Item 6 - CATs and Common Good Assets

7/28/2019 Item 6 - CATs and Common Good Assets

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REPORT TO: POLICY AND RESOURCES COMMITTEE ON 2 JULY 2013

SUBJECT: COMMUNITY ASSET TRANSFERS AND COMMON GOODASSETS

BY: CORPORATE DIRECTOR (EDUCATION & SOCIAL CARE)

1. REASON FOR REPORT

1.1 The Committee is asked to consider the issues relating to applications for aCommunity Asset Transfer (CAT) of “inalienable” common good property andconsider the recommendations below.

1.2 This report is submitted to Committee in terms of Section III A (20) of theCouncil's Administrative Scheme relating to management of the commongood.

2. RECOMMENDATION

2.1 It is recommended that Committee agree to:-

(i) amend paragraph 3 of the procedure set out in the CAT policy (asdetailed in paragraph 6.3) to include a further referral to Committeeof applications for CATs of potentially inalienable common goodassets, to enable consideration to be given, on a case by casebasis, to whether court consent to the transfer is required (asdetailed in paragraph 5.10); and

(ii) consider recovering the costs of progressing a CAT through thecourts, on a case by case basis (as detailed in paragraph 5.3).

3. BACKGROUND

3.1 This Committee agreed to formally adopt the Community Asset Transfer (CAT) Policy at its meeting on 7 May 2013 (paragraph 4 of the minute refers).The policy included potentially inalienable common good assets in the CATprocedure and stated at paragraph 3 that:

“Where the asset falls under „inalienable common good‟, the decision toproceed with the transfer will be decided by the Policy and ResourcesCommittee following receipt of an expression of interest.”

3.2 CATs provide an opportunity for community groups to acquire Council assetsfor the purposes of providing local services and / or helping to give local





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3.10 Where court consent is required, the court will consider the physical conditionof the asset; the level of local support for the transfer of the asset to thecommunity group; whether the proposed use of the asset is in keeping withthe principle of common good property and the proposed transfer price of theasset (if any) amongst others. Court consent is not a mere formality: there isa possibility that such consent could be denied, or granted subject toconditions which the court thinks fit to impose. For example the most obviouscondition which the court is likely to impose is that any financial receipt,further to transfer of the asset, should be paid into the common good fund andpossibly ring-fenced for a specific purpose in line with the original commongood asset‟s usage.

3.11 The cost of applying to the court for consent to transfer a common good assetcan cost anything from £1000 for a straightforward case, (excluding necessary

advertising fees) to several thousand pounds for more complex and lengthycases. In general, any application for court consent will take approximately 6months from the gathering of information stage through to the date of theinitial court hearing. This will however vary depending upon the availability of information, the complexity of the case etc. After the initial court hearing, it isnot possible to provide an estimate of the likely timescales involved as thisvery much depends upon whether there any objectors to the proposed assettransfer and upon the Sheriff‟s views.

4. BENEFITS OF ASSET TRANSFERS VIA CAT

4.1 The Committee is asked to note the benefits of transferring potentiallyinalienable common good assets in the CAT process, namely:-

(i) Community interest in using and improving inalienable common goodassets;

(ii) the unusual nature of some of the common good assets held by theCouncil which make them unlikely to attract interest from commercialpurchasers;

(iii) on-going and significant costs and risks to the Council/ common good

associated with maintaining common good assets;

(iv) the ability of the Council to obtain a capital receipt for the benefit of thecommon good account through CAT;

(v) advanced stage of the CAT application by the Forres Heritage Trust for the Tolbooth in Forres. This group currently have a 1 year lease of thesubjects, whilst they prepare their business plan for a CAT, and haveincurred significant cost to date in improving the subjects on theassumption of a CAT;

(vi) longstanding group work which has been ongoing to transfer CullenTown Hall;



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4.2 The transfer of inalienable common good assets within the CAT processfurther enables those assets to be subject to the same requirements as anyother CAT, in terms of the need for a robust business case and demonstrableevidence of community need and support for the CAT. The level of any suchsupport, and the sufficiency of the business case, would however need to begreater and related to the grounds for the court permitting alienation, whereinalienable common good assets are concerned.

4.3 Although the exclusion of inalienable common good assets from CATs couldcircumvent the potential and additional resource implications that can arisefrom the need to obtain court consent to their transfer, enabling inalienablecommon good assets to be disposed of through the CAT process provides theCouncil with the flexibility to support outright disposal of inalienable commongood assets, where this option meets with Council objectives, and where the

costs and associated risks are within bounds with which the Council iscomfortable. Where, however, any such disposal is impracticable or where therisks associated with that disposal are too high this would not be in line withCouncil objectives. Any disposal could accordingly be rejected.

4.4 Additionally, the disposal of inalienable common good within CAT providescomfort to those community groups that have expressed an interest in and, insome cases, have expended large sums of money on the basis of beinggranted, a CAT of a potentially inalienable asset.

4.5 If inalienable common good assets fall out-with the CAT process, disposal of

such assets would remain within the existing asset disposal procedure. Thebenefit of the CAT procedure is that it provides the Council with an additionallevel of corporate scrutiny over any such disposal which is absent from thegeneral disposal procedure.

