MAYOR AND CABINET

Report Title Community-based asset transfers

Key Decision Yes Item No. 7

Ward All

Contributors Executive Director Community Services, Head of Strategy, Director of

Programme Management and Property, Head of Property and
Development, Sustainable Resources Group Manager.

Class Part 1 Date: 9 July 2008

1. Purpose and summary

This report describes the Council’s approach to community-based asset transfers,

including specific proposals in relation to Parker House.

2. Policy context

2.1. ‘Making assets work - the Quirk Review of community management and ownership of
public assets’ was published in 2007. The Review found that the benefits of
community management and ownership of public assets can outweigh the risks and
opportunity costs in appropriate circumstances, and if supported by a robust
assessment of risks there are no substantive impediments to the transfer of public
assets to communities.

2.2. The Government’s response ‘Opening the transfer window’ accepted the Quirk Review
recommendations in full and initiated a programme of activity to identify and
disseminate good practice.

2.3. The Department of Communities and Local Government published ‘An action plan for
Community Empowerment: building on success’ and is planning a White Paper on
empowerment later this summer. Community-based asset transfers are identified in
this context as one of the ways in which local authorities enable citizens and
communities to influence what happens in their local area.

3. Recommendations

That the Mayor:

3.1 Endorses the overarching approach on community-based asset transfer described in

this report and in Annex A;

3.2 Confirms the Council’s existing policy in relation to leasehold agreements with
community groups;

3.3 Agrees to accept funding of £1 million from the Big Lottery Community Assets Fund as
part of the proposal to refurbish Parker House and to proceed with the proposed
 refurbishment of Parker House funded through the Big Lottery Community Assets
Fund;

3.4 Agrees that following completion of the refurbishment the Council will grant a 50 year
lease at a peppercorn rent of Parker House in accordance with the funding conditions
required by the Big Lottery Community Assets Fund;

3.5 Delegates authority to the Executive Director for Community Services in consultation
with the Executive Director for Resources, the Head of Asset Strategy and
Development and the Head of Law, to negotiate and agree the terms of the lease
referred to in recommendation 3.4 above together with all associated legal
documentation.

4. Background

4.1. ‘Asset transfer’ refers to local communities’ ability to acquire buildings, either at market
value or at a discount, in order to deliver services that meet local needs. It is seen as
one way in which local authorities (in particular) can support the development of social
capital and thereby meet wider strategies for renewal and delivery of local services.

4.2. Barry Quirk led a national review on community management and ownership of public
assets which published its findings in 2007. The Review found that while there are
risks and practical challenges, there are no insurmountable obstacles to successfully
transferring assets to community ownership.

4.3. Publication of the report stimulated significant interest locally, and through the
Council’s Asset Management Board and the Stronger Communities Partnership Board
officers have developed a framework for identifying and developing community-based
assets transfers. This report describes this framework and seeks the Mayor’s
agreement to the overarching approach.

4.4. Community-based asset transfers can potentially encompass a range of different

scenarios, including freehold and leasehold and can extend from offering first refusal
at a commercial rate to a transfer at reduced or nil value. It is important that our
approach is consistent with the Council’s wider policies on assets, and in this context
the Mayor is asked to confirm the existing policy of only entering into leasehold
agreements at market rates.

4.5. This report also specifically seeks the Mayor’s agreement to proceed with the proposal
to refurbish Parker House following the Big Lottery’s decision to award up to £1 million
as part of the Community Assets Fund.

A framework for community-based assets in Lewisham

4.6. Transferring ownership of a building to a community-led organisation will only be

suitable in certain circumstances, and in the wrong conditions an ‘asset’ can rapidly
become a liability to the recipient. Critical to the success of any transfer is a clear
rationale backed by a robust business-case demonstrating the ability of the recipient to
manage the asset effectively and the advantages secured by a change in ownership.

4.7. The framework that has been developed with the Council’s Asset Management Board
and the Lewisham Stronger Communities Partnership Board aims to provide a basis
for identifying, assessing and supporting decision-making making on assets where
 ownership could be transferred in a way that is transparent, consistent and linked to
wider strategic objectives.

4.8. There is no commitment to transfer any assets, and the framework that has been
developed is not intended to create a bidding process. Any proposed transfer will need
to satisfy criteria in relation to achieving value for money and community
empowerment. In addition to these criteria, successful projects will be expected to
deliver benefits in one or more of the following four categories:
• Promoting area-wide benefits
• Supporting a sustainable third-sector
• Economic development and social enterprise
• Improvements to local services

4.9. The framework and associated assessment tool are included in Annex A. We are now
using the framework to identify potentially suitable projects, and the assessment tool
will be used to develop proposals that will be put to the Mayor for agreement. The
Stronger Communities Partnership Board will continue to be involved in the
development of proposals as part of this process.

