Book pages - Community - DTAS Community Ownership Support Service

Creating Place Plans

As well as introducing statutory duties for CPPs to produce Local Outcome Improvement Plans and Locality plans, the Planning (Scotland) Act 2019 also introduced a new right for communities themselves to produce Local Place Plans. This is important because the Act also indicates that planning authorities should ‘have regard to’ these Plans when forming their own plans.

This section of the website explains the different approaches and provides links to tools and resources that help communities to take control of their own Community Place Planning process. To learn more about how you can input into statutory plans delivered by public agencies navigate to the Community Planning section.

There are different terms applied to the process of Place Planning with and by a community. Three of the most common are:

Placemaking – often used by professionals e.g. architects and town planners. A popular way of carrying this out in recent years has been using Charrettes – which bring together the public, stakeholders and designers over a number of days to draw up proposals to make their towns and villages better places to live.
Community Action Planning – developed by communities for their communities, these are “bottom-up” action plans. They demonstrate the needs and aspirations identified by the community, both in terms of the physical environment and in service delivery, and work out who needs to contribute to make them happen. There will be projects the community itself can accomplish, others that they can do in partnership with others and yet others that will need to be done by public agencies. These action plans can form a vital part of ensuring that services are delivered to meet local needs.

You can explore each of these on the left of this page.

Research

Research has been carried out on community asset ownership by various organisations. Below are links to some of these available.

DTAS – Baseline Report – Through this study, Development Trusts Association Scotland (DTAS) has sought to establish the current scale andnature of community ownership of assets across Scotland as of 2012. The research was conducted by DTAS’ Community Ownership Support Service (COSS).

Community Land Scotland Pilot Study of Social Impacts of Community Land Ownership 2015 – Community Land Scotland commissioned this small piece of work to be able to explore a potential and practical working methodology through which to test how it may be possible to explore and measure dimensions of social benefits deriving from community ownership.

Related Resources

Community Ownership in Scotland – A Baseline St

The Policy Journey

The Policy and Legislative Journey

Over the past several years legislation and national policy in Scotland has developed to encourage and support the ownership of assets by communities. The journey to the current legislative position, where communities have legal rights to participate in policy development and buy assets from public bodies, is outlined below.

Land Reform (Scotland) Act 2003

In 2003 The Land Reform (Scotland) Act 2003 gave communities the right to buy land and buildings in certain circumstances and represented a fundamental change in the legal and policy context surrounding ownership and land management, giving the potential for greater powers to be transferred to communities.

Community Empowerment Action Plan

Then in 2008 a joint COSLA/Scottish Government statement of commitment to Community Empowerment set both national and local government on a longer term path to make sure that more communities become more empowered across the country.

This commitment resulted in 2009 in the publication of the Community Empowerment Action Plan – a joint Scottish Government/COSLA policy document. In the Plan, Community Empowerment is defined as “a process where people work together to make change happen in their communities by having more power and influence over what matters to them”. This Action Plan makes clear that community ownership is one aspect of community empowerment, identifying it as one of eight actions that will help to build capacity to deliver empowerment. It recognises that in the right circumstances the acquisition of physical assets – a building or land – can make a major contribution to developing independent, strong and resilient communities.

Promoting Asset Transfer Pilot Programme

Following the publication of this Plan, the Scottish Government funded the Development Trusts Association Scotland to deliver the Promoting Asset Transfer Programme, focusing on the transfer of assets from local authorities to communities at less than market value. The aim was to raise awareness about the benefits and risks associated with asset transfer, effect cultural change in local authorities and improve practice.

Disposal of Land by Local Authorities (Scotland) Regulations

The powers to transfer assets at less than market value were established in The Local Government in Scotland Act 2003, which amended section 74 of the Local Government (Scotland) Act 1973, and set out that the Scottish Ministers may, by regulations, provide the circumstances in which local authorities can dispose of land at less than the best consideration that can be reasonably obtained.

Then in 2010 Scottish Ministers issued the Disposal of Land by Local Authorities (Scotland) Regulations which give discretionary powers to local authorities to dispose of land (and assets) to community organisations at less than best consideration, without reference to the Minister.

Christie Commission Report

The Commission was established by the Scottish Government in November 2010 to develop recommendations for the future delivery of public services. The Commission, which was chaired by Dr Campbell Christie CBE, operated independently of government. It completed its work in June 2011 and published its report on Wednesday 29 June 2011. A summary of the recommendations of The Commission can be downloaded here.

Some of the identified priorites were:

Recognising that effective services must be designed with and for people and communities – not delivered ‘top down’ for administrative convenience.
Maximising scarce resources by utilising all available resources from the public, private and third sectors, individuals, groups and communities.
Working closely with individuals and communities to understand their needs, maximise talents and resources, support self reliance, and build resilience.

Recommendations include:

Making provision in the Community Empowerment Act to embed community participation in the design and delivery of services.

Public Finance Manual

Also in 2014 changes were made to the Public Finance Manual to bring other public bodies into line with Local Authorities to allow them to transfer assets at less than market value with Scottish Ministers approval.

Community Empowerment (Scotland) Act 2015

In 2015 the Scottish Government introduced the Community Empowerment (Scotland) Act. This Act strengthens the legislation that has gone before. It reflects the policy principles of community empowerment and improving outcomes and provides a framework which will:

empower community bodies through the ownership, lease and management of land and buildings and strengthening their voices in the decisions that matter to them; and
support an increase in the pace and scale of public service reform by cementing the focus on achieving outcomes and improving the process of community planning.

The Community Empowerment Act was passed in June 2015 and given Royal Assent on 24th July 2015. Part 5: Asset Transfer was implemented on 23rd January 2015. Detailed guidance notes for community groups can be found on the Scottish Government website or download below.

