Meeting documents

The Community Estate Portfolio

Report to Property Board 31 July 2007

1. Introduction and reason for the report

The Board is reminded that in October 2006, the Government published a White Paper - `Strong and Prosperous Communities' - in two volumes totalling some 230 pages! The full text is available on the web and a link is provided in Annex 1 below (there is a summary)

The White Paper signals the next stage of public sector reform. It aims to create strong and prosperous communities and deliver better public services through a rebalancing of the relationship between central government, local government and local people (increasingly known as the 3^rd sector) via a number of initiatives.

Immediately after publication of the White Paper, the Secretary of State for CLG invited Barry Quirk, Chief executive of the London Borough of Lewisham, to review the barriers and incentives affecting the transfer of public assets to community management and ownership. His report (The Quirk Review) titled "Making Assets Work" was published in May 2007 with the Government's response "Opening the Transfer Window" being published a few days later. Annex 1 provides a briefing paper published by the Institute of Public Finance on the subject including links to both the Quirk review and the government response as well as the original White Paper.

As usual in these situations, a vast body of paper has been generated.

2. Consultation

This report has been prepared by Property Services but has been subject to consultation throughout the Council and comments have been incorporated where necessary.

3. Summary of findings

Quirk provides a summary of his findings on his page 7 and 8. This is reproduced in full below.

The report contains 3 conclusions

The report also identified 5 key actions

Quirk makes it clear that the above actions and conclusions lead to a range of possibilities extending from short-term management agreements, through to leasehold ownership on leases of varying lengths and freehold ownership. It also stretches from small volunteer-run village halls and community centres to multi-million pound, multi-purpose community enterprises.

The greater the stake, the greater the financial and legal responsibility the organisation takes on, but also the greater the freedom to exploit the asset's potential.

It seems clear that both Quirk and the government have in mind disposals at less than best value where appropriate and the Board is reminded that in 2003 the Local Government Act 1972 was amended so that such disposals could take place at a ceiling of A32,000,000 without further reference to the government.

4. Working definition of properties held for community use.

It is suggested that the following definition be adopted.

"Community Estate in this context means land or a building owned by the Council (freehold or leasehold) not held specifically for income producing purposes which is occupied, usually by a charitable or similar voluntary sector body, on terms that often (but not always) involve some degree of financial assistance from the Council. Financial assistance means assistance with rent and/or direct grant and /or practical help with building maintenance. The definition excludes properties held in the Commercial Estate where any occupation and subsidy is likely to be transient".

The Board is invited to confirm this definition.

5. The situation in B&NES

Like most Council's B&NES owns and manages a number of properties that are used primarily for the direct benefit of the community and are not treated as income producing investments, thus falling within the above definition. Such properties tend to be occupied by community, voluntary sector or similar bodies where there is often a significant level of financial assistance given by way of direct cash grant and/or rent subsidy and sometimes assistance with repairs in return for certain defined activities usually set out in a tailor made Service Level Agreement.

This Council does not own much in the way of unused properties where there are no plans for further use but an example of this would be Whiteway Community Centre. It does own unused properties, some of which are identified for disposal; and some which on the face of it which would fall within the Quirk Report thinking.

Please see Annex 2 to this report which identifies the properties that officers consider fall within the above general definition. The Board's attention is drawn to the variety of different types of building and their differing uses.

It should be noted that some of the properties in the schedule can be regarded as transient in the sense that if the need to support the tenant ceased for whatever reason, the tenant would either vacate or would resume paying a full market rent. Thus some of the premises identified could fall vacant at virtually any time for one reason or another. In certain cases and where the planning use permits, it should prove relatively easy to re-let to a commercial tenant on market terms or sell at market value.

The Council has a Policy for granting leases to the Voluntary Sector and Similar Bodies which was developed/approved by various Committees in the period culminating in January 1999 when the then Resources Co-ordination Committee approved new financial arrangements. This includes some 10 No shops and offices held in the Commercial Estate presently occupied by Charitable Bodies at market rents subsidised to some degree by a number of the Council's supporting services.

It will be appreciated that as a result of the above comments properties will move in and out of the Community Portfolio over time.

The Policy for granting such leases has worked reasonably well over the past few years and per se, is not seen as being in need of variation. However, there have been several instances recently where tenants have made approaches to officers seeking to renegotiate longer leases or to purchase out right.

