London,
02
June
2017
|
12:04
Europe/Amsterdam

Real Estate e-alert: Assets of Community Value ("ACV")

What is an ACV?

In order to empower local communities and obviate the damage posed to them by certain buildings or amenities being closed or sold, the Localism Act 2011 introduced Assets of Community Value ("ACVs"). This Act conferred a right upon the local community to bid for land which is determined to be of value to their community. An asset is deemed as being of community value if it furthers the social well-being or the cultural, recreational and/or sporting interests of the local community. Examples include pubs, football stadiums, gyms and car parks. Local authorities maintain lists of ACVs in their areas. The listing is registered as a local land charge and a restriction is entered on the Land Registry title to the land so purchasers should be aware.

The consequence of being designated as an ACV is that when the landowner wants to dispose of an ACV the community is given the opportunity to bid for it and raise capital to buy the land. The landowner cannot then sell the land until a period of time has passed. This can result in landowners suffering significant losses if prospective purchasers are deterred. However, no right of first refusal is created and ultimately the landowner is not bound to sell the land to any particular person or at any particular price.

What recourse is available to landowners?

Compensation is available to landowners if they incur loss or expense due to the land being designated as an ACV, but the burden of proof is on them to demonstrate that any loss suffered was "wholly caused" by the ACV status. Further, compensation cannot be claimed for any diminution in value resulting from designation as an ACV. The potential to seek compensation therefore does not fully ameliorate the risks of owning an ACV.

De-listing an ACV

It is therefore important that landowners consider attempting to have the asset's ACV status overturned. In order for land to be designated as an ACV the relevant criteria must be met. If the landowner believes that these are not satisfied, they can request a review of the decision to designate it. If that review does not result in the asset being de-listed, the landowner has a further right of appeal to the First Tier Tribunal.

If on review or appeal the landowner is able to demonstrate that the principal use of the land does not further the interests of the local community, or that said use is not realistically going to continue in future, then the ACV designation will be overturned and the asset de-listed.

As the recent case of New Barrow Limited v Ribble Valley Borough Council (2017) ("New Barrow Case") demonstrated, even if at the time of designation it is realistic to expect that the land will continue to further the local community's interests, if this subsequently changes then the ACV status may be overturned. This ruling could prove to be extremely useful to owners of ACV land where the use of the asset is unlikely to continue to be of benefit to the local community for the foreseeable future.

New Barrow Case

In the New Barrow case, the landowners ("New Barrow") owned a large plot of land which it intended to develop into 504 residential properties. Within this land was a small plot which, prior to the commencement of the development works, was being used as allotments under a licence agreement with New Barrow. A community interest group applied to have the plot on which the allotments were situated designated as an ACV and it was listed accordingly by Ribble Valley Borough Council. New Barrow applied to have this decision reviewed but was unsuccessful. The Council held that the use of the land as allotments clearly satisfied the test of furthering the social wellbeing or social interests of the local community. New Barrow therefore appealed to the Tribunal.

Between the date of the review and the appeal hearing, New Barrow terminated the allotment licences and granted a licence to occupy to Redrow Homes Limited, who had contracted with New Barrow to do the development. The purpose of this licence was to enable the site to be used as a storage depot and building yard, as well as to enable access to the surrounding development land. The Tribunal held that as a result of this licence, it was clear on the date of the appeal hearing that the future use of the land would not further the social wellbeing or social interests of the local community. Since the use of the land as allotments had ceased, the reason the criteria for ACV status were satisfied no longer existed. As such, the Tribunal ruled that the land should be de-listed.

The New Barrow Case was noted by the Tribunal as being fact-specific. The reason the appeal was successful was because the listed land was entirely surrounded by the development land and it would therefore be incongruous for it to be left out of the development proposals. The Tribunal therefore considered there to be an extremely limited possibility that the use of the land as allotments was likely to continue in future.

Conclusion

Owners of land designated as an ACV should therefore note that if the principal use of the land changes, or is likely to change in future, so that it no longer is of primary benefit to the local community, they may be able to successfully appeal that designation. Whilst one would need to demonstrate on a fact-specific basis that it would be highly improbable for the use of the land which provided the justification for the ACV status to continue, this case shows that the Tribunal is prepared to reconsider designation if the relevant criteria are no longer met.

In saying that, if landowners to wish to have the designation reviewed, they must apply to the local authority within 8 weeks of receiving notification of the decision to list the land. If that review is unsuccessful, then the landowner must appeal to the Tribunal within 28 days of receiving the outcome of the review. This means that if land is listed as an ACV and several years later the owner decides to change the use of the land, at this point it will be too late to appeal the designation.

For more information on ACVs, please contact Chirag Rao, Jake Calvert or a member of the Real Estate team.