CRtB – Furtherance of Sustainable Development

This is a new community right to buy contained within the Land Reform (Scotland) Act 2016 which affects both rural and urban land. The right to buy land to further sustainable development includes salmon fishing and mineral rights and, significantly, this new right to buy allows a community body (which is subject to statutory regulation) to nominate a third party purchaser to take title to the ground being acquired.

It should be noted that this latest right to buy is an absolute right to buy, meaning a community organisation may force the sale of land even where the owner of the land is not contemplating a sale.

The Act sets out some quite strict requirements, however, which must be met before the right to buy may be activated. The key conditions are:-

The transfer of land is likely to further the achievement of sustainable development in relation to the land.
The transfer of land is in the public interest
The transfer of land:-
- Is likely to result in significant benefit to the relevant community to which the application relates; and
- Is the only practicable, or the most practicable, way of achieving that significant benefit
- Not granting consent to the transfer of land is likely to result in harm to that community.

The exact meaning of this criteria is difficult to determine, and the tests are quite subjective. However, it seems that the information level required is quite high as far as the expectations on community organisations wishing to buy land against the wishes of the owner.

If the Scottish Ministers sanction a sale, the price which is to be paid is the market value. The Act came into force on 26th April 2020.

You can find further information on the Scottish Government website. This webpage includes guidance for community bodies, landowners and other interested parties, request forms, and guidance for landowners, tenants and creditors (information also available in easy read). The Community Land Team at the Scottish Government is always happy to discuss anything related to this with community groups, owners, or anyone else who has an interest.

CRtB – Abandoned, Neglected or Detrimental Land

Part 3A of Land Reform Act – Abandoned, Neglected or Detrimental land

The Community Empowerment (Scotland) Act 2015 introduces a new Part 3A into the Land Reform (Scotland) Act 2003 which allows qualifying community bodies to apply to buy land (including buildings) which is either:

wholly or mainly abandoned or neglected; or
being used or managed in a way that results in or causes harm to the environmental wellbeing of a relevant community

If an application is successful, then the existing landowner is required to sell the land to the community body on terms set out in the Act. In other words, the sale to the community is not contingent on the landowner deciding to put the land or buildings on the market as with the existing Community Right to Buy, but is effectively a compulsory purchase.

Note: the following is not an exhaustive summary of this right, but simply seeks to highlight some key provisions – please refer to the Full Guidance Notes for details, or contact the crtb@gov.scot.

What is taken into account when deciding whether land is abandoned or neglected?

The legislation does not give a definition of ‘abandoned or neglected’, with it being for the community body making the application to justify why they consider the land to qualify.

When deciding whether land is abandoned or neglected, it’s necessary to take into account:

The physical condition – including how long it has been in that condition, whether it is a risk to public safety, has a detrimental effect on adjacent land, or causes environmental harm.
Matters relating to the designation or classification of the land – including whether or not any part of it forms part of a nature reserve, conservation area or special site, whether there are any listed buildings or scheduled monuments on the site, and any relevant policies in a local development plan, strategic development plan or National Planning Framework 3.
Matters relating to the use or management of the land – including extent to which they are used or managed for lawful public recreation or leisure activities or for preserving or conserving the natural, historic or built environment, and whether any such activity requires a permit or licence.

What is taken into account when deciding whether land is being used or managed in a way that results in or causes harm to the environmental wellbeing of a relevant community?

When deciding whether land is being used or managed in a way that results in or causes harm to the environmental wellbeing of a relevant community, it is necessary to take into account:

Matters relating to the use or management of the land – including extent to which they are used or managed for lawful public recreation or leisure activities or for preserving or conserving the natural, historic or built environment, and whether any such activity requires a permit or licence.
Matters relating to the effect on the relevant community – including whether the use or management has caused a statutory nuisance and whether any warning notices, closure notice or closure order has been issued or made under the Antisocial Behaviour etc. (Scotland) Act 2004.

What land is eligible?

Certain land is excluded from the scope of the legislation, including:

Land on which there is a building that is an individual’s home (except where it is occupied under a tenancy), and land pertaining to any such home;
Eligible croft land, or any croft occupied or worked by its owner or a member of the owner’s family;
Land which is owned or occupied by the Office of King’s and Lord Treasurer’s Remembrancer (KLTR)

Who can apply?

This right is open to the same types of community groups as the existing Community Right to Buy, namely:

Companies Limited by Guarantee, the articles of association of which meet the criteria set out in the legislation.
Scottish Charitable Incorporated Associations (SCIOs), the constitution of which meets the criteria set out in the legislation.
Community Benefit Societies (BenComs), the registered rules of which meet the criteria set out in the legislation.

What needs to be done before an application can be made?

For an application to be successful, a number of criteria must be satisfied, including being able to demonstrate that:

The purchase of the land by the community body would be in the public interest and would further the achievement of sustainable development, whereas continued ownership by the current owner would not;
There is community support for the proposed purchase (demonstrated by means of a ballot of the whole community);
The community body has first tried to negotiate the purchase of the land from the landowner;
The same (or similar) group must not have been offered the land in the previous 12 months; and
Where an application is made on the basis that the management or use of the land is causing harm to the environmental wellbeing of the community, the community has first approached any relevant regulator to take action to address this. A relevant regulator might be, for example, SEPA.

Who to contact for further information or to find out more about making an application to buy land which you consider to be abandoned, neglected or to be causing harm to the environmental wellbeing to your community?

The Scottish Government’s Community Land team can provide further guidance to anyone interested in the right to buy abandoned, neglected or detrimental land, or any matter relating to this.

