Acquiring Land and Buildings

Negotiating a stake in land or a building that is the subject of development or transfer is probably the most important agreement that needs to be undertaken in the whole process. The terms of this agreement are a key determinant for the financial viability of any transfer or development project and can have a significant impact on its funding and implementation (rent/acquisition price). The final formal acquisition of a stake can take place either at the start of a process of building development/refurbishment or at the end. It can be the subject of a protracted negotiation or a relatively straightforward transaction depending on the project.

Community Right to Buy Legislation

The Community Right to Buy provisions in Part 2 of the Land Reform (Scotland) Act 2003 allow communities in Scotland to register an interest in land and have a pre-emptive right to buy that land when it comes up for sale.

Your community may be looking for land or land with a building on it to fill a particular community need.   It may be that you have identified a demand for a hall or community centre, a play area, or local enterprise initiative.  By registering an interest for a specific piece of land you will have the opportunity to purchase if it is offered for sale. 

The interest does not, however, prevent the land owner from investing in or developing the land. The right to buy is only triggered when the land owner decides to sell i.e. it requires a willing seller.

Part 3 of the Act gives crofting communities the right to buy croft land. The Crofting Community Right to Buy can be used at any time - unlike Part 2 of the Act, the land does not need to be offered for sale.

The Part 2 Community Right to Buy is now available to urban communities by virtue of the Community Empowerment (Scotland) Act 2015.  Guidance has been published and is available below.

It should be noted that the community body's offer for the land is at a price agreed between the community body and the owner but if there is no agreement then the value of the land will be assessed by an independent valuer (appointed by the Scottish Ministers) who acts as an expert and failing that a price stated by the Lands Tribunal on appeal.  Community land ownership can help deliver a range of economic, social and environmental benefits and help sustain rural communities.  As a landowner, a crofting community body will work to address local needs and invest revenue into initiatives to help regenerate their community as a whole. 

The 2015 Act will also give communities the right to purchase abandoned, neglected or "detrimental" land (land in respect of which there are environmental concerns).  It should be noted that this right does NOT require a willing seller (as is the case with the "standard" community right to buy).  This comprises Part 3A of the Act.  These provisions are not yet in force.

The Scottish Government is responsible for administering the Community Right to Buy and the Crofting Community Right to Buy provisions. It can also provide impartial advice. If you are interested in using these provisions, or want to know more about them, please contact Community Assets Branch.

Asset Transfer Legislation

The 2015 Act will also allow communities to request asset transfers from certain "relevant authorities" (listed in Schedule 3 of the Act).  

In respect of ownership, the community body can take a number of forms, including:

(a) a company with an appropriate dissolution clause (not fewer than 20 members per the articles);

(b) a SCIO (not fewer than 20 members per the constitution); or

(c) a community benefit society (again, not fewer than 20 members).

The right to request an asset transfer is NOT triggered by sale of the land  and transfer does not necessarily mean outright ownership, eg it could mean a lease or other right.  In the context of leases or other rights the community body need not take the above forms.

Communities should ensure that the asset transfer request details the benefits which they believe will accrue to the community if the request is agreed to, including economic development, regeneration, public health, social wellbeing and environmental wellbeing considerations.  Note that the relevant authority must agree to the request unless there are reasonable grounds for refusing it.

Relevant authorities will also require to publish registers of all of their assets and produce annual reports on asset transfers.

(The 2015 Act contains other provisions of interest to communities - guidance is awaited.  It is anticipated that the asset transfer provisions of the Act will come into force in October 2016.  Draft consultations are available below.)

These provisions are expected to come into force at the end of 2016.

By virtue of the Land Reform (Scotland) Act 2016, communities will benefit from a further right to buy land for sustainable development.

Common Good Land

Some assets controlled by local authorities fall under the definition of common good land.  Such land may have been gifted to the local authority to hold for the common good of eg the burgh.  Communities should firstly determine whether the land is in fact common good and secondly consider whether it is alienable (can be disposed of) or inalienable (cannot be disposed of except by court order).  The area of common good law is not without its uncertainties and interpretations.  Our resources area contains articles for perusal and we are, of course, available for the provision of advice.

The 2015 Act obliges local authorities to maintain common good registers and hear representations from community councils and interested community bodies (a) on the registers and (b) in deciding whether to dispose of, or change the use of common good land.

Leases - some detail

The following table is a standard "heads of terms" for a lease. Once agreed, this is used as the basis for instructing lawyers to agree the missives (contract) and lease.

Heads of terms for a lease 

Comments / Issues to be addressed in negotiation

Property address

Check title.

Landlord

 

Tenant

Will there be a guarantor?

Rent

Is VAT applicable?  Payment intervals?  Are there to be rent reviews?

Rent free period (and other Incentives)

Needs to be specified

Type of lease

Lease or sub-lease? 

Landlord's initial works (including timing)

Are any works to be carried out prior to the Tenant occupying?

Tenant's initial works (including timing)

And/or vice versa eg fit out?

Rent Deposit

Any?

Lease Duration

 

Break clauses 

Notice periods?  Who has the right to terminate the lease and when?

Alienation

Can the tenant assign, sub-let or charge its interest with the Landlord's consent?

Services and service charge?

Is there a service charge payable by the Tenant eg for repair of common parts?

Repairing obligations

Is the Lease full repairing and insuring (FRI) or is the Tenant taking on a lesser obligation depending on the state of repair? For example, a schedule of condition may be attached to the Lease, the Tenant only being bound to repair and maintain to the extent shown. 

Rights

eg access, car parking, use of common parts.

Alterations

Are these permitted with the Landlord's consent?

Use 

Needs to be specified and cross-checked against planning status.

Insurance

Landlord insures? Confirm cover and responsibilities.

Dilapidations (these are obligations for repairs and maintenance on termination of the lease) 

Are any to be scheduled and given to the Tenant before the Lease ends?

Other issues

eg Land and Buildings Transaction Tax and reliefs (see Taxes).

Rates and utilities 

Confirm responsibilities and amounts.

Legal costs 

Each party covers own costs?

Conditions

References, surveys, planning consent etc

General 

DDA, Asbestos register energy efficiency certificate, H&S.

Landlord's solicitors 

Contact details

Tenant's solicitors 

Contact details

Timing and other matters 

Target for conclusion of legal agreement (missives)

Landlord's agent(s):

 

Tenant's agent(s)

 

When purchasing or leasing an established or new retail space you may find it useful to refer to RICS and use their standard lease which can be downloaded below.  (Please note that a more detailed lease may be required eg in a multi-occupancy situation, and that the RICS Guide, below, requires to be updated to alert tenants to the application of Land and Buildings Transaction Tax, rather than Stamp Duty Land Tax.)

Related Resources

Community Empowerment (Scotland) Act 2015 Asset Transfer Flowchart

A flowchart to guide you through the asset transfer process from relevant authority to community body under the Community Empowerment (Scotland) Act 2015.

PDF icon flowchart feb 2016.pdf

Lease and Property Transaction Glossary

A glossary of lease and property transaction terms

PDF icon Lease and Property Transaction Glossary

RICS Small Business Lease: Form

A fillable form for the RICS Small Business Lease

PDF icon RICS Small Business Lease: Form

RICS Small Business Lease: Guidance for Tenants

The purpose of this guide is to help tenants of the RICS Small Business Retail Lease (Scotland) understand some of the terms included.

PDF icon RICS Small Business Lease: Guidance for Tenants