Protecting the discount

A robust assessment of the risks, their implications and likelihood of becoming a reality can only be carried out through close discussion with the community organisation that is seeking to take on the asset alongside a rational and thorough analysis of the business case. However, it should be acknowledged that risk is inherent in all forms of enterprise, and the existence of risk in itself is rarely a good reason to avoid community asset transfer. Only where risks are significant (in impact and likelihood of occurring) should the local authority consider conditions that restrict use or enable the ‘clawback’ of value.

Community empowerment needs to be the fundamental aim behind asset transfer (see Scottish Government & COSLA Community Empowerment Action Plan, 2009), which also fits clearly with the wellbeing powers granted to Local Authorities under the Local Government in Scotland Act 2003.  

Section 14 of the Guidance Notes on Asset Transfer Requests outlines the use of conditions to protect the discount.  "In the case of asset transfer to community bodies, disposal at less than market value, or with other support or concessions, may be justified by reference to the expected benefits to be delivered by the project. In that situation, relevant authorities sometimes seek to protect themselves against the risk that the benefits may not be delivered by including clauses in the contract requiring some form of restitution if the project fails."

"It is for relevant authorities to determine whether it is appropriate to include such conditions in the contract (and for community transfer bodies to decide whether to accept the transfer on those terms). The aim of  the guidance is to ensure that, if conditions are used, it is done in an appropriate and proportionate way."
This form of protection may be supplemented by maintaining relationships with the community transfer body and supporting it to develop its capacity and deliver the project effectively.
Any conditions which the relevant authority proposes to impose to protect discount should be included in the decision notice, in sufficient detail that the community transfer body is able to decide whether they are acceptable or not. As a result, the community transfer body could seek to challenge them through the review and/or appeal process.
Our 'Managing risk in Community Asset Transfer' publication sets out a range of ways in which potential risks involved in Community Asset Transfer can be managed. In some cases, it may be appropriate to impose title conditions (terms, burdens, obligations) on the future use and onward disposal of the asset in order to protect public monies. However, such conditions cannot usually be justified if the property is sold at best consideration.


Related Resources

Asset Transfer Guidance for Relevant Authorities

This guidance has been developed for relevant authorities.  Relevant authorities are required to have regard to guidance issued by the Scottish Ministers in carrying out their functions in relation to asset transfer.

PDF icon Asset Transfer RA Guidance Notes.pdf