Tel: 0300 244 9822 or 0300 244 1945 or email: crtb@gov.scot

Community Right to Buy

Community Right to Buy
Community Right to Buy allows communities throughout Scotland to apply to register an interest in land and gives the opportunity to buy that land when it comes up for sale. This mainly applies to privately-owned land or buildings. COSS has published ‘Introduction to Community Right to Buy’ guidance which provides an overview of whats involved and the different options available to communities for aquiring private land through Community Right to Buy.

The Scottish Government’s Community Land Unit has all the information on making a Community Right to Buy application and can advise and support you through the process. Their contact details can be found at the bottom of this page.

What is “Community Right to Buy” (CRtB)?
A CRtB gives a pre-emptive right to communities throughout Scotland to buy land under Part 2 of the Land Reform (Scotland) Act 2003. It provides for those communities, who successfully register a community interest in land, to have the first option to buy when the registered land is offered for sale.

Community bodies can register an interest in any land, such as churches, pubs, estates, empty shops, woodland, fields and more. Community bodies can also register an interest in rights such as salmon fishing rights and certain mineral rights.

A registered interest in land lasts for five years (from the date of approval from Scottish Ministers) and can be re-registered on an ongoing basis at five-year intervals.
The sale involves an owner who has decided to sell (termed a ‘willing seller’).
The community right to buy (CRtB) should be used where the community has identified land and has proposals for that land that could further the achievement of sustainable development.

CRtB is one of a number of avenues available to help communities buy land. It might not be the best option for your community body.
All options should be considered (e.g. working in partnership with the landowner, private negotiations with the landowner, leases, or buying the land on the open market).

What “Community Right to Buy” is not

It is not a forced sale of land.
It is not a compulsory purchase of land.
It is not intended to be used as a means to block or blight developments on land (This should be addressed through the appropriate channels.)*
It is not intended to be used to stop the landowner from developing their land even if the community disagree with their plans. This should be addressed through the appropriate channels*.
It is not intended to be used as a means to prevent or block other interested parties from purchasing land*.
A registration is not meant to preserve the status quo. The right to buy needs to show sustainable development benefits for the land and the community*.

Where an application to register an interest in land appears to demonstrate any of those points marked * above, then Scottish Ministers may decline to register the application.

What land can be registered?
An application to register an interest in land can be made in relation to any type of land (and rights on the land) including, for example:

Brown and green field sites
Lochs
Woodland
Retail units
Industrial units
Schoolhouses
Halls
Churches
Salmon fishing or mineral rights

The only land in which an interest cannot be registered, called “excluded land”, is land which consists of certain rights which are owned separately from the land, for example rights to gather mussels and oysters.

Who can apply?
Your community must form a community body (CB) to apply to register an interest in land. This must either be a:

Company limited by guarantee
Scottish charitable incorporated organisation (SCIO)
Community benefit society.

Your community body must comply with the relevant requirements of Section 34 of the Act.

The community body should:

Be controlled by members of the community;
Be defined geographically;
Meet the additional requirements for defining your community as set out in section 34(5) of the Act
Ensure its main purpose is consistent with furthering the achievement of sustainable development.

Note – the above is not an exhaustive list of eligibility criteria. Please refer to the detailed guidance downloadable from the bottom of this page.

Model templates and guidance to enable a community to form a Scottish Charitable Incorporated Organisation (SCIO), or a Company Limited by Guarantee (CLBG), for the purpose of registering an interest in land can be found here.

Scottish Ministers must give written confirmation that the main purpose of the community body is consistent with furthering the achievement of sustainable development before the community body can apply to register an interest in land under the Act.

Unless you are already an eligible body under the Act (and validated by the Community Land Unit of the Scottish Government) it is recommended that only once your community body receives the compliance letter it registers newly formed organisation articles of association, constitution or registered rules with the relevant governing body (Companies House, the Office of the Scottish Charities Regulator or the Financial Conduct Authority, as appropriate for the type of body formed).

Timeous or Late Application?

There are two types of applications:

Timeous applications are applications which are made when no action has been taken by the landowner or creditor with a view to transfer the land, for example putting the land on the market or entering into private negotiations with a potential purchaser.

Late applications are applications which are made when the land is on the market or where any action has been taken with a view to the transfer of the land to be registered.

Late applications require additional supporting information, such as:

Reasons why it is in the public interest to register the interest;
Evidence of a significantly greater level of support at registration stage than the expected 10% normally required for timeous applications; and
Details of any relevant work or steps taken to buy the land before steps were taken to transfer the land. Ministers can also consent to a late application if they are satisfied that there are good reasons why such work or steps were not taken and for allowing the interest to be registered.

Registering an interest in land – Community support

A CB is normally required to demonstrate at least 10% support from their defined community for their proposed application to register an interest in land.

A petition list is the best way to determine this and should contain:

A clear question asking whether signatories agree to the community’s proposed application;
Printed name, address and full postcode of each signatory; and
Date and signature of each signatory.
Evidence of community support must be within six months of the date the application is made to Scottish Ministers.

Overview

There have been a number of developments in the last 25 years which have brought us to where we are now with land reform and community ownership. These include:

The Abolition of Feudal Tenure Act etc. (Scotland) Act 2000, which abolished remaining aspects of feudal tenure, initiating modernisation in the land system.

The Scottish Land Fund, which was introduced in 2000 to fund community acquisitions of land and land assets.

The Land Reform (Scotland) Act 2003, which introduced Community Right to Buy.

The Community Empowerment (Scotland) Act 2015, which extended Community Right to Buy to urban communities, introduced Community Right to Buy Part 3A and gave communities further powers to buy publicly-owned assets through Community Asset Transfer.

The Land Reform (Scotland) Act 2016, which introduced Community Right to Buy Part 5, established the Scottish Land Commission and introduced the Scottish Land Rights and Responsibilities Statement.

As a result of this legislation, there are now three different Community Right to Buy (CRtB) options for communities:

Community Right to Buy – Community bodies who successfully register a community interest in a site, have the first option to buy when the registered site is offered for sale.

