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Negotiated sale

Negotiated Lease or Sale

If both the owner, whether a public authority or private owner, and the community transfer body agree to negotiate outwith the provisions of the Act, and there is trust on both sides, then an Asset Transfer can take place without employing the asset transfer process as defined in the Act.

This is similar to the disposal of surplus assets process undertaken by Local Authorities through the Disposal of Land by Local Authorities Regulations 2010. 

It should be noted that this process does not provide community transfer bodies with the rights conferred by the Act, including the rights of appeal.

You can find our Negotiated Sales Route Map in the Related Resources below.

If you are unsure about the best approach to asset transfer for your organisation, you should discuss with your local COSS Advisor.

Policies and procedures

The Community Empowerment (Scotland) Act 2015, associated regulations and guidance notes are the processes that all relevant authorities should follow with regard to Asset Transfer. Many relevant authorities have developed their own internal processes for receiving and assessing Asset Transfer Requests under the legislation. These are usually published on the website of the authority alongside the required electronic availability of asset registers.

Community organisations should ensure that they read, and understand, the detail of the Act and the Scottish Government’s guidance notes (see link below) to be clear about the rights they have in regard to asset transfer. They should also read the relevant authority’s policy and follow their requests for information in certain formats if they feel it fits with the requirements of the act appropriately. However, it is advisable to enter discussions with the owning authority at an early stage to gather appropriate information about the asset of interest.

Communities should be aware that they are able to submit an Asset Transfer Request for any asset owned by a public body whether it is deemed available for disposal or not.  Relevant authorities must assess every eligible request and agree to the request unless there are suitable grounds for refusal.

Provided an eligible community transfer body follows the requirements as set out in the Act, it is not a requirement that they enter a request under the conditions of any authority’s policy but if they do not refer to their asset transfer policy, it may be more difficult for a request to be assessed and a positive outcome reached.

 

Appeals process

Appeals Process

A review and/or appeals process has been included in the Act to ensure fair and equitable consideration by an independent party should disputes arise.

A community transfer body can seek a review or appeal if:

  • The request is refused.
  • The request is agreed, but the terms and conditions in the decision notice are significantly different from those in the request.
  •  No decision notice is issued within the required period.

The process depends on which relevant authority the request was made to.

  • If the request was made to a local authority, the community transfer body can apply for an internal review by the authority. If the outcome of the review does not resolve the issue, or if no decision is made within the required period, the community transfer body can then appeal to Scottish Ministers.
  • If the request is made to any other relevant authority, the community transfer body can appeal to Scottish Ministers.
  • If the request is made to Scottish Ministers, the community transfer body can apply for a review by Ministers.

Appeals must be made in writing within 20 working days, beginning with:

  1. The date of the decision notice or
  2. If no decision has been made, within 20 working days beginning with the date of the deadline for the decision (6 months from the validation date, as given in the acknowledgement of the request, or a later date if agreed between you).

Scottish Government Guidance provides details of each process and how reviews and appeals willl be conducted.

A community transfer body can also appeal to Scottish Ministers if a request is agreed, but no contract is concluded within the required time limit.

In all cases the final decision lies with Scottish Ministers. There is no further route of appeal beyond them (except by judicial review).

 

Validation and decision notices

Validation Notice

Once a relevant authority agrees that all required information has been received in your asset transfer applications, as laid down in the Act, a Validation Notice will be issued. 

The Validation Notice date is the start date for the legal process. Any correspondence prior to this notice being issued will be during the ‘negotiation’ stage of the process and therefore outwith the Act. 

A Validation Notice must contain:

  • the validation date – this is the date on which the last of the required information was received (the date the request was received if it was complete). This is the date from which other time limits will be calculated.
  • an explanation of the timescale to issue the decision notice. Relevant authorities must issue a decision notice within 6 months after the validation date, unless a longer period is agreed between the relevant authority and the community transfer body.
  • information about the right to appeal to the Scottish Ministers or request a review, as appropriate. This is required at the outset because of the option to appeal if no decision is made within the time limit. The acknowledgement should set out who the appeal or request for review can be made to, according to the relevant authority to which the request is made, and the circumstances in which it can be made.
  • whether another asset transfer request has already been made to the relevant authority in respect of the same land (or part of the same land).
  • whether the relevant authority considers that it is now prohibited from disposing of the land to any other person.

