Since the 2010 cuts in government funding, decisions on how the council makes the best use of its land and building assets are more important than ever.
Community Asset Transfer Guidance
This guidance has been updated as of Tuesday 20 August 2019.
Since 2010, the council has been affected by above average cuts in government funding. Therefore, decisions on how the council makes the best use of its land and building assets are more important than ever.
There is a need to rationalise the remaining property portfolio and dispose of land and properties that do not significantly contribute to the key aims of the council. This has led to the council utilising and investing in its retained buildings in a more efficient and effective manner to ensure that these assets effectively supports the delivery of services and outcomes.
The council’s existing portfolio generally comes in two forms. Firstly, there are those assets that directly support the delivery of services and secondly, there are assets such as the commercial and shops portfolio that make a financial contribution as well as generating social and economic benefits. There are circumstances, for example, when assets cease to be of a reasonable financial or other benefit, where there is potential for a community asset transfer in order to deliver social and other benefits to the community.
As a council with cooperative principles, we believe that in some circumstances community asset transfer is a potential vehicle to give local people and organisations greater control over the future of their area and community. This guidance recognises the potential benefit that asset transfer can bring to the community, to the organisation proposing an asset transfer and to the council.
Changing ownership or management of an asset potentially offers opportunities to extend the use of a building or piece of land, thus increasing its value in relation to the numbers of people that benefit from the asset and the range of opportunities it offers. It may offer additional opportunities to bring resources to an area and to empower local residents and communities by raising aspirations and a sense of belonging. In this way the local economy, the environment and the community/voluntary sector itself could be strengthened by the appropriate use of community asset transfer.
The council also recognises that there will be cases when community asset transfer is not appropriate and will not achieve the benefits referred to above. Additionally, in some circumstances, other outcomes or priorities may outweigh those to be derived from community asset transfer.
This guidance provides the council with a structured means of establishing the benefits and disadvantages of community asset transfer so that an informed decision is made.
Purpose of the guidance
There are two circumstances whereby a community asset transfer may be appropriate:
- When the council wishes to dispose of land or buildings and is willing to forgo any financial return for potential community benefit; and
- When an existing community based tenant resident within council land or buildings wishes to explore the potential for asset transfer.
The council does not invite speculative approaches from community groups for asset transfer.
This guidance sets out a clear framework to enable the assessment of all expressions of interest in the above two circumstances.
The council recognises the multiple benefits of community asset transfers and will be proactive in using asset transfer as one of the tools at its disposal. However, despite a reasonable approach from a group, in some cases the transfer of the asset will not be appropriate. Therefore, the council aims to create a transparent and consistent framework to enable proposals for community asset transfer to be evaluated.
This guidance seeks to balance the particular benefits of a community asset transfer against other benefits or outcomes that the council could obtain from the asset, for example, the income from a commercial rental, future investment value, or the regenerative benefits of the disposal of the asset.
The council has an existing guidance to dispose of underused or surplus assets whilst investing in infrastructure projects across the Borough There needs to be a balance between asset sales to fund investments and to regenerate communities through alternative uses.
When making its decision, the council will seek to balance community benefit, the risk involved in any such transfer and the opportunity cost of the alternatives and what will be foregone.
The council recognises that the way its physical assets are managed can have a positive impact on the strength of the third sector and local communities more generally. Through effective community asset ownership and management, organisations can grow and become more sustainable. Ultimately, the aim is to ensure that any asset transfers underpin the council’s wider aims in the Corporate Plan and other relevant strategies.
After officers have performed an evaluation of a proposed community asset transfer then a report making a recommendation will go to the Executive Director of Place for a decision in consultation with the Cabinet Member with Portfolio for Regeneration, Economy and Skills.
School buildings and landholding will not be considered under this guidance as any disposal would first need approval under Section 77 of Schools Standards and Framework Act 1998.