Community Right to Buy, Abandoned, Neglected & Detrimental – Community bodies have a right to compulsorily purchase land which is wholly or mainly, abandoned or neglected or the use or management of the land results in or causes harm to the environmental wellbeing of the community.

Community Right to Buy, Furtherance of Sustainable Development – Community bodies have a right to compulsorily purchase land for the purposes of sustainable development that will deliver significant benefit to the community.

Please refer to the COSS guidance ‘Introduction to Community Right to Buy’ for an overview of the three rights, information on the processes involved and case studies.

Summary of the Community Empowerment Act

The Community Empowerment (Scotland) Act 2015

The commitment to community empowerment and asset ownership has been further strengthened by the introductiion of this Act, with the following stated aim from the Scottish Government:

“The Community Empowerment Act does a number of things including: extending the community right to buy, making it simpler for communities to take over public sector land and buildings, and strengthening the statutory base for community planning. Crucially it can help empower community bodies through the ownership of land and buildings and strengthening their voices in the deciison and services that matter to them” Scottish Government

The Community Empowerment Act

Aims to change the balance of power between communities and the public sector.
Introduces many more rights for community bodies.
Strengthens their voices in the decisions that matter to them.
Encourages partnership working between service providers and communities, cementing the focus on achieving outcomes and tackling inequalities.
Enables communities to make requests not just to local authorities but to a wide-ranging list of public bodies (relevant authorities), for any land or buildings they feel they could use in a better way to deliver services and benefits.

There are 11 areas covered by the Act:

Part	Topic	Main content
Part One	National Outcomes	Requires Scottish Ministers to continue the approach of setting national outcomes for Scotland, based on consultation, which guide the work of public authorities.
Part Two	Community Planning	Places Community Planning Partnerships (CPP) on a statutory footing and imposes duties on them around the planning and delivery of local outcomes, and the involvement of community bodies at all stages of community planning.
Part Three	Participation Requests	Provides a mechanism for community bodies to put forward their ideas for how services could be changed to improve outcomes for their community.
Part Four	Community rights to buy land	Amends the Land Reform (Scotland) Act 2003, extending the community right to buy to all of Scotland (urban and rural) and improving procedures.
Part Five	Asset Transfer Requests	Provides community bodies with a right to request to purchase, lease, manage or use land and buildings belonging to local authorities, Scottish public bodies or Scottish Ministers.
Part Six	Delegation of Forestry Commissioners’ functions	Allows for different types of community body to be involved in forestry leasing.
Part Seven	Football Clubs	Gives supporters a role in decision-making, or even ownership when the opportunity arises, of their football clubs.
Part Eight	Common Good Property	Places a statutory duty on local authorities to establish and maintain a register of all property held by them for the common good. It also requires local authorities to publish their proposals and consult community bodies before disposing of or changing the use of common good assets.
Part Nine	Allotments	Updates and simplifies legislation on allotments. It requires local authorities to take reasonable steps to provide allotments if waiting lists exceed certain trigger points, strengthens the protection for allotments, requires fair rents to be set and allows tenants to sell surplus produce grown on an allotment (other than with a view to making a profit).
Part Ten	Participation in public decision-making	A new regulation-making power enabling Ministers to require Scottish public authorities to promote and facilitate the participation of members of the public in the decisions and activities of the authority, including in the allocation of its resources. Involving people and communities in making decisions helps build community capacity and also helps the public sector identify local needs and priorities and target budgets more effectively.
Part Eleven	Non-domestic rates	Provides for a new power for councils to create and fund their own localised business rates relief schemes, in addition to existing national rates relief, to better reflect local needs and support communities.

Title deeds

When agreeing to take ownership or a lease of property, community organisations will want to know exactly what it is they are taking on and whether or not the property is fit for the community’s intended use. They will also want to know what obligations come with ownership, as such obligations that have financial and human resource implications.

It is recommended that those buying any property have the title examined by a qualified legal professional. A non-exhaustive list of some of the things they should look into on your behalf is available below. As the client you should be aware of them, ensure they have been checked over and take into account any implications of the findings.

Contracts and agreements

Contracts and Agreements

Many asset development projects have acquired assets which are interests in leases in land or buildings. The box below highlights lease provisions which existing projects have identified as having significant impact on the viability and sustainability of their project and their ability to use the assets to benefit their communities.

Based on this experience particular attention should be paid to these issues, with legal advisors in the negotiations on any lease associated with achieving the project objectives.

Lease provisions	Potential Impact
Length of the lease	It is not possible to secure grants or other finance to improve or acquire property on leases that are too short. (A standard security may be granted over the tenant’s interest in a lease of over 20 years.)
Assignation (transfer of a tenant’s interest in a lease) and sub-letting (letting by the tenant to a third party)	Conditions may prevent flexible use of the asset to meet project objectives.
VAT provisions	This will need to be considered in relation to the project as whole and in particular its effect on capital and revenue funding requirements. It will also affect affordability as a cost to any business tenants for land/buildings when plans are made for maintaining and managing the asset.
Obligations for repairs maintenance and insurance (including on termination)	These will have cost implications.
Sale price, rental levels and payment and rent review provisions	These will have capital and revenue cost implications
Irritancy Clauses	The landlord has the right to terminate the lease on non-payment of rent, tenant breach or on insolvency of the tenant. In this situation grant funds may have to be returned if the lease does not run its full term – which can prevent the asset from being used flexibly to meet the project objectives.
Tenant’s Obligations	These obligations typically restrict the use of the leased subjects and may limit the use of the asset including as security for borrowing. These obligations may be particularly relevant to conditions for grant or loan funding for projects.
Obligations on termination of the lease (Dilapidations)	These will have cost implications.