The Head of Policy & Partnerships comments that -

"Benefits sometimes cited for asset transfer include a sense of community belonging and better focus on local priorities. The Council with its partners has signed two Local Area Agreement targets which are relevant to these outcomes. These are to increase volunteering and to improve access to local decision-making. If these targets are met, the Council will receive £362,000 in `reward grant'.

6. Options

The Board is reminded that the AD Support Services & Chief Property Officer has delegated authority to manage the estate as a whole. However Officers would wish to exercise this delegation within a framework set by the Board.

The Board's discretion as to how it wishes to manage its Community Assets may not remain strictly absolute. Whilst at present, the Government seems content to encourage Local Authorities to think laterally when it comes to direct community ownership (in some form) of say, a community hall, if it is perceived that authorities are ignoring advice/circulars etc, then wider powers may be taken to force the issue

Community Call for Action - CCfA It seems likely that the Government will extend this existing provision available in law and presently covering crime and policing matters to enable any elected councillor to ensure a request from a member of the public is given due consideration by referring it to the council's Overview and Scrutiny Committee.

Furthermore there is an existing but little known legal power - Public Request to Order Disposal (PROD) that is available. Its use could lead to the SoS directing a council to dispose of a building or piece of land that is unused or underused in certain circumstances.

Officers advise that the Board, in formulating its policy, it has a number of options including the following:-

a. Continue with the present policy of granting leases of appropriate length and terms at market rents with subsidy if necessary and where appropriate given by the supporting service.

b. It could regard its community portfolio as assets to be held long term and only to be disposed of, if ever, at value. By inference officers would continue to manage premises as at present only bringing to the Board exceptional circumstances where Member decisions were required.

c. It could take the view that whilst it would not wish to loose freehold ownership, longer leases of say up to 50 or 99 years duration could be granted thus giving community tenants a longer term of security. Terms would follow the current policy with the assumption of rent subsidy.

d. It could pro-actively promote Community Ownership by transferring the interest to the community either freehold or long leasehold on "soft" terms.

NB It is axiomatic that it would treat each case on its merits and terms would vary case on case.

It will be obvious to the Board that it will rarely be open to the Council unilaterally to alter the status quo; without goodwill on both sides, it could take a very long time to alter binding legal arrangements. For instance Saltford CA is let on lease of some 99 years duration on FRI terms and operates very successfully with no assistance from the Council. On the other hand, Percy Community Association (New King Street, Bath) occupies a building where maintenance costs are high even with the Council being responsible for external repairs and the maintenance of the lift and automatic doors. Terms for a new lease are presently under negotiation.

7. Financial Implications

Clearly the options set out above would have varying financial effects depending on the circumstances. Any decision to deal with a property at anything other than full market value will impact on the book value of the asset in the balance sheet and will, in certain circumstances, have an effect on revenue budgets.

8. Current examples

As indicated above the premises listed in Annex 2 are occupied by tenants on a variety of contracts including a Community Centre let on a full repairing and insuring lease granted for 99 years with some 50 years left un-expired at £1pa where the tenant funded the construction of the building to a short term occupier on a contracted out lease which ends in August 2007.

Some of the properties are what might be termed overtly "community assets" in both construction and use ie the Community Centres. Some are less obviously so such as Abbey Chambers the greater part of which is occupied by subsidised tenants who in turn provide a direct service for the Council and/or the wider community.

There have recently been two examples of direct requests to Properties Services from tenants of Community Halls to purchase. Both have been advised that further action would be premature pending detailed consideration by the Property Board. Below please find further cases illustrating some of the issues.

Case 1 - WHISTY Community Association, Radstock.

A communication was received from the Secretary in May 2006 advising that the CA had entered into a 20 year lease of the land from Wansdyke DC after which the Community raised funds to build the Centre. The trustees and committee indicated that the lease had about 6 years unexpired and following an item in the news (probably a reference at that time to the Council disposing of surplus assets) asked if the Council would sell the freehold.

Officers' initial response was to indicate that a freehold sale would not be possible but the Council would consider surrender and re-grant on terms to be agreed. Later, the Secretary was advised that in the light of the White Paper (see appendix 1 to this report), it would be looking at its Community Estate and preparing a policy to deal with this and other requests in the future.

Case 2 - Beacon Hall Community Hall, Peasedown St John.

Setting aside the fact that there is a fundamental mis-understanding between the Council and the Community Association as to the legal relationship between the two parties, last year the CA secretary enquired if the council would sell (preferably) or if not grant a very long lease to the CA on generous terms. Alternatively, instead of disposing to the CA, transfer on a similar basis to the Parish Council would be an option. The CA was advised that in the light of the White Paper, the council would await its outcome expected in the Spring of 2007 after which a policy would be developed.