4.10. In general terms potential community-based initiatives relating to the ownership of

assets fall into the following scenarios:
• Where an external organisation has a proposal focussed on a specific Council
owned building
• Where an external organisation has a proposal based on accommodation
requirements that do not specify a particular building
• Where a wider policy objective has been identified that could be served through an
asset transfer but no individual organisation or asset has been identified.

4.11. The framework and assessment tool will enable us to identify Council assets that may
be relevant in each of these scenarios and to assess proposals for transfer in a
consistent way based on an agreed set of criteria. We will seek to ensure that the
general principles of community-based ‘asset transfer’ are embedded within the
context of the Council’s overarching engagement with the community and voluntary
sector as one of the tools that can be deployed in achieving wider strategic objectives.
This will be achieved through the Stronger Communities Partnership Board, and by
reflecting the potential role asset transfer can play within other Council strategies for
example in relation to community development and community premises.

Current policy on leasehold agreements

4.12. The current policy on letting of Council property to community groups was agreed by
the Policy and Resources (Finance) Sub Committee on 11th March 1999. This policy is
to charge to let properties to community groups on market terms, including rent levels.
For the purpose of this policy a community organisation can be regarded as any
potential tenant for a property who would not satisfy the normal commercial criteria for
selecting a tenant but does provide a service that is corporately supported.

4.13. The market rent reflects both location and condition of a property and takes into
consideration any financial investment the organisation has made in the property
under the terms of the lease, for example as a result of grant funding. The advantage
of this arrangement is that the true cost to the Council of providing accommodation to
community organisations becomes apparent. The Council can still decide whether it
wishes to provide financial support to cover all or part of the rent payable.
4.14. While asset transfers can take place under this existing policy there are cases where
assets have transferred on terms that are below market value based on the individual
merits of each of those cases. The framework and assessment tools discussed in this
paper will now be used to assess these cases in a more structured way.

Refurbishment and transfer of Parker House

4.15. The Big Lottery has awarded Lewisham Council up to £1 million through its
Community Assets Programme to refurbish Parker House, a 5 storey office block in
Evelyn. A condition of the grant is that the Council agrees to transfer ownership of the
building to a community-based organisation.

4.16. This project is designed to deliver community-owned and managed office space that
• Responds directly to local demand for community work space
• Embeds capacity and an on-going source of revenue within the local community
• Reinvigorates the local economy and promote opportunities for social enterprise
• Creates stronger and more dynamic links between local third sector organisations
• Generates opportunities to improve a range of existing services benefiting the
Pepys estate in Deptford and Lewisham as a whole
• Stimulates community involvement and informed community representation.

4.17. Detailed negotiations are in progress on the lease arrangements and agreement
needs to be reached by September in order to confirm our acceptance of the offer of
funding. The Mayor is therefore invited to agree that, subject to satisfactory
agreement on a lease, the Council proceeds with the proposed refurbishment of
Parker House funded through the Big Lottery Community Assets Fund and following
the refurbishment enters into a leasehold agreement at a peppercorn rent in
recognition of the £1 million investment made through the Community Assets Fund.
The Mayor is also requested to delegate authority to the Executive Director for
Community Services in consultation with the Executive Director for Resources, the
Head of Asset Strategy and the Head of Law to agree the terms of the lease for Parker
House in accordance with the funding conditions required by the Big Lottery
Community Assets Fund.

5. Financial implications

There are no immediate financial implications that follow from the overarching
framework that has been developed. Each specific proposal will need to be agreed on
its own merits.

6. Legal implications

6.1. The Council has power under Section 2 of the Local Government Act 2000 to do
anything which it considers is likely to contribute to the social, economic or
environmental wellbeing of its area. This includes power for a local authority to incur
expenditure, enter into arrangements or agreements with any person, facilitate the
activities of any person and to provide accommodation to any person. The power does
not permit the Council to do anything which is specifically prohibited or restricted from
doing under other legislation. In exercising the wellbeing power the Council is
required to have regard to its community strategy. The Council must use its well-being
powers rationally and lawfully. This well-being power therefore provides the legal
context for asset transfer. However, each proposed asset transfer will need to be
judged on its own merits and will need to be dealt with in accordance with the relevant
statutory framework and the Council’s own internal approval processes.
6.2. Under Section 123 of the Local Government Act 1972 the Council may not dispose of
non-housing land otherwise than for the best consideration reasonably obtainable
except with the consent of the Secretary of State. The definition of “disposal” includes
the grant of a lease for 7 years or more. Where it is proposed in particular cases to
grant leases at less than market rents or to transfer assets at less than best
consideration, the Secretary of State has issued the General Disposal Consent
(England) 2003 which applies to disposals under Section 123 and applies where the
local authority considers that the purpose for which the land is to be disposed is likely
to achieve in respect of any parts of its area the promotion or improvement of
economic, social or environmental well being and the undervalue at which the land is
being disposed does not exceed £2,000,000. This Consent will therefore almost
certainly apply to all community-based asset transfers. Provided the undervalue is
within the £2m limit, the Council will be able to rely on this Consent without the need to
seek a specific disposal consent from the Secretary of State.

