Section 1. Introduction
The Localism Act 2011 came into effect on 21 September 2012 and introduced the “Community Right to Bid”. This is applicable to England only. The intention of the Community Right to Bid is to assist local community groups in trying to preserve buildings, facilities and land which are important to their communities (‘Community Buildings’). Examples of Community Buildings include: churches, church halls, village shops, pubs, community centres, children’s centres, allotments and libraries.
A community organisation can nominate a Community Building to be considered as an asset of community value if its main use furthers the social well-being or social interests of the local community, or where its use in the recent past has furthered these interests and it is realistic to think that the Community Building will further social interests again in the next five years.
Community organisations that can make a nomination are as follows: Parish Councils, neighbouring Parish Councils, unincorporated groups, neighbourhood forums and community interest groups with a local connection (Community Group)
Many of our Methodist chapels are places dear to the heart of local communities and this can mean that when Managing Trustees close and look to possibly dispose of a chapels or other Methodist building/land a Community Group could nominate the property under the Localism Act. This is known as the “Community Right to Bid” and it is something which Managing Trustees need to be aware of and play close attention to. A nomination by a Community Group can affect a disposal of Methodist property particularly in relation to the timing of the proposed sale or long lease.
If a Community Group is successful in its nomination then Methodist property will be placed on the List of Community Assets. The Managing Trustees will then be obliged to follow a strict process set down in the Localism Act before the property can be disposed of.
It is important to appreciate however that this is a “Right to Bid” and NOT a “Right to Buy”.
Section 2. What happens if a church receives a nomination?
If Methodist church property is nominated by a Community Group to be placed on the List of Assets of Community Value, the Local Authority (LA) usually notifies the Managing Trustees and TMCP.
Unfortunately, not all Local Authorities do this and some may only notify the Managing Trustees when they have decided to place the property on the List of Assets of Community Value. If the LA does notify the Managing Trustees of the nomination they will be given a date in the notification letter by which they need to respond to the LA and make any objections. The LA has to make a decision within 8 weeks of receiving the nomination from a Community Group as to whether or not the property will be placed on the List of Assets of Community Value.
TMCP may receive a notification from the LA as TMCP will be identified on a Land Registry search as being the legal owner of the property. However as this is not always the case and the Managing Trustees should ensure they contact TMCP once they have received notification of a nomination, or confirmation of whether or not the church property is to be added to the Lists of Assets of Community Value.
Section 3. What happens following a nomination?
The LA have 8 weeks from receiving a nomination from a Community Group to decide whether to place the nominated property on the List of Assets of Community Value.
If a property is added to the List of Assets of Community Value it will remain on the list for 5 years. The LA will register a land charge against the property and place a restriction on the title of the property at HM Land Registry (if registered).
Section 4. Right of appeal
The Managing Trustees have the right to appeal against the listing and can ask the LA to review its decision. A request for a review must be made in writing before the end of a period of 8 weeks from the date of the listing decision letter.
The LA will provide details of how to appeal but the Managing Trustees may wish to appeal if the property is not, or has never been, used for any purpose (other than religious use) which furthers the social wellbeing or social interests of the community. If the Managing Trustees do wish to appeal and are unsure how to proceed then they should instruct a solicitor to assist them.
If an appeal is successful the property is added to the List of Unsuccessful Nominations. Community Buildings included on this list may be removed after five years, although the LA is not obliged to remove them. However, while Community Buildings are included on the List of Unsuccessful Nominations the reasons should be noted on the same. The list must be available for free inspection and the LA must provide a free copy of the list if requested to do so.
Section 5. What happens if the managing trustees wish to sell a property which is on the List of Assets of Community Value?
If the Managing Trustees want to dispose of a Methodist property on the List of Assets of Community Value (be it on a freehold basis or with a leasehold interest of 25 years or more) then they must notify the LA in writing of this intention.
A Methodist property which is on the List of Assets of Community Value cannot be sold until the correct procedure (set out below) has been followed. If the LA hasn’t been notified of the Managing Trustees’ intention to sell the property the timeframes referred to below will not start to run until the LA are notified. As such this will result in delays, with time and money being wasted by the Managing Trustees and any potential purchasers of the property.
If the Managing Trustees did not follow the procedure set down in the Localism Act (detailed below) and went ahead with a sale, following completion the buyer would not be able to register the purchase with the Land Registry. This is because the restriction on title would prevent the Land Registry from registering the new owner as the registered proprietor on the Land Register and the transaction would be void.
Once the Managing Trustees have notified the LA of their intention to sell the property, the LA will in turn notify the interested Community Group. There is then a 6 week period running from the date of notification (known as an interim moratorium) where the property cannot be sold and the interested Community Group can request to be treated as a potential bidder/purchaser.
If the Community Group does not ask to be treated as a potential bidder within the 6 week timeframe the Managing Trustees are free to dispose of the property in the usual way, in accordance with charity law and Methodist law, policy and best practice.
If the Community Group confirms it does want to make a bid for the property the full 6 month moratorium period running from the date of notification comes into operation during which the property cannot be sold.
During both the interim moratorium and the full moratorium periods the Managing Trustees cannot exchange contracts to sell the property. However, the Managing Trustees are not in any way prevented from marketing the property and liaising with other prospective purchasers to discuss potential sales which could take place after the 6 month full moratorium period has elapsed.
If the Community Group is unsuccessful in their bid(s) during the full moratorium, then at the close of the 6 month period the property will become available for open sale and cannot be made the subject of a further moratorium for 18 months.
Managing Trustees will still need to comply with the Charities Act 2011 and Methodist law requirements on disposal e.g. achieving the best price reasonably obtainable, whoever the eventual purchaser will be.
As mentioned above, the Right to Bid by a Community Group is NOT a right to buy: the 6 month full moratorium is intended to allow a Community Group time to secure funding etc. so as to put them on a level with other bidders. The Community Group is not a preferred bidder; they will have to compete with other interested parties (who can purchase the property at the end of the full moratorium). All potential bidders will still be required to offer market value for the property which the Managing Trustees’ Surveyor will need to confirm is the best price reasonably obtainable if that offer is to be accepted.
Helpful process diagrams can be found at pages 3 and 5 of the Department for Communities and Local Government Community Right to Bid Non-statutory advice note for local authorities. Pages 3 and 5 contain diagrams of the processes for nominating an asset for inclusion on the list of asset of community value and the selling of a listed asset.
Please note that this document is to provide guidance and assistance to Managing Trustees and their professional advisers. This guidance note is general in nature, may not reflect all recent legal developments and may not apply to the specific facts and circumstances of any particular matter.
Also note that nothing within the documents and guidance notes provided by TMCP nor any receipt or use of such information, should be construed or relied on as advertising or soliciting to provide any legal services. Nor does it create any solicitor-client relationship or provide any legal representation, advice or opinion whatsoever on behalf of TMCP or its employees.
Accordingly, neither TMCP nor its employees accept any responsibility for use of this document or action taken as a result of information provided in it.
Please remember that Managing Trustees need to take advice that is specific to the situation at hand. This document is not legal advice and is no substitute for such advice from Managing Trustees' own legal advisers.
If you require any further guidance on the Localism Act 2011 or how it will impact on any future disposal of property please contact TMCP.