Decision Notice

Having made its decision based on the information provided in the asset transfer request, the relevant authority must issue a decision notice to the community transfer body, setting out its decision and the reasons for it. This must be done within six months from the validation date, or a longer period if agreed between the relevant authority and the community transfer body. If no decision notice is issued within this time, the community transfer body has the right to request a review or appeal to the Scottish Ministers, as appropriate.

The decision should not be unnecessarily delayed. It may be possible to make a decision in less than six months if the request is straightforward or there has been substantial discussion with the community transfer body before the request is submitted – as little as three months has been suggested. On the other hand, a longer period may be required for complex requests or where another process is required to remove a restriction on the relevant authority.

Relevant authorities should advise the community transfer body of any potential delays at the earliest opportunity, and seek their agreement to an extension to the time period. An extension should always be agreed before the prescribed (or previously extended) period expires.

The information to be provided in a Decision Notice must:

A. state the date on which the asset transfer request was made

B. identify the community transfer body which made the request

C. identify the land to which the request relates

D. set out the authority‘s decision to agree to or refuse the request

E. set out the authority‘s reasons for its decision

F. contain notification of the right of appeal or review, how an appeal or application for review may be made, and the date by which it must be made.

and if the request is agreed:

G. specify the terms and conditions on which the authority is prepared to transfer ownership, lease the land or confer the rights requested

H. state that, to proceed with the process, the community transfer body must submit an offer,

I. specify the period within which the offer must be submitted (this must be at least 6 months from the date of the decision notice)

Model Validation and Decision Notices can be found in the Resources Section of the Scottish Government website.

 

 

Content of an Asset Transfer Request

This section describes the information that is legally required to be specified in an asset transfer request and the process that is used by relevant authorities.

Most relevant authorities have policies and procedures in place which are based on the information given in the CEA.

A model form for an asset transfer request is provided on the Scottish Government website. This is intended to help community transfer bodies to make sure they provide all the information needed for a valid request, but it is not statutory. The only requirement is that they provide all the information specified in the Act and Regulations.

Although you can submit this information in any form that you wish, it is advisable to follow the template laid out by the relevant authority, as this will save time and ensure you give all the information that is required.

Most relevant authorities have a two-stage procedure:

  • Stage 1 or Expression of Interest
  • Stage 2 or full CAT application

Be Aware!

The Stage 1 process usually found in relevant authorities’ policy and procedures is an INFORMAL process for gathering information and building relationships for both parties.

The legal process of community asset transfer does not start until a full application has been submitted (usually called a stage 2 application), accepted as complete AND an acknowledgement sent with a Validation Date set for a decision to be made (usually within 6 months).

Filling in a Stage 2 –  Full Asset Transfer Request

For points (k) to (o) below, covering information on areas such as the benefits of the request and how it is to be funded, only outline information is required for an asset transfer request to be accepted by a relevant authority as complete and valid.

However, the relevant authority would usually need to seek further detail during the process, and the community transfer body would have to provide enough additional information and detail to enable the relevant authority to make a decision on the application.

The relevant authority may decide to refuse the request if it does not feel it has sufficient information on the proposals. The level of detail required should be proportionate to the scale and nature of the request, but the community transfer body should always be given the opportunity to provide any missing information which is considered to be key to the decision.

The information provided in this section is the minimum legally required to have your asset transfer request ‘validated’. For it to stand a good chance of being succesful, you will need to provide considerably more informaion to the relevant authority. Please refer to the Writing Your Asset Transfer Request section of this site for help with this.