6.3. In the case of housing land, under Section 32 of the Housing Act 1985 the Council
may not dispose of any land held for the purposes of Part II of the Act (i.e. housing
purposes) without the consent of the Secretary of State. The Secretary of State has
issued a series of General Consents for the disposal of different types of housing
properties. General Consent E3.1 permits local authorities to dispose of any land held
for housing purposes for the best consideration that can reasonably be obtained,
provided that any dwelling-house included in the disposal is vacant and will be
demolished without being used again as housing accommodation. Where a
community-based asset transfer of housing land is taking place at less than market
value, a specific Ministerial Consent will be necessary for the disposal and the
appropriate authority will need to be obtained to make the application for consent.

6.4. In addition to the statutory requirements, members also have a fiduciary duty to local
people to act prudently when disposing of Council owned assets. Before agreeing to
dispose of land at less than best consideration, the decision maker will need to be
satisfied that the non-financial benefits arising out of any community-based asset
transfer will outweigh the capital receipt/rent which is being foregone.

6.5. In accordance with the Mayoral Scheme of Delegation, approval to the acceptance of
any external funding exceeding £1 million is reserved to members. In accepting the
funding of £1 million from the Big Lottery Community Assets Fund and agreeing to
proceed with the proposed refurbishment of Parker House funded through the Big
Lottery Community Assets Fund, the Council will be required to comply with Central
Government Grant Conditions, many of which mirror the Council's own standard grant
conditions.

6.6. As part of the funding conditions, the Council is required to grant a 50 year lease of
Parker House at a peppercorn rental to an agreed community-led organisation. Parker
House is a non-housing asset. This report delegates authority to the Executive
Director for Community Services in consultation with the Executive Director for
Resources, the Head of Asset Strategy and Development and the Head of Law, to
negotiate and agree the terms of this lease. Once the terms of the lease have been
agreed, the Head of Asset Strategy and Development will need to be satisfied that the
terms agreed represent the best consideration reasonably obtainable. If this is not the
case, the disposal will either need to fall under the General Disposal Consent
(England) 2003 or will require an application for specific disposal consent from the
Secretary of State.
6.7. The Council will be required to deliver specific Project Outcomes to BLF and will be
dependent upon the selected community-led organisation to deliver these outcomes
on its behalf. Failure to deliver them would constitute a breach of the grant conditions
with clawback implications for the Council. The Council will therefore have to closely
monitor the community-led organisation’s performance and will need a binding
agreement with the community-led organisation so far as their outputs are concerned.
BLF's prior approval will be required to any changes to the project or the community-
led organisation.

6.8. The Council will be required to enter into a Deed of Dedication with BLF in respect of
Parker House which will restrict the Council’s ability to sell/lease the property in the
future without BLF's consent.

6.9. The grant agreement with BLF will remain in place for 10 years (unless there is any
breach at the end of that period, in which case it will continue as long as the breach
continues). Any breach of the funding conditions by the Council (or breach by the
community-led organisation which puts the Council in breach) could result in the grant
being clawed back. The Council will therefore need to be satisfied that the selected
community-led organisation is capable of meeting the outputs required by BLF and
enabling the Council to meet its obligations.

7. Crime and disorder implications

There are no specific crime and disorder implications arising directly from this report.

8. Equalities implications

There are no specific equalities implications arising directly from this report.

9. Environmental implications

There are no specific environmental implications arising directly from this report.

10. Background documents and originator

Contact: Aileen Buckton (Executive Director Community Services)/ Martin O’Brien

(Sustainable Resources)

Background documents:
• Annex A: Lewisham Community Assets Framework and assessment tool
• ‘Making assets work – The Quirk Review of community management and
ownership of public assets’ (HMSO 2007)
• ‘Opening the transfer window – The Government’s response to the Quirk Review’
(DCLG 2007)