Land and property acquisitions and disposals by the trustees of registered charities must by law act in the best interests of the charity and secure the best possible deal for the charity. It also requires them to use professional advisors and to follow specific procedures when acquiring, disposing or managing the land and property assets of the charity. These procedures are not onerous, and there is free, easily accessed advice for Charity Trustees available from the Office of the Scottish Charities Regulator (OSCR) that can be consulted to help commission professional advice.

Other contracts and agreements with stakeholders

Some of these agreements are covered in the Developing an Asset section relating to construction contractors and professional advisors.

There are other contracts and agreements that are sometimes required when the transfer of ownership takes place in addition to leases/licences which give a right to occupy the land/building.

A management agreement is an agreement between the local authority (or owner) and another organisation to work together in the operation of the building for the benefit of local people. It does not give any rights to occupation, security or legal interest in the building.

A service level agreement is an agreement, for an agreed period, between two partners, setting out the services to be provided in return for resources, usually financial or staffing. Performance requirements and quality standards will be set as part of the agreement as well as procedures for monitoring and review. They are sometimes required in order to enable a peppercorn rent to be justified for a community building, since such an agreement allows a monetary value to be put to services that can be set against the rental income “lost” to a local authority or other public sector owner. Some Local Authorities argue that it would be iniquitous to allow peppercorn rents to all groups who use community buildings given their varying age and condition, as some groups would get a better deal than others. It is argued that, without other management and service level agreements put in place in return for favourable lease agreements, a benefit for the wider community cannot be guaranteed and the group can just get the benefit of the building without providing community benefits in return.

These transactions, and the legal issues and documentation that arise from them are many and varied. They will depend on the nature of the project and the assets involved. They will also be affected by the way the project is being funded, the type of organisation that is implementing it and the type of organisations that agreements are being sought with.

The project is also likely to need additional agreements with funders, and loan providers. But they will need to meet the specific needs and circumstances of the project and will differ in each case. As a result, they will need specific professional advice.

Legal issues

A land or building asset that is developed and improved or transferred from one owner to another can raise a large number of legal issue.

The most common are:

Establishing whether there are any restrictions on the use or development of the asset which may have been imposed in the past but can restrict what all future owners of the asset can do with it. For example some land or buildings may have been gifted, for example, common good land, or created for the benefit of a charity or a certain use (e.g. a playground or recreation ground) or may have rights of way granted over it to other people.
Choosing a legal structure for the establishment of a new organisation to undertake the development (where necessary) and final ownership of the asset.
The sale or transfer of ownership (often described as an ‘interest’) of the asset.
The form and content of contracts and partnership agreements with other stakeholders, professional advisors and contractors.
Taxation issues – Value Added Tax, Land and Buildings Transaction Tax.

Whatever the issue to be dealt with it will be necessary to take legal advice – partly because what is proposed for use of the asset will affect the legal issues that arise and partly because the law does change.

Negotiating an Asset Transfer

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.

Check the Title: there may be legal restrictions already placed on a property, such as title conditions. The current owner ought to have this information in their title to the property. The owner’s title will be recorded in the Register of Sasines or registered in the Land Register of Scotland, which are the public records of property ownership.

These title conditions may determine how a property is used and can be an obstacle to the feasibility and viability of a project. A guide to what to consider when checking property titles can be downloaded at the bottom of this page.

It is also imperative that any licences to operate from the property are obtained, if appropriate, as well as planning permissions, e.g. for use.

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 the residents of the former burghs or council area. 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 about this 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 e.g. fitting 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 e.g. for the repair of common parts?
Repairing obligations	Is the Lease a full repairing and insuring lease (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	e.g. 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, including who pays for the insurance premiums.
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	e.g. Land and Buildings Transaction Tax and reliefs (see Taxes).
Rates and utilities	Confirm responsibilities and amounts.
Legal costs	Each party covers their 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 e.g. 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.)

Legal

A land or building asset that is developed and improved or transferred from one owner to another can raise a large number of legal issues.

The most common are:

Establishing whether there are any restrictions on the use or development of the asset which may have been imposed in the past but can restrict what all future owners of the asset can do with it. For example some land or buildings may have been gifted, for example, common good land, or created for the benefit of a charity or a certain use (e.g. a playground or recreation ground) or may have rights of way granted over it to other people.
Choosing a legal structure for the establishment of a new organisation to undertake the development (where necessary) and final ownership of the asset.
The sale or transfer of ownership (often described as an ‘interest’) of the asset.
The form and content of contracts and partnership agreements with other stakeholders, professional advisors and contractors.
Taxation issues – Value Added Tax, Land and Buildings Transaction Tax.

Useful Links:

Free Legal Services Unit

Taxes

Careful consideration will have to be given to the implications of various tax requirements on the development and use of the asset project, particularly if the organisation who takes ownership of it is a registered charity.

The summary below is not comprehensive but provides an overview of the issues to help research and consider the implications of different taxes on the project and get the best out of professional advisors.

Value Added Tax (VAT)

Most business transactions involve supplies of goods or services and VAT is payable if they are

Supplies made in the United Kingdom (UK) or the Isle of Man
- by a taxable person
- in the course or furtherance of business and
- not specifically exempted or zero-rated.

Currently there are three rates of VAT (a standard rate of 20%, a reduced rate of 5% and a zero rate).

Capital costs and VAT on land

VAT rates on construction works vary according to the building use being created (for example buildings for some uses that are new attract zero rating), the status of the building (for example whether it is listed) the nature of the construction work (whether it is refurbishment or new construction) and whether a registered charity is involved.

Dealings with land are generally exempt from VAT although some can be standard (eg grants of rights) or zero-rated (eg residential or charitable and first grant of property, new property, conversion from commercial to residential or listed and substantially reconstructed).

