Menu Close

Types of transfer

Community Asset Transfer should be understood as a spectrum, which ranges from management agreements, to leases of varying duration, through to full ownership.  Although for most organisations outright ownership is the preferred route, sometimes leases, with an option to purchase later written in, can be a better option.  This allows less-experienced groups to “try before you buy” and helps manage risk. 

Transfer – Sale

To maximise the benefits of asset transfer, outright ownership of the title may be the preferred mechanism for community involvement in the management and development of assets. This is particularly true of assets where there will be significant investment in terms of grant and loan funding. Clear title will be important to both public and private funders with the large grant funders who are accessible to community groups insisting on this model.

Long Lease

In some situations a long lease (leases can have a duration of up to 175 years) may be the most appropriate form of tenure. For example, a local authority may wish to retain ownership (and therefore control) of assets which are of strategic or historic significance. It may also be the case that the local authority’s title is subject to title conditions, making the grant of a long term lease a more attractive prospect for external funders.

Shorter Lease

From a community’s perspective short term leases can be an effective interim step to full ownership. It can provide a range of benefits through:

  • enabling the community group to confirm they have the necessary support of the wider community to develop the building and services – increasing levels of participation from volunteers and other interested parties.
  • sustaining patterns of usage within the building while the business plan is being developed and assumptions tested. 
  • building the confidence within the group. 
  • demonstrating that the group has the operational capacity to run and manage the facility. 
  • keeping the building occupied and heated minimising the potential for deterioration.

 

Occupation Agreement / Licence to Operate

This type of agreement may be appropriate where there is an interconnected lease and service level agreement. For example, in the delivery of care services from a local authority-owned care facility, swimming pool or a facility where the local authority continues to deliver services from part of the facility. This type of arrangement has also been used effectively to provide community groups with time to develop their business plan while keeping a facility open.

 

Types of Tenure – Advantages & Disadvantages

Types of Tenure

Advantages

Disadvantages

TITLE

Buying the property as owner

Security of ownership

Creates sellable asset Independence

Can use the asset to help raise funding

Not subject to service charges

Freedom to improve or redevelop the asset, and to attract grants to do so (subject to planning, etc constraints, certain title conditions and the conditions of any security)

Expense of purchase

Cost of repairs and insurance

May not be sellable if in poor condition

Land and Buildings Transaction Tax (LBTT) if charitable relief not given

LEASE

Taking a lease for a fixed period of years at an annual rent

(In Scotland leases of over 20 years can be called “long” but terms depend upon what the parties have negotiated)

In some cases where agreed with the landlord, rent may be low or peppercorn

Longer leases may have few obligations placed upon the tenant, almost akin to ownership

All leases:

Expense of rent (which may increase at regular intervals) and service charge

Restrictions on use, alterations and alienation (i.e. assignation, sub-letting, sharing occupation, charging)

 

 

Longer leases:

If a premium is paid, expense, cost of repairs and insurance may not be assignable if the property is in poor condition

Cost of dilapidations at the end of the lease

 

 

 

LBTT if charitable relief not given (depending upon rent and term)

LICENCE TO OCCUPY

Formal written permission to occupy for a short period

(In Scotland, if an arrangement has parties, a rent, a duration and premises, there is a lease; however, licences to occupy are often used for a short term arrangement or where the premises are not “fixed”)

Opportunity to keep a building open

Maintain usage levels

Gives opportunity to build the business case

Establishes level of community support

Can ensure a conservation gap doesn’t open up

Costs can be minimal

Restrictive in terms of use, alterations, etc.

Disposal usually prohibited

No security of tenure

Difficult to get funding if licence too short