AGENDA ITEM NO.
REPORT TO:
Executive Board
REPORT NO:
CPSO/02/04
DATE:
20 January 2004
REPORTING OFFICER:
Chief Property Services Officer (Ext 7200) and
Chief Legal & Administration Officer (Ext 2202)
CONTACT OFFICER:
Valuation & Commercial Estate Manager (Ext 7250)
Solicitor (Property/Development Services (Ext 2212)
SUBJECT:
Local Government Act 1972 General Disposal
Consent (Wales) 2003 – Disposal of Land at less
than Best Consideration.
WARD:
Not applicable.
PURPOSE OF THE REPORT
To notify the Executive Board of provisions of the new General Disposal Consent (Wales) 2003 and
to consider the implications for the Council.
INFORMATION
(A) Policy Framework
1.
It is Government policy that Local Authorities should dispose of surplus land wherever
possible and generally it is expected that land should be sold for the best consideration
reasonably obtainable. The Government does recognise that there may be circumstances where
an Authority considers it appropriate to sell land at an under-value. However, when disposing
of land at an under-value Authorities must remain aware of the need to fulfil their financial
duties in a way which is accountable to the Local Community which they serve.
2.
Local Authorities were given power under the Local Government Act 1972 Section 123 to
dispose of land in any manner they wished with the only constraint being that, except in the
case of leases for less than seven years, the disposal had to be for the best consideration
reasonably obtainable. Any disposal at less than best consideration required the approval of the
Secretary of State. Section 123 applies to land held for most Local Authority functions but
notable exceptions are disposal of land held for Housing purposes or otherwise let on secure
tenancies (governed by the Housing Acts) and for Planning purposes (governed by Planning
Legislation). Until recently the 1998 General Disposal Consents enabled disposals at an undervalue in certain limited circumstances e.g. to Charities and for certain community uses.
3.
The General Disposal Consent (Wales) 2003 which came into force on the 31 December 2003
now provides a general consent removing the requirement for Local Authorities in Wales to
seek specific approval from the National Assembly for a wide range of disposals at less than
best consideration. Authorities are granted consent in circumstances where the under-value
does not exceed £2 million and where the disposing Authority considers the disposal is likely
to contribute to the achievement of the promotion or improvement of the economic, social or
environmental well being of the whole or any part of its area or all or any persons resident or
present in its area.
4.
It is important to note that it will be for the Local Authority to decide whether any particular
disposal meets these criteria or continues to require specific consent under the 1972 Act. It
must be noted that the upper limit of £2 million under-value may in some cases be more
restrictive than under the previous 1998 Consent (which was unlimited if the purpose of
disposal, e.g. for charitable purposes, satisfied the Consent).
5.
The Consent only applies to land which was acquired or is held for purposes within the 1972
Act and therefore land held under other powers e.g. Planning or Housing Acts may only be
disposed of pursuant to powers granted under the relevant legislation.
6.
The Consents and Guidance on the “well being powers” state that the Council should where
appropriate have regard to its Community Strategy. Whilst a proposal need not necessarily be
specifically referred to in the Community Strategy or indeed the Corporate Strategy, the
Government would expect Councils to think very carefully before using the Power in a way
which ran counter to the aims and objectives of its approved Policies and Strategies.
7.
In determining whether or not to dispose of land for less than best consideration the Council
would have to obtain the view of a professionally qualified valuer as to the likely amount of the
under-value. Additionally, legal advice should be obtained on the question of whether the
disposal is capable of falling within the terms of the Consent. The Government also advise that
it may be useful for a Council to keep its appointed Auditor informed of any legal advice it
receives and the proposed action it wishes to take.
8.
The Council must be able to demonstrate that it has acted reasonably in agreeing under-value
transactions. It is unlikely that aggrieved unsuccessful or potential purchasers (or indeed local
residents) will in all cases accept the decision and therefore it is fundamental that the Council
should be able to demonstrate reasonableness having regard to applicable Council Policies.
B.
Budget
1.
One of the Council’s key priorities is of course to ensure sound financial management and a
critical element of this is to obtain ‘Best Value’ from the disposal of the Council’s surplus
property assets in order to achieve a level of receipts sufficient to sustain the delivery of key
services. Consequently, where any sale at an under-value is recommended it will be necessary
to demonstrate that the outcome will be at least as beneficial as the opportunities forgone by
agreeing a reduced receipt. If a significant number of disposals under the provisions of the new
General Disposal Consent were to take place, there could be reductions in capital receipts or
rents which would have resource and budgetary implications for the Council.
2.
Sales of land or property at an under-value have only ever taken place on an exceptional basis
previously and it is not envisaged that the change in legislation should alter this situation. This
report, however, proposes that clear guidelines and information requirements should be drawn
up to allow proper consideration of such requests in the future.
3.
