Much has been made by the media of the introduction of Assets of Community Value (ACV) since their creation (pursuant to the Localism Act 2011 (LA 2011)). Some say ACVs are vital in protecting communities and in preserving the character of villages and towns across the country. Others consider them to be a gimmick created to appease local communities’ concerns whilst, those with interests in development see them as yet another obstacle in taking on redevelopment projects (especially in built up areas).
In this blog post we hope to help clarify what an ACV is and provide some practical advice about how developers or lenders should treat them.
What is an ACV?
Following a period of political debate the idea of ‘localism’ and handing powers to communities to determine how their areas evolve and develop was established and the LA 2011 was brought into force. Perhaps the most newsworthy aspect of the LA 2011 was the introduction of a new class of property, the ACV.
The creation of the ACV allows local communities (through either a Parish Council in England, a Community Council in Wales or other voluntary or community groups with local connections (Community Group)) to apply to their local authority with a request for a particular piece of land or property to be listed as an ACV. Then follows a period of consultation and consideration (including a right for the owner of the asset (asset owner) to appeal any decision) following which, if the application is successful, the land or property will be listed as an ACV. This listing lasts for a maximum of five years.
Since the introduction of the LA 2011 more than four years ago a large variety of assets have been registered as ACVs including car parks, hospitals, school playing fields, football grounds (including Old Trafford no less!), village halls, bowls clubs, local parks, nature reserves and, by far the most common, local pubs!
What is the effect of a property being listed as an ACV
Once land or property has been listed as an ACV, it becomes subject to certain statutory requirements which impact on the ability of the asset owner to dispose of it and include:
- The asset owner is obliged to inform their local authority once they decide to sell the asset or grant/assign a lease of 25 years or more. The local authority must then inform the nominating Community Group and publicise the proposed sale.
- An initial six week moratorium kicks in from the date on which the local authority is told about the proposed sale. During this period the asset is safeguarded and only a Community Group can make a bid for the asset. The asset owner may not agree a sale to any party other than a Community Group during this period. At the end of the six week moratorium there are two options:
- The asset may be sold to a third party if no Community Group has made a bid.
- If a bid has been made, the Community Group shall be afforded an additional four and a half months (taking the period up to six months in total) to prepare its business plan and arrange funding for its purchase. The asset owner is restricted from selling to any third party during this period but it is not obliged to accept the bid.
- After six months, if the asset still remains unsold then the asset owner may finally dispose of the asset to a third party at any point within the next 12 months.
- If the asset does not sell prior to the expiry of this 12 month period then the process will re-start.
Whilst these requirements undoubtedly benefit Community Groups, it is worth noting that the obligations do not give the Community Group a right of first refusal, or restrict the asset owner in respect of who they can sell the ACV to or at what price.
Although ACVs can certainly cause a headache for developers, lenders and legal professionals alike, there are a number of considerations and practical steps that can be taken:
- Do your research! Local Authorities are obliged to keep a list of ACVs and a list of assets nominated to become ACVs. Ensure that you or your solicitor carries out a search at the outset to avoid coming unstuck further down the line. ACVs will also be registered as Local Land Charges and will therefore be revealed in a Local Land Charges Search, which usually forms part of the Local Search carried out as part of standard property due diligence.
- Keep it confidential – We have all seen and heard stories of local communities protesting at the construction of a new supermarket or the closing of their local pub. Ensure that your negotiations from start to finish remain confidential so as to reduce the risk of your development becoming a target.
- Be flexible – Anecdotally at least there seems to be a view that being an ACV rarely results in a property ultimately ending up in the ownership of the local community. This may be due to lack of funding or being unable to compete with bigger developers, so stay calm and play the long game. Remember – if no sale is agreed within six months of you becoming interested, then you will get the chance to agree a purchase.