It is, however, possible to “opt to tax” property the “supply” of which would ordinarily be exempt, and VAT would be payable. In such circumstances a charity can, before the transaction settles, serve a certificate on the owner or landlord disapplying its option to tax. The charity would have to keep using the property for “relevant charitable purposes” (ie it couldn’t, for example, hire out a hall for income).

Any charity should, therefore, check the VAT status of the property immediately and consider (a) the purposes to which the property will be put, and (b) that disapplying the option to tax may make the transaction a less attractive prospect for the owner or landlord (due to irrecoverability or repayment of VAT).

VAT is payable at the standard rate for all professional fees associated with the development and construction process.

Revenue Costs

Reduced Rate supplies are things like:

Domestic fuel or power
Installation of energy saving materials
Grant funded installation of heating equipment or security goods or connection of gas supply
Renovation and alteration of dwellings
Women’s sanitary products and children’s car seats

Exempt or zero-rated supplies do include some aspects of construction and improvement of land and buildings and activities like betting and gaming, books, educational and training activities, food and catering and aspects of sport and leisure.

How the asset is used and the form of the organisation that will own it or run it will affect VAT applicable to revenue costs and income, and will therefore impact on the overall viability and sustainability of the asset.

This is a complex area of planning and implementation of asset development and transfer and it is recommended that professional advice is be obtained. That said, very helpful advice can be gathered from local VAT offices and there is a great deal of free guidance available.

Land and Buildings Transaction Tax

Land and Buildings Transaction Tax (LBTT) is a charge on land and property transactions. This tax replaced Stamp Duty Land Tax on 1 April 2015 (save for exceptions regarding certain contracts entered into on or before 1 May 2012). In the case of sales/purchases, LBTT is charged at increasing percentages on slices of the purchase price (ie not a single rate of tax applied to the whole amount). In the case of leases, residential leases are exempt from LBTT and commercial leases are subject to LBTT (taxed according to a calculation based on the rent payable, returns being required throughout the lease term). It should be noted that LBTT is payable on the amount chargeable plus VAT, and also that it might be possible to claim charitable relief. Funding may be available for LBTT on the purchase price of the property concerned.

(NB Tax rates quoted in these documents may change but general guidance remains relevant.)

Business Rates

Be aware that business rates are chargeable for non-domestic property. It is worth checking the rateable value of any asset prior to acquisition, and also calculating the potential rates liability. An overview of business rates and non-occupied and charitable relief can be found here.

Local authorities have a certain amount of discretion in this area by virtue of the recent community empowerment legislation, which allows local authorities to reduce or remit rates with reference to the category of land, or areas, activities or other specified matters. The reduction or remission ceases on a change in occupation. Note that from 1 April 2017 vacant non-domestic properties will be brought into a water charging regime.

Types of finance

Grants

Grants are non-returnable funds provided for a specific purpose linked to public benefit. The most common sources of available grants in Scotland are:

The National Lottery Community Fund – includes the Scottish Land Fund (SLF)
Trusts and Foundations (e.g. Robertson Trust, Esmee Fairbairn Foundation, Garfield Weston)
Architectural Heritage Fund
Scottish and UK Government (e.g. Capital Regeneration Grant Fund)

Sources of grant funding information

There are numerous websites providing funding information and it is often hard for groups to know where to start. A good starting place is:

Funding Scotland – from small grants to funding for big capital projects, this SCVO website helps find funding from over 800 different funders that assist Scottish based community groups.
Foundation Scotland – offers a diverse range of funding programmes for organisations working to benefit a range of communities across Scotland.

Other sources of finance beyond grants

COSS have written a comprehensive and practical guide to alternative approaches to raising finance and fundraising: “Beyond the Usual Suspects”. The most common alternative sources of funding (loans, community shares and community bonds) are briefly explained below.

Community Shares Scotland, part of DTAS, can support organisations interested in doing a community share offer or to find out more about loans and bonds.

Loans

These are funds made available over a set period. The main loan has to be repaid as well as the costs of the loan (interest) with an agreed repayment schedule. They come in a large range of shapes and sizes have very varied rates of interest and repayment terms. There is often a fee payment when loans are arranged. Lenders range from the mainstream commercial banks, social or charity banks, specialist social investment firms, trusts and foundations.

Community Shares

Community shares are a fundraising mechanism for community enterprises that serve a community need. Community shares allow supporters to invest in an enterprise or facility that they want to save or to see developed. In turn, the enterprise is owned and governed by the members and shareholders. Community shares have been used to finance many community run projects including shops, pubs, hubs, housing, renewable energy and food and farming initiatives.

Community Bonds

Bond issues or loan stock issues (the terms are interchangeable) are offers to the public to lend money to an organisation on similar terms for several years. It is long-term debt capital. Bonds capital is commonly loaned in smaller denominations, typically £50 or £100, and evidenced by a piece of paper, a bond, which promises to pay interest and return the capital to the bondholder on a set date.

Bonds are widely used by public authorities, credit institutions and companies, but are rarely used by smaller community enterprises – mainly because of the requirement to repay within a fixed period, and to pay interest.

Unlike community shares, bonds do not provide for community engagement. Bondholders are not members, and they have no voting rights in the affairs of the society, so there isn’t the same scope to engage bondholders in the business activities of the society as customers, volunteers or elected directors.

Community Shares Scotland can offer further advise and support on community bond offers and community finance more broadly.

