Negotiating a lease
During a Community Asset Transfer from a local authority there is usually a process of negotiation between the authority and the community group acquiring the asset. While these negotiations are often specific to the asset, these are some high level resources if your community organisation is considering a community asset transfer.
Legal options for asset transfer
A high level introduction to the ‘spectrum’ of legal options available, pros and cons for each, and how options relate to relevant policy.
Aimed at community groups contemplating transfer and their supporters/advisers.
The options include:
- Licence to occupy
- Short term agreements
- Short term lease (usually <10 years)
- Long term lease (>20 years, to secure investment)
Key issues that may arise
- Being funder friendly: Being ‘finance ready’ to obtain a bank loan
- Overage: a provision in the lease that requires the community group to pay it a certain amount in the event that the asset is sold in the future at a profit
- User clause: a local authority may impose conditions on how the site can be used
- Transfers and subletting: ‘Alienation’ is the legal term for the process by which the community group can dispose of their interest in a property through transfers and subletting.
- Legal costs: Increasingly, local authorities are expecting the community group to meet the authority’s legal costs for the negotiation of the lease
- Closed bids: Where the community asset transfer is taking place in a closed bid situation, the terms of the lease will be part of the contract pack and therefore there is limited ability to make amendments to that draft form of lease
- Business rate relief: Charities are currently entitled to business rate reliefs on the properties that they occupy. The mandatory relief will be 80% of the normal business rates and a further 20% relief is available at the discretion of the local authority
- Personal liabilities and warranties: Under the terms of the lease, the local authority may try to impose personal liability on members or directors of the organisation, typically through the giving of personal guarantees
- Reinstatement: Leases often contain a clause that requires the building to be ‘reinstated’ at the end of the lease term.
Need specific help?
Locality’s team is highly experienced in community asset transfer between local authorities and community organisations, and can help with this process. You can contact the team via the Contact us email form or via Locality’s website.