The potential benefits of Community Asset Transfer
The council’s existing assets include land and buildings used for a variety of different private, social, community, and public service purposes. For some of these assets, the transfer of the asset to the community with their subsequent management and ownership of the asset could deliver:
- Benefits to the local community including:
- closer identification and influence over the management of the facility making it more responsive to local needs with reduced overhead running costs;
- greater use of facilities and a wider range of activities with improved health and other wellbeing outcomes for the community; and
- a catalyst for local volunteering, stimulating the direct involvement of local people in shaping and regenerating their communities and increasing community cohesion.
- Benefits to the council and other public sector service commissioners including:
- activities that are stimulated or safeguarded contributing directly to the delivery of council objectives and the Corporate Plan;
- contributing to the council’s objective to rationalise its estate and facilitate more effective and efficient use of its asset base;
- improving levels of volunteering, civic participation, and engagement in positive activities in the borough;
- financial savings for the council, including staff and asset overhead costs and business rates; and
- levering external investment into areas of need that the council cannot attract (e.g. grant funding, social investment, local philanthropy, and the engagement of local employers via corporate social responsibility).
- Benefits for the community and social enterprise sector including:
- financial security, recognition, and enhanced management capacity;
- creation of new community businesses, social enterprises, and partnerships;
- building capacity to take on the delivery of public services and develop as community enterprises;
- stimulating new social markets amongst community and social enterprises;
- diversifying the supply base for public services; and
- Improving access to funding and contract opportunities at local, regional, and national levels.
Any proposal to transfer an asset to the community will need to clearly demonstrate a range of the above outcomes/benefits.
National policy context
There is a clear multi-party policy at a national level to encourage the transfer of ownership and management of public sector land and assets to community organisations. Such transfers are increasingly seen as a means to achieve a range of objectives from promoting civil renewal, active citizenship and improving local public services to tackling poverty and promoting economic regeneration.
The Localism Act 2011 created the Community Right to Challenge, which gives community and voluntary sector organisations the right to put forward an expression of interest in running Council services and also requires local authorities to maintain a list of assets of community value which have been nominated by the local community. Both these initiatives and a community asset transfer are similar. However, in delivering a service or managing an asset of community value the Act does not give an automatic right to the organisation expressing an interest, nor guarantee the organisation will be successful in any mandatory procurement exercise.
There are other statutory provisions that offer community organisations and social enterprises new mechanisms with which to acquire and develop land and buildings as well as assets that are held in private ownership. The Public Request to Order Disposal provisions extended as the Right to Reclaim Land and revisions to Compulsory Purchase guidance are intended to increase the role of the community in proactive regeneration efforts.
Local strategic context and links to other strategies
The operation of this guidance has to take into account the approach and desired outcomes of other council strategies, policies and initiatives. In addition, all proposals for transfer must make an explicit contribution and impact to the needs of the borough as set out in the:
- Strategy for Knowsley;
- Corporate Plan;
- Medium Term Financial Strategy;
- Corporate Property Plan;
- Cooperative Principles;
- Social Value Model;
- Unitary Development Plan;
- Supplementary Planning Documents;
- Economic Regeneration Plan;
- Green Spaces Standard;
- Specific regeneration and development plans; and
- Any other policies of relevance to a particular proposal.
This guidance does not sit alone and in many circumstances other outcomes and benefits and outcomes will outweigh those to be derived from community asset transfer.
Principles for guiding an asset transfer
The council’s guidance on community asset transfer is underpinned by the following principles.
Determining when a Community Asset Transfer would be used:
- The council’s first consideration once an asset is surplus to service delivery or commercial requirements is to identify whether the facility is an asset or a liability to the council or blight to the area in its current form;
- It is unlikely that a community asset transfer will be considered where the facility is an asset whereby it can generate income from the open market or generate a capital receipt by selling the asset;
- It is less likely that a community asset transfer will be considered where alternative local premises are reasonably available to community based organisations and users;
- The asset transfer should not be contrary to any legal obligations, restrictions, or grant conditions placed on the council; and,
- The council will adopt, wherever possible, a proactive approach to identifying and advertising surplus land and buildings no longer required for the delivery of services, including an indication of the likelihood that they could be considered for a community asset transfer.
