime was as accessible as it could be.

The HOC report acknowledged the difficulties experienced by community groups in obtaining financial backing and putting together a competitive bid. The report also noted that while the right had been extensively exercised in relation to nomination it appeared that relatively few community groups had actually been successful in purchasing an ACV (with almost 50% of attempts to buy an ACV being unsuccessful). Obviously the ACV regime is not intended to force an owner to sell to a community group where a group submits a bid; however, it is questionable whether the aim of the legislation to enhance “community rights” has been met if in a majority of cases community group bids are unsuccessful.

To combat this issue, the HOC report suggested extending the moratorium period from six months to nine months in order to give community groups more time to put together a competitive bid. Whether this would achieve the desired aim is unclear, although investigation would be needed in order to determine whether it would help community groups to submit more successful bids or whether it would simply protract the selling process for owners.

Another possible solution offered by the HOC report (if the government were to refuse to extend the moratorium period) was for community groups to seek “preferred bidder” status whereby the owner would agree to sell to them provided they could meet certain criteria. However, it seems questionable whether this would greatly increase the number of successful bids from community groups, particularly in the light of the fact that in most cases a land owner would be looking to achieve the highest price possible for their land or building and may not be willing to sacrifice additional profit to sell to a community group.

Conclusion

Although the ACV regime is one of the most popular community rights exercised by community groups, the legislation and DCLG guidance appear to have a number of “grey areas” meaning that at present the effectiveness of the right is undermined and there are discrepancies between how authorities make their listing decisions and administer the ACV regime. The government’s promised review of community rights later this year is eagerly awaited…