Recently, the Association has commenced discussions within the community which contemplate an extension to Beacon Hall, to include office facilities for the Parish Council.

The current lease to the CA was granted by Wansdyke DC in May 1995, for 25 years on FRI terms. The Hall was built under the auspices of the Community Association using funds contributed by the housing developer under a Section 106 Planning Agreement with some assistance from Wansdyke. The lease thus has just less than 13 year to run which would not normally be long enough to satisfy a grant making body such as the Lottery Commission. At the end of the lease the land and buildings would revert to the Council.

Case 3 - The Corn Market, Walcot Street, Bath

The Board will doubtless know that this is an important Listed Building on the northern boundary of a potential development site. There is a community organisation interested in taking it over but the estimated cost of putting it into a useable condition is in the region of £1.5m and there must be doubt about their ability to raise funds of this magnitude.

Case 4 - 3 Longacre

This property has been occupied by a local community organisation in the past but is now vacant; it is in very poor condition and negotiations for its sale to Somer for housing ( for single homeless persons) are well advanced. It could, conceivably be subject to approaches pursuant to this agenda although this seem unlikely.

Case 5 - Cleveland Baths

The Board's attention is also drawn to Cleveland Baths where a situation along the lines foreshadowed by Quirk is developing. A fully worked up business plan from the promoter is awaiting finalisation before any decision on how to move forward is possible. A source of significant funding will be needed.

9. Some further considerations

A number of the case studies described in Quirk are, in fact, Development Trusts of which there are some 400 in England and Wales together owning £350m in Property Assets. Each trust is community owned and needs to be able to generate income and uses its property to do so. Assets are "locked in" so cannot be disposed of for other than community benefit. Profits are ploughed back into the trusts. A local example is the Sofa Project based in Bristol.

Whilst a Community Association may well not wish to become a Development Trust, the same considerations for setting up a Trust would apply if it was intended to sell or grant a long lease on advantageous terms. For example

a. the CA must have a robust business plan.

b. the CA needs to have competent members/trustees (or access to appropriate advice) who can manage money, understand maintenance and repair of buildings etc.

c. the CA needs to be adequately funded or able to raise adequate funds.

d. the CA needs to accept that the premises can only be used for the relevant purpose (ie as a community hall) and cannot be sold (asset lock).

e. the CA needs to have the overt support of the authority.

As implied elsewhere, there would need to be variable solutions to any disposal of a community asset which would be based on a range of factors: eg the capacity of the organisation; what it wants to do with the asset; the expertise of its managers; its business plan; availability of funds for its purpose; the confidence of the council in the ability of the organisation in the short and longer term.

Disposal could therefore range from a simple licence quickly terminable; a short term lease (up to twenty years) with or without rights to renew; a longer lease (up to 99 Years) to a very long lease or freehold disposal.

With freehold sales or grant of very long leases, the ability of the council to control what happens/how the asset is used diminishes. There is always the concern that the asset may over time be used for purposes not originally envisaged or intended or even sold for a more valuable use. The use of "Claw Back" can often work well where cash grants are made but can be less than successful where freehold or long leaseholds are involved.

The Head of Policy & Partnerships further comments that -

Current national initiatives in response to the Quirk review include:-

B7 a regional programme of workshops for local authority staff on this issue from September 2007 to March 2008.

B7 a Pilot Programme for local authority-community sector partnerships in 20 local authority areas.

B7 promotion by Government of the proposed 93Community Call for Action94 to enable communities to support bids for taking on public assets

B7 a A330m Community Assets Fund for refurbishing local authority premises for transfer to communities, managed by the Big Lottery Fund. 93

There is also a Planning dimension to be considered when reaching any decision. The emerging Draft local Plan has a whole chapter - B3 - on Community Facilities & Services. In essence, community facilities within the meaning of the chapter are to be retained unless they can be re-provided in an equally advantageous manner in the vicinity.

10. The Way Forward

The Board is invited to advise Officers of the overall framework within which the Community Portfolio should be managed in the future.

It is specifically asked to indicate:-

11. Recommendations

That the Board:-

1. - notes the report.

2. - confirms the validity and relevance of the existing concessionary lettings scheme and that this represents the primary method by which the Council supports community initiatives.

3. - confirms that it is not minded to promote the disposal of community assets but will be prepared to consider such proposals on an individual basis by way of reports submitted to it for consideration.