An asset transfer request must be made in writing and must:

A

state that it is an asset transfer request made under Part 5 of the Community Empowerment (Scotland) Act 2015

B

contain the name and contact address of the community transfer body

C

be accompanied by a copy of the community transfer body’s constitution

D

explain, if the request is made by a body which is not a community controlled body, the basis on which the body is a community transfer body.

E

specify the land to which the request relates

F

specify whether the request falls within paragraph (a), (b)(i) or (b)(ii) of section 79(2), i.e. whether it is a request for ownership, lease or other rights in the land

G

specify, if the request is for ownership, the price that the community transfer body would be prepared to pay for the transfer to ownership of the land

H

specify if the request is for lease:

the amount of rent that the community transfer body would be prepared to pay, the duration of the lease,

any other terms and conditions that the community transfer body considers should be included in any lease

I

specify if the request is for other rights, the nature and extent of the rights sought

J

specify any other terms or conditions applicable to the request

K

specify the reasons for making the request

L

describe how the community transfer body proposes that the land is to be used

M

specify the benefits which the community transfer body considers will arise if the authority were to agree to the request

N

outline how it is proposed that the transfer of ownership of the land, the lease of the land or the conferral of other rights in respect of the land on the community transfer body (as the case may be) as well as the proposed use of the land – is to be funded

O

describe the level and nature of support for the request from the community to which the community transfer body relates

 

Timescales

The Community Empowerment Act lays out timescales for each part of the process. The main stages of the process have the following timescales:

  • 6 months for relevant authority to assess and issue a decision notice from the date of a Validation Notice (an extension is possible through negotiation).
  • 20 days for community transfer bodies to lodge a request for a review or appeal if they do not agree any part of the decision notice.
  • At least 6 months for the community group to submit an offer, following issue of an acceptable Decision Notice (an extension is possible through negotiation).
  • Conclusion of contract – normally within 6 months of the date of the community offer.

When referring to the guidance notes and the detail of the Act, communities and relevant authorities should pay close attention to the time limits and the requirements for requesting extensions and reviews or appeals.

 

 

Relevant Authorities

Asset transfer requests can be made to a relevant authority listed in Schedule 3 of the Community Empowerment Act.

List of Relevant Authorities in the Community Empowerment Act

  • Local Authorities
  • Scottish Ministers (including agencies such as Forest and Land Scotland and Transport Scotland)
  • Crofting Commission
  • Further Education colleges which are “incorporating colleges”
  • Health Boards, both regional and Special Health Boards
  • Highlands and Islands Enterprise
  • Historic Environment Scotland
  • National Park Authorities (Cairngorms and Loch Lomond & Trossachs)
  • Regional Transport Partnerships
  • Scottish Canals
  • Scottish Courts and Tribunals Service
  • Scottish Enterprise
  • Scottish Environment Portection Agency
  • Scottish Fire and Rescue Service
  • NatureScot (formerly Scottish Natural Heritage)
  • Scottish Police Authority (who own all land and buildings used by Police Scotland)
  • Scottish Water
  • Visit Scotland

Asset transfer requests can be made to any of these relevant authorities. Scottish Ministers can add new relevant authorities, can remove relevant authorities or amend the list, for example if an organisation changes its name. Organisations which are not already on this list can only be designated as a relevant authority if they are:

  • a part of the Scottish Administration
  • a Scottish public authority with mixed functions or no reserved functions
  • publicly-owned company – this means any corporate body which is wholly owned by one or more relevant authorities already on the list

Register of Assets

To help community bodies identify assets that may be available through asset transfer, section 94 of the Act requires each relevant authority to establish, maintain and make available a register of land which it owns or leases ―to the best of its knowledge and belief.

Communities should refer to the registers for relevant authorities in their area. This will enable them to identify ALL potential assets suitable to deliver their intended project.

The Community Empowerment Act allows eligible community organisations to submit an Asset Transfer Request for ANY asset owned by a relevant authority, not just those deemed available and surplus by the authority.