Once a Community Asset Transfer is an agreed approach then this is how it would be put into practice:
- priority for the opportunity to have a community asset transfer will be given to the asset’s existing users and community organisations;
- where there are several interested parties for an asset, a competitive evaluation process will be used to decide the preferred organisation, if any;
- there is no guarantee of exclusivity on a first come first served basis when considering asset transfers and other expressions of interest will be considered, as appropriate;
- collaboration between community based organisations and the sharing of assets to optimise social value and value for money across the borough will be encouraged;
- proposed asset transfers will be managed on a case by case basis within the guidance framework and any decision to transfer an asset should not be regarded as setting a precedent;
- the council will share information regarding the condition and operating costs of the asset with the interested party;
- it cannot be assumed that the council will make good any minor defects with the asset before the transfer;
- any significant repair costs or remodelling would question the suitability of the asset for a transfer unless an interested party can deliver the necessary investment as part of their business plan;
- the community organisation will need to be a legal entity and be able to demonstrate a sustainable business plan;
- elected members, including ward members, will be engaged appropriately throughout the process;
- any proposed asset transfer must promote social, economic or environmental wellbeing (social value) and/or support the stated aims and priorities of the council;
- the community organisation will be responsible for the running costs, including repairs, maintenance, and insurances;
- financial support the council does not give financial support for community asset transfers;
- any transfer for community use should be on a leasehold basis. This protects the future of these assets and ensures the council can determine any future changes in use and occupation during the lifetime of the lease;
- the length of the lease should be appropriate to the business case and where appropriate, long enough to attract funders and investments;
- where an element of wider community usage is retained after the transfer then there will be a requirement to protect existing user groups in terms of usage and charges for a limited period;
- the social value and outcomes to be delivered, along with any other conditions or grants will form part of a management agreement;
- compliance with the management agreement will be monitored by the council as specified in the agreement;
- if a below market value transfer is acceptable then the council will apply appropriate legal restrictions to the lease and management agreement to ensure the asset remains a community benefit and for the purposes agreed;
- failure to comply with the management agreement can result in the management agreement ceasing and the lease will automatically terminate at the same time; and,
- where control is passed to a third party organisation for any purpose other than community use and benefit then this relationship will be on a commercial basis.
- where an agreed Asset Transfer is confirmed, new lease holders will be required to maintain current user groups hire rates for the first 12 months. New user group hire rates can be determined by the new lease holder.
Challenges and risk
The council accepts that there are risks that may arise from a community asset transfer that need to be carefully assessed before any decision can be made to use that option. Therefore, all community asset transfers need to be considered in the widest possible context, and an assessment will be completed that needs to take account of:
- loss of capital receipt and future investment value;
- loss of an asset which could have a wider strategic benefit or development use in the longer term;
- lack of value for money;
- State Aid and procurement rules;
- likely capacity of a community organisation to deliver services and outcomes;
- possibility that a community organisation will fail and go into liquidation (whilst recognising that on balance it may be worth transferring if the short term benefits outweigh the likelihood of failure in the longer term);
- any ongoing council liabilities;
- whether the asset is fit for purpose and would not impose an unreasonable liability to a community organisation or the Council;
- potential unfair advantage for one group over another; and,
- potential for negative impact on community cohesion and the council’s reputation.