5. ISSUES

The disposal of inalienable common good assets within the CAT processrequires consideration to be given to the following issues:-

Issue A: Costs;

5.1 The disposal of inalienable common good assets through the CAT processrequires that consideration be given to the costs of court consent, if suchconsent is required, for outright disposal of an inalienable common goodasset.

5.2 As outlined at paragraph 3.11 above, the costs of applying to the court for consent are difficult to accurately estimate and could be considerable. This isa matter which Committee could give consideration to at a proposed further referral stage, in terms of whether some or all of the costs should berecovered from the relevant community group interested in a CAT. Any

decision by the Council to recover such costs would need to be by way of agreement with the community group. The agreement could also makeprovision for the Council‟s liability for costs to be subject to a maximumamount to be determined in each individual case to ensure that the Council is



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not left with an open ended liability in this connection. Any agreementregarding partial recovery of costs from the community group would besubject to receipt of a robust business plan and strong community support.

5.3 Although the full costs of applying for court consent could be passed onto therelevant community group in each instance, it is recommended that suchcosts are considered on a case by case basis as the proposed CAT may bein line with Council objectives and priorities, and represent good value to boththe community and Council. The discretion to recover some or all of theassociated court costs enables the Council to take account of the overallbusiness plan of the community group, the proposed disposal price to be paidfor the asset and other supporting information.

Issue B: Risk Options;

5.8 As with any asset disposal there are associated risks where there is aquestion as to the Council‟s right to dispose of a common good asset. Theserisks can however be managed through the CAT process by ensuring that anyproposed disposal of the asset is one which is in line with Council policies andobjectives, enabling the Committee to set the parameters of consent to anysuch a disposal.

5.9 The least risky option for the Council, where agreement in principle to anexpression of interest has been granted, would arguably be to apply to courtfor a determination in each instance where there is a question as to the

Council‟s ability to alienate the asset. This however has cost and timeimplications for both the Council and the relevant community group. Further,the ability of the Sheriff to make a determination would be dependent uponthe provision of information concerning the history of the asset and its former usage; the proposed new use of the asset; and would require consultationwith the former inhabitants of the common good burgh. This information wouldnot be readily available at the expression of interest stage.

5.10 Alternatively each case could be carefully assessed to ascertain whether court consent is strictly necessary for the disposal of the asset. This optionwould require investigation by Legal Services to enable a legal opinion to be

provided as to whether court consent should be sought. The provision of alegal opinion would be dependent upon case particulars and would requirebackground research by the CAT working group and community groupregarding the history of the asset and its former use; consideration of theproposed new use of the asset to include the merits of the community group‟sbusiness case; and would require consultation with the former inhabitants of the common good burgh. This information could be remitted to Committeeupon receipt of the outline business case to enable a determination to bemade as to whether court consent should be obtained. This option also hastime and resource implications for the Council and community group.

5.11 Both the above risk options provide the necessary transparency and fairnessof procedure that are essential to any CAT. If there is strong local support for a CAT, there may be minimal risk to the Council and community group inprogressing a CAT of the asset concerned without court consent. The costs of



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obtaining court consent may in some instances be prohibitive for communitygroups and prevent the disposal of an asset which the Council supports. Thesecond option presents a more affordable option for community groups, but itdoes present a slightly higher risk for the Council should a decision be madethat court consent is not required. The second option does not however preclude a court application for consent being made where this is considerednecessary.

6. FURTHER COMMITTEE REFERAL

6.1 In light of the risk associated with obtaining court consent, it is recommendedthat Committee approve an amendment to paragraph 3 of the CAT policy andprocess to enable Committee to give more detailed consideration to, anddetermine the parameters under which Council support could be given to, a

CAT of an inalienable common good asset. The suggested amendment to theprocess would be by way of further Committee referral for detailedconsideration of an outline business case concerning an inalienable commongood asset.

6.2 This change in process would enable Committee to determine, at thatstage, the specific conditions under which the Council would approve a CATof a particular asset and what would require to be met by the communitygroup for a sale or lease agreement under the CAT process. This wouldinclude detailed consideration of whether court consent for the disposal of theasset is required. Consideration could also be given at this stage, where

applicable, to whether some or all of the costs of obtaining court consent tothe disposal should be recovered.

6.3 It is recommended that paragraph 3 of the CAT policy be amended to read asfollows:-

“Where the asset falls under „inalienable common good‟, the decision toproceed with the transfer will be decided by the Policy and ResourcesCommittee following receipt of an expression of interest. This will be known asa decision in principle.

Upon its receipt, the outline business case will also be referred to the Policyand Resources Committee to enable more detailed consideration to be givento the terms of any CAT, to include consideration of whether court consent tothe transfer is required and the recovery of costs of obtaining such consent.”

6.3 It is recommended that the existing process of referral to Committee at theexpression of interest stage should be retained. This will enable Committee tomake a decision in principle at the earliest possible stage as to whether aCAT of the asset is one which could receive Council support or is whollyunsuitable and out-with Council interests.

