Note on transfer at an undervalue and community asset transfer
In general, local authorities are required to achieve the “best consideration reasonably
obtainable” when they are disposing of land, under the Local Government Act 1972. If they
are seeking to dispose of land or buildings at less than the market value, then they have to
obtain the consent of the Secretary of State for Communities and Local Government.
However, the Secretary of State has issued a number of “general” consents, that is, a set of
conditions which, if they apply to a particular transfer, means that a local authority does not
need to obtain specific permission to transfer at an “undervalue”.
The most important of these consents in a community asset transfer (CAT) context is the
General Disposal Consent 2003 (“the General Consent”). This permits local authorities to
transfer land at less than its market value, without the need to seek specific permission from
the Secretary of State, provided that:
the purpose for which the land is to be transferred is likely to contribute to the
“promotion or improvement” of the economic, social, or environmental well-being of
the area; and
the difference between the market value of the land and the actual price paid for the
disposal (if any) is not more than £2,000,000.
The conditions for the consent to apply mirror the wording of the “well-being power” in
section 2 of the Local Government Act 2000, although the General Consent applies to a
wider cross section of authorities than those actually covered by the Act.
Formal guidance on the use of the General Consent is issued by CLG in the form of a
circular, which is available to download via:
http://www.communities.gov.uk/publications/planningandbuilding/circularlocalgovernment
This guidance may change; the circular (like many other central government publications) is
under review.
It should be noted that this guidance, and indeed the General Consent, only applies to land
held by local authorities under the Local Government Act 1972. Essentially that means land
which is NOT held for housing purposes (which is usually held under the Housing Act 1985),
or land held for planning purposes (which, in relation to disposal, is subject to section 233 of
the Town and Country Planning Act 1990). Land held under those Acts is subject to a
separate set of permissions and criteria which are outside the scope of this note.
Issues can also arise in relation to the particular complexities around land held as common
land or village greens, and local authorities and TSOs should have regard to the separate
guidance note issued on this area.
The General Consent guidance suggests that local authorities should:
have regard to their community strategy, when considering whether to exercise the
power to dispose;
This document forms part of a series produced by Anthony Collins Solicitors for the Asset Transfer Unit.
This document is intended to be used as general guidance only. Neither the Asset Transfer Unit nor Anthony Collins
Solicitors can accept any responsibility for any liability arising from its use in any given context. We would recommend that
further legal advice is taken before application of the guidance/use of the documents in specific circumstances.
comply with “normal and prudent commercial practices”, including obtaining the view
of a professionally qualified valuer so that the likely amount of the undervalue can be
assessed. There is a technical appendix to the guidance which goes into further
detail on how the valuation should be carried out, including assumptions that the
valuer should make, and factors that should be ignored;
consider the question of State Aid (on which see our separate guidance note).
Local authorities sometimes hold land as trustee of charitable property, which most
frequently arises in relation to libraries, educational buildings, or public open space (for
example we have advised on the ownership arrangements for a civic park, which was
originally gifted to the authority under the terms of a trust deed). Here the authority will again
have additional responsibilities which arise from its role as trustee, and will be subject to the
more onerous requirements set out in the Charities Act 2011. Guidance on the disposal of
land held charitably is provided by the Charity Commission at:
http://www.charity-commission.gov.uk/library/guidance/cc28text.pdf
Practical issues
Some issues have arisen in the use of the power to dispose at less than market value, and
we address these below:
1. Are local authorities required to put a disposal out to tender, where it is at an
undervalue?
We are aware of a local authority that insisted that, in relation to a specific site which was not
currently occupied by the TSO, they were required to tender the opportunity to acquire the
site at an undervalue to ensure that they could be seen to have followed the correct process.
There is no requirement as such that local authorities undertake a tendering process within
the General Consent. However, there is the general requirement for authorities to follow
“normal and prudent commercial practices” mentioned above, and a reminder as to the
fiduciary duty that authorities have to local people.
However, where a local authority has established a robust business case for transfer, we are
not of the view that “market testing” a transfer proposal is required to meet the General
Consent criteria.
2. What should TSOs expect local authorities to do in relation to justifying a
transfer at an undervalue?
TSOs should expect local authorities to seek to understand:
what community benefits will be realised by transfer;
how the interests of local people will be better served;
the business plan and financial viability of the TSO’s plans for the premises;
the State Aid implications of the transfer;
the TSO’s future plans;
the market value of the premises and the difference between that and the proposed
transfer value.
This document forms part of a series produced by Anthony Collins Solicitors for the Asset Transfer Unit.
This document is intended to be used as general guidance only. Neither the Asset Transfer Unit nor Anthony Collins
Solicitors can accept any responsibility for any liability arising from its use in any given context. We would recommend that
further legal advice is taken before application of the guidance/use of the documents in specific circumstances.