Organisations eligible for a Community Asset Transfer
Voluntary, community organisations, and social enterprises are eligible organisations for a community asset transfer under this guidance. These groups may be based on a geographical area, around particular social interest groups or some other shared interest. Ideally, applicants should meet the following criteria in that they will:
- be a legal entity that exists to deliver social, economic or environmental benefit to the borough, can demonstrate community benefit objectives, and with surpluses/profits reinvested back into the community to further its intended aims. Typically they include charities, community interest companies, and industrial and provident societies;
- be community led, with governance arrangements that demonstrate strong links to the local community who in turn can influence its operation and decision making processes;
- not have a political purpose or objective;
- have a clear vision of the activities they wish to deliver, the resultant positive impact and that the use of the asset is genuinely for the benefit of the community;
- demonstrate good governance by operating through open and accountable processes with fully constituted governing boards following clear terms of reference and have reliable financial systems;
- have the skills and capacity to manage the asset and deliver services; and,
- be open to and demonstrate an inclusive approach to members of the wider community.
Business case for a Community Asset Transfer
As it is likely that many of the potential organisations for a transfer of assets would have a limited financial history or facilities management experience, it is important that a robust business model is developed that is supported by a solid business case in support of their proposal. Therefore, this guidance requires that an organisation needs to demonstrate their ability to successfully operate an asset leased from the council through a business case that has been validated by council officers.
The detailed requirements of this business case are given in appendix A. It is the responsibility of the organisation itself to create and present the business case, as this is part of them demonstrating their ability as a business. It would be a conflict of interest for the council to produce the business case. However, the council can advise on contents, signpost to external sources of business support and skills development and provide comments on the acceptability of their plan.
Appendix A - Expected Contents of a Business Case for a Community Asset Transfer
Fundamental to the success of any transfer is the organisation demonstrating to the council that they have a proposal with a clear business model rationale backed by a robust business plan showing their ability to manage the asset effectively, including the financial and organisational capacity of the organisation.
Community Asset Transfer Proposal and Business Model
- Organisation details - who you are, how long have you existed, current involvement in the community, legal structure, governance and how local people are involved, track record, contact details.
- Identify the building / land proposed to be transferred.
- Length of lease requested.
- Any funding that the organisation will bring to support the transfer – refurbishment/remodelling and development grants or loans.
- Needs met by the proposal and anticipated benefits for the organisation’s users, wider community, and the council.
- Intended use for the building – planned activities and availability.
- Identify any local support for the proposal through consultation, and that it is not aligned solely with a single interest group.
- Indicative timescales for the asset to be operational.
Detailed Business Plan
The business plan is the single most important document to inform the decision about whether to proceed with a community asset transfer.
All business plans should address the following:
- Expected outcomes and proposed programme for delivery.
- Proposed impact and the social, economic, and environmental benefits for the local community.
- Arrangements for managing and operating the asset (staff, volunteers) on a daily basis, the identification of the necessary expertise and any training, capacity or skills building requirements within the organisation.
- Legislation and regulatory controls addressed – equality standards, safeguarding, health & safety, disability discrimination, and licensing requirements.
- Track record of delivering services and/or managing property.
- Consideration of strengths, weaknesses, opportunities, and threats.
- Market needs – the local needs that the activities will be responding to and the beneficiaries.
- Demand from users for the asset.
- Projected utilisation rates and activity timetables.
- Supply of similar activities in the same area and the response to this in collaboration or competition terms.
- Pricing and charging guidance for users (individuals and groups) - maximising opportunities for income generation to ensure sustainability.
- Marketing the asset to potential users – methods and targeted groups.
- Asset - investment and maintaining the asset, including how all health and safety responsibilities will be met and any sources of finance the asset transfer will release or attract.
- Sources of finance that the asset transfer will attract or release.
- Financial projections - a three to five year budgeted profit & loss, a first year cashflow forecast, and any capital expenditure required to develop the asset that demonstrates the longer term financial sustainability of the proposal. The assumptions in the financial plan should be explained and any funding arrangements e.g. grants, loans, should be supported by evidence.
- Risk assessment - identification of the different risks and what would be done to prevent the risk from occurring, or coping with it.
In addition, the organisation will be expected to submit copies of governing documents, any evidence of external advice provided, expressions of support from financiers, partners, customers, and users, and where available copies of accounts.