Organisational competence

To secure finance at any of the project stages will require evidence to be provided that the project is worth supporting financially and that the organisation taking the funding is competent and fit for purpose. These requirements will vary but the main requirements are shown below:

Key factors

Any project will have a range of options to secure finance for its implementation, but it will depend heavily on four things:

a) The nature of the organisation intending to take ownership – its legal structure, aims, history, track record and experience

b) The project – what kind of asset development project is to be financed

c) How much finance is required – some types of finance are only available in small or very large amounts

d) When the finance is needed – some types of finance are only available for spending over a specific period or when the project has got to a certain stage (for example after planning consent or agreement to ownership has been secured)

a) The nature of the organisation

Some types of organisation will not be eligible for some kinds of finance. If the asset project involves the establishment of a new organisation, the effects on the potential finance available for the project need to be considered when choosing the legal structure

b) The project – what it is that is being financed

Fit finance with your project, not your project to the finance available! Some finance is only available for certain kinds of project. It can be tempting to change your project to fit, and a bit of tweaking is fine, but always remember what it is you want to do and why and stay true to that.

c) How much finance is required?

You need to think carefully about how much finance you require and the best places to look for it. Some types of finance are only available in small or very large amounts and will come with their own conditions and restrictions, so a thorough investigation of the possibilities will be required. Case studies of different funding ‘cocktails’ that groups have used are available.

You should carefully research what finance options are available and consider their relevance and applicability to the project. Case studies can also be used to see how other organisations have secured finance to develop and implement their projects.

d) When the finance is needed

As part of project planning you will need to look at the amount of time that will be needed for each stage of the project and the order in which tasks can be implemented.

These will provide the basis for planning when resources will be needed for each task. This is an important part of the project financial planning since it will be necessary to ensure that contractual obligations (eg having resources available to pay professionals, contractors etc) are met as the project proceeds.

This information can then be used to inform the development of the project cash flow for the business plan.

Finance and project stages

All projects will have different opportunities to secure finance for their development and implementation. These will depend on the type of assets being developed (housing, workspace, leisure for example) and the community and stakeholders involved (whether there is a sympathetic landowner involved or significant grant funding is available).

But most projects will need to secure funds in three stages:

Stage one: project feasibility and pre-asset transfer costs

To make an initial assessment of feasibility and viability of a project it may be necessary to investigate the site/buildings, work up proposals, approach funders, pay architects and other professionals and fund the community involvement process before any capital finance to implement the project can be secured.

It is often difficult to find finance to undertake this work, particularly up to the level of detail that will be required to demonstrate viability and sustainability of the project convincingly.

However there are some funds available and experience from practice on the ground is that persistence pays off and the solution is often a combination of grants from project stake holders, voluntary activity and pro bono (provided at no charge) work by professionals.

Stage two: project implementation/set-up or start-up costs

To bring a project to fruition, capital finance to acquire and develop the asset will be required eg external work, internal work including fixtures and fittings and equipment, and external landscaping work. There are also revenue costs to be considered to develop the organisation undertaking the project and manage the assets into the future. It is also important to establish any potential liabilities or needs taken on with an asset transfer eg any repair needs of a building, contractual commitments, retrictions on use or liabilities such as pensions.

Stage three: ongoing support/operational costs

The costs incurred at this stage are those associated with managing and operating the asset eg utilities, administration and insurance. Some projects take some time to achieve viability and may require ongoing revenue support via grants or use of reserves to enable them to develop so that they generate a profit.

The basics

Understanding the business model

The business model of any organisation or project is about how it generates the majority of income from its activities.

For some asset development projects this may be straightforward i.e. letting or hiring space to others.

For others this may be more blurred e.g. providing a space where people with learning disabilities can make things to sell. This can bring in an additional income stream, although the majority of the income comes from contracts or service level agreements with the local authority for example to provide opportunities for people with learning difficulties to be usefully employed and learning new skills.

Understanding the business model is a particularly important part of business planning, for measuring the financial performance of activities and successfully securing finance for the capital to fund an asset development project.

Knowing the numbers

To be successful at securing finance it is essential that senior staff and members of a governing body of an organisation know and understand the headline figures for the capital and revenue requirements of a project and any of the assumptions associated with them.

So you will need to know the overall operating costs and income associated with the project, as well as understand the assumptions on which they are based (rental/hire levels, inflation etc) and what level of income is required to meet all costs.

Financial management

Know where you are – a key component of managing financial risk is to know exactly what the financial position of your organisation is in order that action can be taken to remedy any problems.

Get regular financial updates – this essentially means that you will need regular information showing the actual financial position (what has been invoiced/charged and what costs have been paid) against the planned performance (budget).

Be ready to take action – it is important for this information to be up-to-date and timely so that action can be taken before it is too late – this is particularly the case where an organisation has no reserves.

Deciding what represents “timely” means looking at the commitments of your organisation (particularly in relation to spending) and deciding how much time would be needed to allow you to implement action. For example reducing staff levels may take longer to implement than finding other cost reductions.

Full cost recovery

As the funding environment for voluntary and community organisation has changed towards project specific rather than organisational funding, there is a tendency for organisations to omit key areas of cost that are not directly related to project delivery from funding bids, contract tenders and commissioning bids.

This can erode levels of cash reserves/surpluses and squeeze areas of work (eg central administration, Human Resources, networking or strategic planning) that are important to long term sustainability of the organisation because they affect things like the quality of service or treatment of employees.

In the financial management and planning of organisations therefore it is important to apply full cost recovery to prevent this.

Full cost recovery means:

“Recovering or funding the full costs of a project or service. In addition to the costs directly associated with the project, such as staff and equipment, projects will also draw on the rest of the organisation. For example, adequate finance, human resources, management, and IT systems, are also integral components of any project or service …The full cost of any project therefore includes an element of each type of overhead cost, which should be allocated on a comprehensive, robust, and defensible basis” (ACEVO 2009).

Writing a business plan

The style of a business plan can be very diverse. Remember it should be proportionate to what it is you want to do. For example, if you are taking on a small piece of land or a storage shed you will not need to produce a huge detailed document.

