Legislation is now in force which could affect the timeframe of acquisitions or disposals or be used as a delaying tactic to try to stall a development which might be unpopular in the local community. If you are proposing to buy or sell land or buildings, you must now make enquiries to ascertain whether the asset has been listed, or is under consideration to be listed, as an asset of community value. If it is, this may delay or interfere with the transaction and if the disposal is made without following the correct procedure in accordance with the rules it is likely to be ineffective.

The legislation gives communities in England a right to identify a building or a piece of land they believe important to the community and, if that asset then comes up for sale, they have first choice to bid for it on the open market. The rules apply on the transfer of a freehold or the grant or assignment of a lease of more than 25 years. In all cases such a disposal must be with vacant possession.  

A local authority is required to maintain a list of assets of community value (and a list of nominations which were unsuccessful).  Only a parish council or a local voluntary and community body such as a charity or certain type of unincorporated association has a right to make a nomination of assets to be included on this list.  The local authority has eight weeks from receipt of the nomination to decide whether land nominated by a community body should be included on the list.  It must take all practicable steps to advise various interested parties that it is considering listing; they include the owner, the freeholder, any leaseholders and any lawful occupant of the land.   The owner, who may be the freeholder or the leaseholder, has a right of review and of appeal. The listing will be a local land charge.  Where land is included in (or indeed removed from) the list of assets of community value the local authority must give further notice to various persons including the owner, occupier and the group that made the nomination.

Nothing then happens until the owner decides to dispose of the asset.  At that point, the owner must notify the local authority of its intention, the authority informs the community group and it then has six weeks from the date of the owner's notification in which to express a written intention to bid.  If no intention is expressed then the owner can sell.  If there is an expression of interest then the community group has a six month period, again from the date of the notification to make a bid.  If there is no bid, then the owner can sell. If the owner chooses to dispose of the land to the community interest group it has 18 months from the date of its original notice to do so.  If this notification provision and these time frames are not adhered to by the owner then the disposal will be ineffective.  

It is important to realise that the community group only becomes a potential bidder.  There is no obligation on the owner to accept its bid even if it matches or exceeds the owner's asking price.  The rationale behind the legislation is not to restrict to whom the owners of the listed asset can sell.  It is not a first right of refusal situation.  The legislation is not trying to restrict what the owner can do but just give communities more time to raise funds and put proposals together.  It is trying, in the words of the DCLG's policy statement, to give them a "level playing field".

There are various exemptions to the type of disposal to which the rules apply which include disposals between group companies, those pursuant to a court order or insolvency proceedings or under a statutory compulsory purchase order, gifts and certain disposals which have been made as a result of legally enforceable pre-existing arrangements such as an option to buy or right of pre-emption.  There are also certain types of land which are not of community value and which cannot therefore be listed, the most significant of which is residential premises (but not if part only of the asset is for residential use).  

A compensation scheme administered by the local authority is available for private property owners who can claim for costs or loss incurred as a direct result of complying with the procedure.

These rules are not going to prevent an owner of land from selling to whom it wants to, provided the correct formalities are adhered to but there is potential for delay and for the possible use of the listing by communities to try to stop unpopular developments.  Developers therefore now need to monitor their own portfolios and make sure they adhere to the correct procedures on a disposal.  When buying a property the correct due diligence procedures must be followed so that a purchaser becomes aware of any listing and the potential problems this creates as early as possible in the transaction.