Content of Registers

Effective asset management systems are an essential part of financial management by public bodies. However, it is recognised that the ownership and boundaries of land are sometimes unclear, especially where records are old and land has changed hands by statutory powers or reorganisation of public bodies. The legislation therefore does not require relevant authorities to make checks or confirm title (ownership) before publishing information in the register of land.

The Scottish Government has committed to improving the accuracy of information about land ownership, and is seeking to have all public sector land included on the Land Register by 2019. The process of undertaking voluntary registration will, over time, also improve the accuracy of information held by public bodies and published in their register of land. However, the two processes are not formally linked.

Relevant authorities will already hold the information which is required to be included in the register of land, in their asset registers held for accounting purposes and in property management systems. In some cases the information may already be published as part of a publication scheme under the Freedom of Information (Scotland) Act 2002.

It is for each relevant authority to determine whether a particular property is required to be included in the register, depending on the individual terms of ownership or lease in each case.  The Act requires that the register must be maintained. It will be in the authority‘s interest to keep the register current, to avoid enquiries about properties they no longer own.

You should check the Relevant Authority website for the Register of Assets. For example:

 

Eligibility

Community Organisation Eligibility for asset transfer

To become eligible for any form of asset transfer a group needs to be considered to be a “community transfer body”. This can either be a community controlled body as defined by the eligibility requirements outlined below or a body designated by Scottish Ministers.

Currently the only class of bodies to be designated are those organisations who meet the requirements for the community right to buy or the crofting community right to buy under the Land Reform (Scotland) Act 2003. If you meet those requirements you will also be eligible for asset transfer.

There is no definition of “community” in the Act – it is up to the community group to make that definition. It could be :

  1. A geographic community – a village or area of a town or city
  2. A community of interest – one that shares a characteristic or interest.  This could include people affected by a particular illness or disability, faith groups, sports clubs etc

Distinction is made between which type of body can request an asset transfer on the basis of whether the asset transfer is for lease/management or ownership (which has additional requirements detailed below).

Eligibility Requirements for Asset Transfers

To be eligible for an asset transfer, your group has to be a community controlled body which means a body that has a written constitution that includes the following:

(a) A definition of the community to which the body relates.

(b) Provision that the majority of the members of the body consists of members of that community.

(c) Provision that the members of the body, who consist of members of that community, have control of the body.

(d) Provision that membership of the body is open to any member of that community.

(e) A statement of the body’s aims and purposes, including the promotion of a benefit for that community.

(f) Provision that any surplus funds or assets of the body are to be applied for the benefit of that  community.

Additional Eligibility Requirements for Ownership

In addition, if your asset transfer is for ownership, the community transfer body must also be incorporated as one of these three structures:

  • A Scottish Charitable Incorporated Organisation (SCIO) the constitution of which includes provision that the organisation must have not fewer than 20 members  or
  • A Community Benefit Society (BenCom) the registered rules of which include provision that the society must have not fewer than 20 members  or
  • A Company the articles of association of which include provision that:

(a) The company must have not fewer than 20 members and

(b) On the winding up of the company and after satisfaction of its liabilities, its property (including any land, and any rights in relation to land, acquired by it as a result of an asset transfer request under this Part) passes—

(i) To another community transfer body,

(ii) To a charity

(iii) To such community body (within the meaning of section 34 of the Land Reform (Scotland) Act 2003) as may be approved by the Scottish Ministers

(iv) To such crofting community body (within the meaning of section 71 of that Act) as may be so approved, or

(v) If no such community body or crofting community body is so approved, to the Scottish Ministers or to such charity as the Scottish Ministers may direct.

If you are setting up a new organisation for your asset transfer, you can download Model Documents suitable for Asset Transfer from the bottom of this page on the Scottish Government website.

If you are unsure what type of organisation is best for you, SCVO has information on the various legal structures.

Most existing organisations have to make some changes to their governning document to be eligible for asset transfer. You can discuss this with your COSS advisor who will be able to assist you.

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