Authorities are reminded in the Circular relating to the new Disposal Consent that all disposals
need to comply with the European Commissions State Aid Rules. The subsidised sale of land
and property and its subsequent development can be deemed to be State Aid. The Commission
has approved several schemes where a permitted amount of aid is allowed in the sale of land
and buildings and the proposed transaction must meet the terms of such schemes as are from
time to time enforced. If an Authority concludes that a proposed transaction may constitute
State Aid it must seek clearance from the European Commission before proceeding. The
responsibility for compliance with State Aid Rules rests with the Authority.
C.
Information & Consultation required for future reports to the Executive Board under the
scope of the General Disposal Consent 2003
1.
Given that the onus is now on the Council to ensure that it complies with normal and prudent
commercial practices in determining whether or not to dispose of property for less than the best
consideration and the need to demonstrate that it has acted properly and reasonably in such
cases, then it is considered essential that proposals and reports submitted to the Executive
Board must be supported by the following information:(a)
A valuation report undertaken by a qualified member of the RICS setting out the
restricted and unrestricted value of the property. (In general terms the unrestricted value
is the amount which will be received where the principal aim is to maximise the value of
the receipt; the restricted value is the market value of the property having regard to the
terms of the proposed transaction. However, where an Authority has invited tenders and
is comparing bids, the restricted value is normally the amount offered by the Authority’s
preferred purchaser and in other cases it is normally the proposed purchase price.)
(b)
An assessment with supporting evidence, undertaken by the department sponsoring the
project (the Project Sponsor) of the capital value to the Council of those benefits of the
proposal which are capable of monetary assessment (e.g. operational savings, income
generation, levering of additional financial resources e.g. grants etc) together with an
assessment, with supporting evidence, of the value of non-monetary benefits (economic
benefits such as job creation, environmental improvements, health and safety, design
quality and general social benefits to the community).
(c)
Confirmation from the Project Sponsor that the disposal will contribute positively to an
agreed Council Policy priority and will not adversely affect a higher priority project or
area of operation, together with a clear statement showing where a particular scheme fits
within service priorities.
(d)
The Project Sponsor to specify whether or not capital resources equivalent to the amount
of the reduction in valuation are to be provided, either by a reduction in spending on
other projects or by additional funding being identified.
(e)
A clear statement from the Project Sponsor that the benefits which the County Borough
Council or its residents will derive cannot be achieved unless the sale takes place at an
under-value and confirming that no alternative means of funding is available. In cases
where the proposed disposal is to an identified person/organisation without a tender
process this will normally only be possible by provision of a robust Business Plan and
analysis of the financial standing of the organisation.
(f)
Details (having taken advice from the Chief Property Services Officer) of principal heads
of terms of the transaction which will ensure, as far as is reasonably possible, that the
disposal will contribute to the achievement of well being locally.
(2)
(g)
Any views expressed by the Local Member or Local Community.
(h)
A statement from the Chief Legal & Administration Officer upon whether he considers
that the disposal is capable of falling within the terms of the Consent enabling the
Council to sell at an under-value.
The information in points (a) – (d) above should enable the Council to make a reasoned
judgement about the potential benefits of the disposal in relation to the loss of capital or
revenue. Item (e) above is most important, as it will be necessary to ensure that the benefits
anticipated are actually delivered. This could be achieved by incorporating a variety of legal
provisions, including leasehold disposals, delayed completion or reservation of pre-emption
rights, in the terms of the disposal. Alternatively, the Council might seek to “claw back”
additional payments from a purchaser if the promised benefit is not delivered within certain
timescales.
RECOMMENDATIONS
1.
That the Executive Board notes the provisions of the new General Disposal Consent (Wales)
2003 giving considerable additional freedom for the disposal of property at a consideration
which is less than the best reasonably obtainable.
2.
That in the normal course of events disposals of property covered by Section 123 of the Local
Government Act 1972 will be for the best consideration reasonably obtainable.
3.
That decisions to dispose of property under the General Disposal Consent (Wales) 2003 at an
under-value be taken by the Executive Board provided that all of the supporting information
and confirmation of consultation as set out in this report is supplied when reporting to the
Executive Board.
4.
That where proposals to sell property at less than best consideration fall outside the provisions
of the General Disposal Consent (Wales) 2003 or where the consent of the National Assembly
is required in any event, the Executive Board should determine whether to make an application
for the necessary consents under the appropriate legislation in respect of the disposal of a
particular property.
REASONS FOR RECOMMENDATIONS
1.
To enable the Council to comply with the provisions of the new General Disposal Consent
(Wales) 2003 ensuring that decisions are properly taken by the Executive Board based upon a
minimum amount of information to enable a balanced judgement to be made on the merits of
such disposals and ensuring that all resolutions to apply for consent to dispose of property in
cases outside the scope of the General Disposal Consent (Wales) 2003, whether for the best or
less than best consideration reasonably obtainable, are made by the Executive Board.
BACKGROUND PAPERS
1.
Letter from the Head of Local Government Modernisation Division Welsh Assembly
Government, July 2003.
2.
Welsh Assembly Government Circular; Disposal of Land in Wales by Authorities for less
than best consideration, December 2003.
3.
The Local Government Act 1972; General Disposal Consent (Wales) 2003 (effective
31 December 2003).
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