If any local authority is considering disposing of land in order to generate income in today’s economically challenging times, the second public interest report issued by the auditor under section 8 of the Audit Commission Act 1998 into Uttoxeter Town Council’s sale of land, is a salutary lesson on how not to proceed.
Section 127 of the Local Government Act 1972 provides that a parish or community council, or the parish trustees acting with the consent of the parish meeting, may dispose of land held by them in any manner they wish, subject to a requirement in section 127(2) to secure the best consideration that they can. (The same provisions in relation to the disposal of land by principal councils are contained in section 123.)
The following issues of best practice can be distilled from the auditor’s report and should be borne in mind by a local authority when disposing of land.
Valuing the property
Without marketing the property and/or obtaining an appropriate independent valuation, it is impossible for an authority to demonstrate that it has achieved the best consideration possible. Although this seems an obvious point, unfortunately the town council completed the sale and exchanged contracts without marketing the property or satisfying itself that it had received the best price. A subsequent valuation, after the town council had received net sale proceeds of £119,390, implied the total value of the land was £160,000. Although marketing a property for sale is not a legal requirement, it is usually a key part of ensuring the best price is achieved.
It is essential that not only is proper legal advice taken but that the advice which is received is actually considered. Again, this would be appear to be an obvious point. However, not only did the town council not take sufficient legal advice, it was also found guilty of not properly considering, or acting upon, the advice that it did receive in relation to the sale. In particular, it:
- Ignored advice contained in three letters from the auditor reminding the council of its section 127 obligations and the fact that its procedures had to withstand local scrutiny. Even though the minutes of one of the town council’s meetings record that one of the auditor’s letters of advice was read out, the minutes make no reference to the council’s response to the letter.
- Received two letters of advice from the solicitor acting for the council stating that it would be ill-advised to commit to the purchaser given that there was the possibility of receiving a better price for the land. Although members of the town council at their meeting on 28 August 2008 recommended accepting the solicitor’s advice, that recommendation was deleted following discussion at Council about ten days later. The auditor recommended that when considering committee recommendations, the town council should have the option to accept, amend or reject the recommendation but not to remove them from the minutes.
Ensuring decisions are lawful
Decisions must be properly taken. To ensure that any decision is lawful, it has to be shown that the decision was a reasonable one. A decision will be deemed to be unreasonable if it:
- fails to take into account relevant factors; and/or
- takes into account irrelevant facts; and
- is one that no reasonable council would make.
The town council’s decision to sell the land was rendered unlawful because the decision was taken in the absence of updated legal advice on the transaction or material information, such as the value of the land and buildings included in the deal (which changed on the day of the committee’s meeting to include a sum of £10,000 in lieu of the purchaser providing the town council with two parking spaces which were said to have a monetary value to the council of £30,000).
The auditor was also critical of the way in which the town council reached its decision, which in his view was symptomatic of the organisation’s poor underlying governance framework. In particular, he criticised:
- A lack of clarity over the roles of councillors, the clerk and other staff. The auditor’s report recommended that a written protocol covering the respective roles of individuals at the town council should have been adopted. He also criticised members for involving themselves in the day-to-day running of the council rather than allowing the clerk to act on council decisions.
- A lack of clarity in the terms of reference of committees and sub-committees. The Town Hall committee, which was established in June 2007, had no other term of reference than to “explore option 2 [being an alternative scheme to refurbish the Town Hall] and report back to the Council as soon as possible”. The Town Council’s committees and sub-committees should have ensured that they had clear written terms approved by the council.
- The fact that agendas and background papers were not circulated well in advance of the relevant town council meeting. Unfortunately, the late circulation of agendas and informative background papers on the proposed sale to town councillors meant that they did not have the necessary information available to ensure that their decision to sell the land was properly informed.
- Town councillors for not approaching the decision-making process with an open mind. Clearly, it is essential that councillors decide the particular issue before them based on the arguments and evidence presented at the committee meeting.
Key tips therefore are:
- When disposing of land, an independent valuation should be obtained to comply with the relevant section of the Local Government Act 1972.
- Committees and sub-committees should have clear terms of reference and should ensure that they operate within these.
- Proper legal advice should be obtained and account of that legal advice should be taken in the decision-making process.
- If key information is not available to council members beforehand, the meeting should be adjourned to allow proper consideration of any new information or the decision deferred to a later meeting.
Given the importance of getting the decision process right, PLC Public Sector’s toolkit on decision-making is a useful resource for public bodies, see Practice note, Public body decision-making and challenges to decision-making: toolkit.