Localism Act risks slowing down the property market

17 Sep, 2013

A leading commercial property lawyer warns that new legislation aimed at protecting assets of community value may only result in delays and deals falling through.

 

Earlier this month Manchester United’s iconic Old Trafford ground became the most high profile property to be protected as an asset of community value under the Localism Act and Peter Coleman, head of Higgs & Sons’ commercial property team, says the Act, which came into force in September 2012, is already affecting a number of transactions.

 

“The most common problem we are finding is that where a property is designated as an asset of community value, there are stringent restrictions on the owner’s ability to sell or grant long leases, often the owner is not aware of this until a deal to sell has been agreed. 

 

The Act enables local interest groups to make an application to their local council to designate land and properties as being of particular social or cultural interest. To designate a building as an asset of community value the Local Council must be satisfied that the building has a social or cultural value to the community and anyone applying will also need to establish a connection to the local area.

 

If the application is successful the Land Registry will put a restriction on the title of the property which limits the owner’s ability to sell the property.

 

It has been suggested the Act is designed to give greater powers to local communities to protect buildings and businesses of particular value to their neighbourhood. In particular, local pubs which, as has been seen in the press recently, are shutting down at a rapid rate are the subject of many of the first batch of applications. We have already been involved in two transactions where local interest groups had successfully applied to designate a public house as an asset of community value.

 

However, the Act also applies to many other buildings used by the local community for example Post Offices, local parks and sports pitches as well as social clubs and community halls and it has been suggested the Act could give football fans the opportunity to purchase their club’s ground giving fans a much bigger say in the club. 

 

Once a property is designated it remains protected for five years. After this time, it will be automatically removed but there is nothing stopping another application.

 

Once a property is protected, the owner must first inform the relevant community group of its intention to sell and give the group six weeks to notify the Local Council that they are interested in buying thereby keeping the property in local hands. If no notice is received the owner can proceed as normal. However, if a notice is received the owner will not be able to complete a sale to another party for six months. Peter warns that whilst this additional time gives the community group the chance to arrange funding for the property, the delay could result in the seller losing a prospective buyer.

It is important to note that the Act does not impose any obligations on the owner to sell to the community group, the only requirement is to give notice and wait for the time limits to expire.

 

“We recommend, therefore, that property owners, concerned that their property may have been listed as an asset of community value approach us as soon as possible once they have decided to sell their property. We can consult the Land Registry and if the property is listed as an asset of community value begin the process of serving the notice to sell. The earlier this can be done the less chance there is of a sale being delayed. Once a notice has been served the property owner has 18 months to complete a sale.”

 

To summarise, once a notice has been served on the council a sale cannot be completed for 6 weeks. If the sale has not been completed within 18 months a further notice will need to be served on the council – provided the property is still designated as being of community value.

 

Picture: Left to right, Phil Gray and Peter Coleman

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