6.4 A copy of the general CAT process is attached as Appendix 1. A copy of theproposed new process relating to potentially inalienable common good assetsonly is attached as Appendix 2.



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6.5 The decision of the Committee in respect of any common good asset, whether at the decision in principle or outline business case stage, would not set aprecedent for consideration of any other common good asset, and would besubject to receipt of a suitably robust business plan, evidence of strong localsupport for the CAT and satisfaction of any other condition imposed by theCommittee.

7. PROPOSALS

7.1 It is considered to be in the Council‟s interests to:-

(i) amend paragraph 3 of the procedure set out in the CAT policy to includefurther referral to Committee at the outline business case of potentiallyinalienable common good assets, to enable consideration to be given, on

a case by case basis, to whether court consent to the disposal isrequired; and

(ii) consider recovering the costs of progressing a CAT through the courts,on a case by case basis.

8. SUMMARY OF IMPLICATIONS

(a) Council/ Community Planning Priorities(i) SOA/National Outcome 11 - we have strong, resilient and

supportive communities where people take responsibility for their

own action and how they affect others;

(ii) SOA/National Outcome 15 – our public services are high quality,continually improving, efficient and responsive to local people‟sneeds;

(iii) Service Priority 3.5 – Improving Workforce, Standards andInfrastructure; and

(iv) Service Priority 4.1 – Improving key delivery processes;

(b) Policy and LegalThe administration of common good assets is governed by Section222(2) of the Local Government (Scotland) Act 1973. This reportshould also be considered in accordance with the CommunityEmpowerment and Renewal Bill and associated CommunityEmpowerment Action Plan. Section 74 (2A) of the Local Government inScotland Act 1973 and The Disposal of Land by Local Authorities(Scotland) Regulations 2010 apply to disposals of assets for less thanmarket value or best consideration.

(c) Financial implications

The costs of maintaining common good assets should be borne by theCommon Good account in question, as should any costs associatedwith administration of the common good. In practice, the income



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generated by common good varies significantly and with it the ability of the common good to bear any additional cost.

Costs associated with obtaining court consent for disposal, and costsassociated with maintaining non-operational common good assets mayboth fall to the Council‟s General Fund.

Any income generated by the sale or lease of common good assets willbe credited to the Common Good in question. However, it is consideredunlikely that the CAT process will generate significant revenue or capital receipts.

The costs associated with obtaining court consent to dispose of inalienable common good will include £87 to lodge the relevant action

in court. The cost of advertising the action in relevant newspapers willbe approximately £1500. Thereafter it is impossible to give a reliableestimate for the total cost of the court action. Once the action hascommenced, the costs will very much depend upon the number of objectors; time spent in court; and the ruling of the Sheriff.

Additionally, once a commitment to proceed to an evidential hearinghas been made, that decision cannot be departed from without payingthe other party/ objector ‟s expenses.

It should also be noted that after the initial hearing in court, the

timescale for completion cannot be ascertained with any degree of certainty as this depends on numerous factors and will be influenced bythe Sheriff.

(d) Risk ImplicationsThe ability to dispose of inalienable common good assets in the CATprocess increases the disposal options for the Council for assets whichare not suitable for its own use and for which there is no externalcommercial interest or demand. CATs of such assets provide theCouncil with the opportunity to reduce their liability for ongoingmaintenance and operational costs, whilst supporting communitygrowth.

The disposal of inalienable common good assets may require Courtconsent, which consent could be refused or otherwise granted subjectto conditions which the court thinks fit to impose. Where the action for disposal is unsuccessful, the Council could be ordered to pay theexpenses of any objectors to the action.

If a decision is made to proceed with an asset transfer without courtconsent, there is a risk that such a decision could be open to later

challenge. This risk could be minimised by ensuring that any suchdecision is made further to detailed background research and publicconsultation.



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(e) Staffing ImplicationsThe disposal of inalienable common good assets via the CAT processwill require the commitment of staff across the Council. Where suchdisposal requires court consent, significant input from the Council‟sLicensing & Litigation team will be required, particularly where theaction proceeds all the way to an evidential hearing.

(f) PropertyThe property implications are as detailed in this report.

(g) EqualitiesThe purpose of this report is to inform Committee of the various optionsavailable in terms of CATs and common good assets. At this stage anequality impact assessment is not required.

(h) ConsultationsConsultations have been undertaken with the following staff who are inagreement with the content of this report relating to their service:

Estates Manager Margaret Forrest, Legal Services Manager Head of Financial ServicesLorraine Paisey, Principal AccountantHead of Community CareReni Milburn, Principal Officer, Economic Development

Andrew Gray, Asset Management Co-ordinator

9. CONCLUSION

9.1 The disposal of inalienable common good assets through the CATprocess provides the Council with maximum flexibility to determine theproposed disposal on its own merits. Further referral to Committee(including liability for likely court costs) of the outline business case for a CAT would be in the interests of community groups and the Council tominimise any risks arising from the proposed transfer.

Author of Report: Emma Carle, Solicitor, Property & ContractsRef:

Documents

Item 6 - CATs and Common Good Assets