You need to show who you are, what you want to do and how you are going to pay the bills. If you are taking on a big asset then your business plan will be much more detailed so that you can ensure that the plans for developing and running a land or building asset are robust and realistic.

Presentation – whatever sort of presentation you choose, it is important to bring the plan alive. Do not write a plan that consists of page after page of unbroken text! Readers absorb information in a variety of ways: through text, graphically, numerically and visually.

Use headings and sub-headings to break up the text and tables, graphics or pictures to illustrate key points anad bring the plan to life.
Using tables and figures can significantly reduce the amount of text and picture or diagram can tell a vivid story. Be sure that every table, figure and picture is numbered, titled and referred to in the text.

Be relevant to your type of business – the presentation is in your control and should be relevant to your type of business. For example, if this is an artistic venture, you might want to consider your style of presentation as part of your marketing or brand.

Be relevant to your audience – a business plan, with a new asset at its heart, will have a number of different audiences and readers eg the relevant authority (transferring organisation), funders, members of the group and other stakeholders. Each type of reader will consider a business plan from a different viewpoint, so it may be necessary to modify the content of a business plan to meet the needs of the reader. An overview of what different readers look for is outlined below.

What different readers look for:

Public Bodies	Funders
Social impact of the asset transfer Demand for the asset Beneficiaries Financial viability Sustainability Track record of delivery with examples Team and experience Community involvement Adherence to legal issues and regulations	Social impact of the asset transfer Demand for the asset Beneficiaries How the money will be used Other sources of funding sought How/when money will be repaid (if a loan) How the money will be repaid in the event of failure/not achieving targets Team and experience
Stakeholders	Employees
Social impact of the asset transfer	Social impact
Demand for the asset	Job role and responsibilities
Contributions to the aims and objectives of the stakeholder	Level of pay
Impact on the stakeholder	Job security
Team and experience	Impact on current job role
	Future plans

Business Plan Don’ts

Don’t make claims you can’t back up
Don’t waffle
Don’t assume the reader knows the industry
Don’t leave out relevant facts and figures
Don’t overload on information
Don’t oversimplify
Don’t struggle with trying to make your plan fit a generic template

The following table provides an example template to guide the content of your business plan.

Executive summary	This is a synopsis of a business plan. Its purpose is to summarise the plan in such a way that readers quickly become familiar with content. This is usually written last. Come back to it once you have written everything else so you know it is a true summary.
Introduction/ background	Gives an overview of the background to the organisation and provides an insight into the proposition and its rationale.
The proposition	Describes the asset transfer offer and highlights the unique selling proposition and potential social impact.
Marketing	Provides an analysis of the marketplace, identifies the marketing objectives and describes the marketing strategies and tactics.
Resources and operations	Explains the resource requirements (e.g. equipment) and operational issues (e.g. maintenance and management systems).
Governance and people	Provides details of the management team/board, staff, training and external sources of help, e.g. an accountant and a solicitor.
Legal and regulations	Describes the legal issues and regulations that need to be complied with.
Finance	The finance section will contain information on costs, sales assumptions, funding and financial projections.
Risk	Identifies the potential risks and risk management strategies.
Exit strategy	If applicable, an exit strategy can be included detailing how the end of the project will be managed.
Appendices	The appendices will include information that supports the main body of the business plan, e.g. evidence of market research and sample marketing documents.

Collecting evidence

To be convincing, a business plan must be based on evidence rather than wishful thinking.

It is not hard to collect evidence but it does take time and a systematic approach. Each element of the business plan will require some form of evidence or as a minimum a clear concise explanation of what is proposed or how the objectives of the project are to be met. Particular attention needs to be paid to the market research and estimates of both capital and revenue costs to ensure that they are as robust and comprehensive as possible.

Business plan element	Evidence needed
Summary	Clear and concise account / explanation.
Your Organisation	Annual Report, Accounts, info on legal structure and governing body, information on impact measurement.
Introduction to the Project	Clear and concise account / explanation.
Market	Details of competitors and their charges. Market survey information on need/demand for kinds of uses proposed for the asset. This should be based on a defined catchment (e.g. local/regional/national/online) of relevant customers given the service/facilities being offered (not simply consultation). How prices have been arrived at and calculated.
Promotion	Evidence to support why the methods that have been included have been chosen for the target market.
Resources	How costs have been arrived at – e.g. professional quotes, comparative estimates, actual historical costs, published rates, supplier quotations. Basis for the assumptions that have been made for example about inflation, when income and expenditure have been included.
Risk Assessment	Assessment (rating of impact and likelihood) of relevant risks and proposed ways to address them.

Download this table at the end of the page

Be aware that revenue costs and income will be different if you are making a land or building asset available to others (in which case the organisation taking ownership will be collecting rents and recovering service charges) as opposed to using the asset to deliver services itself (in which case the organisation taking ownership will be having to cover these costs itself).

Potential revenue costs and income
Income	Costs
Rents, fees and charges Membership fees Grants/donations VAT Service charges	Staff Salaries (including Employers National Insurance, pensions). Also consultant costs, recruitment and cover for holidays etc where appropriate. Insurance (Land / Buildings / public liability / employers liability / contents / rents and service charges) (including IT/telephone) Professional fees – Audit and legal Repairs and renewals Marketing/Letting (direct costs and sub contractors) Utilities (e.g. gas, electric, water) Security Training Administration/office costs/bookkeeping Rates Loan repayments Cyclical Maintenance (decoration etc) Cleaning VAT Gas electric lift and fire compliance Sinking Fund (reserved fund for future major works / improvements) Promotion/publicity Allowance for bad debts/voids (unlet property)

Download these tables at the end of the page

Potential capital costs and income
Costs	Income
Land Acquisition and legal fees Site Investigations Building/construction work Professional Fees Furniture Equipment VAT Contingency	Sales Grants Loans Equity