March 9, 2011
Where next for asset transfer?
Two years ago, when DTAS began to promote the idea that council assets might be transferred into community ownership, the response from most quarters was low key. Two years on and the financial crisis has changed all that. At a DTAS event last week to mark the end of this programme, the key message to emerge was that this is an area of work which is growing arms and legs in all sorts of directions. In England, this agenda seems slightly more developed
A round up of advice and top tips provided by an expert panel at an event held on asset transfer for social enterprises
Annemarie Naylor, DTA
The whole point of community asset ownership and community asset transfer is to empower communities. So, to the extent that communities can come together to address local needs, and form social and community enterprises benefiting from limited liability structures, asset transfer holds out the prospect of them proceeding from a position of relative financial strength to explore together how to realise their aspirations. Clearly, the proposition is based upon the development of realistic enterprise plans and the transfer of viable assets. But, the opportunities are immense and broad-ranging, as the activities led by DTA/bassac (soon to become Locality) members across the country make plain.
Our experience of working with many councils who rightly call for solid business plans from community organisations, is that many lack the in-house skills and capacity to assess them. That’s why the Asset Transfer Unit was established to support both councils and communities to further transfer initiatives upon a partnership basis, why 20% of our enquiries to date have stemmed from public bodies and why we continue to build capacity for both parties.
Clearly, the increasing speed and scale of requirements from both is something which we are monitoring closely. It would be tragic were this alternative to disposal which is benefiting so many communities to become “tarnished” by excessive haste and poor quality decision-making.
On the speed and scale of public asset disposal – this is something we’re hearing from a lot of partners and local community organisations at present. While data transparency is liable to aid communities, there are perhaps bigger issues at stake where new approaches to community asset transfer are called for, to take account of the new operating environment.
This partially explains why we’ve moved in recent months to invest – with the Social Investment Business – in work to explore the potential for multiple asset transfer in 5 self-selecting areas. And, it is certainly something we anticipate working on in greater depth with many more communities over the coming months.
Charles Woodd, Department of Communities and Local Government
The government is keen that the community right to buy proposals don’t get in the way of asset transfer at less than market value, but complement it. They do this by extending across a wide range of public and private assets, and giving communities the right to take the initiative, by identifying and nominating assets for listing, so that, if listed, they get time to put together a bid to buy the asset.
The government is certainly encouraging local authorities to rationalise their assets, with other local public bodies, but also to think broadly how working in partnership with their communities through Cat could help them achieve broad community benefits that justify any loss of capital receipt.
Local authorities can always sell assets on the open market. The community right to buy doesn’t make any difference to that. However, it will give communities the opportunity to assert the community value of particular assets, particularly in areas where the local authority has not embraced or understood the benefits of asset transfer. The window created by listing the asset will give groups more time to lobby and negotiate with councils to make the case for asset transfer, rather than open market sale.
Incidentally, do spread the word that we are consulting on the secondary legislation for the CRT Buy scheme, which will set out much of the detail. Here’s a link to the consultation document and a number of events.
Caution should be exercised when taking over a derelict or neglected property. Surveys should not be undertaken by well meaning volunteers without the usual liability insurance.
That said, the greatest risk is probably over-optimism driven by local passion for the property or facility. There must be a fully costed business plan based upon fairly hard evidence. Yes, it will include the mixed resource base of social enterprise such as volunteers, time-banking and grants as well as traded income, but it has to demonstrate clearly how it will be economically sustainable.
I recently helped an organisation explore the possibility of establishing a catering operation. One option was to re-establish a meals on wheels type service for local vulnerable people. However, those individuals were very happy buying chilled meals from a local supermarket. Hence, no market. There are amazing examples of communities that have got it right, but if the budget will only stack up with substantial amounts of grant funding included then the proposal is probably not viable.
Beth Margetson, Anthony Collins Solicitors
There is no doubt that it will be difficult for social enterprises to make a case for a transfer at below market value in the current economic conditions. However, local authorities will also need to be aware of their enduring role in helping to promote and sustain vibrant local communities.
Local authorities are not required to obtain a full market rent or price when disposing of assets where a social enterprise has been able to make a robust case showing how the transfer is likely to contribute to the promotion or improvement of the economic, social or environmental well-being of the area. It will be the relationship between the social enterprise and the local authority and the strength of the social enterprise’s business case that will make the key difference.
Where social enterprises are considering taking a transfer of an asset, they need to be aware of the preliminary steps that need to be taken before they start considering the detail of the document transferring the asset. In particular, some of things the social enterprise needs to consider include:
(a) If it is a suitable vehicle for the transfer: Local authorities will be interested in the track record of the social enterprise or, where a track record has yet to be established, that the social enterprise has the support and advice of experienced individuals. We also recommend that the transfer is made to an incorporated company, so that individual liability is minimised. Charities, community interest companies and industrial and provident societies tend to be the preferred vehicles.
(b) Checking the asset: Understanding needs to be reached about whether the asset can be used for the purposes proposed. Some land is subject to restrictions on use imposed on the title or through planning. We also recommend that an assessment is made of the state of repair of the asset. Will it need a lot of money spending on it to make it suitable for use?
(c) Agreeing an outline of the transfer terms: Care should be taken to understand on what basis the local authority is willing to transfer the asset. Will tight restrictions on how the asset can be used be imposed by the local authority in the transfer? Will a capital receipt be required (albeit less than full market value)? It is best to understand what the local authority wants to achieve at the outset so that you can check your approach is compatible with achieving a successful transfer.
Jane Lowrie, CIPFA
Taking over a physical asset requires a clear understanding of what that entails in general (legal and other responsibilities, for example), but any social enterprise would also need detailed information about the asset in order to develop a realistic business case. Asset managers in local authorities have a lot of data available to them and are able to identify which assets are poor performers in terms of supporting service delivery, but also in terms of ongoing costs and liabilities.
These are likely to be the assets they are keen to release to support the financial savings agenda. Hence any social enterprise needs to get hold of this information and be realistic about the long term sustainability of the building. Hopefully this information would be willingly shared to support the wider community and social agenda. There will be costs to put the building into a suitable state of repair, or to develop it to provide appropriate facilities, but equally importantly, there will be ongoing running costs that need to be met year on year. Awareness of current and historic costs, the condition and future maintenance liabilities and professional advice are essential to ensure the long term viability of a project involving a physical asset.
David Alcock, Anthony Collins Solicitors
There are a number of, not so much barriers, as limitations in the new provisions in the localism bill. The issues about the community right to buy have been explored above; the limitations on the community right to build are going to be about scale. There’s nothing in the bill, but the associated guidance suggests that it will only apply to very small scale developments.
The issues for social enterprises trying to take advantage of the right to bid will be as they are now – procurement technicalities, the difficulty of competing against large private sector providers, the need to have an established track record. All the bill does is open a procurement process (provided the boxes are ticked). Welcome, on balance, but limited.
Rick Rijsdijk, Think Research
Potentially there could be many benefits for local authorities – community cohesion, social capital, better services for the residents, to name but a few. The problem is that many councils are very cash driven and will try to sell the redundant assets to the highest bidder, and try to offload assets that have no real commercial value to social enterprises/community groups. The point is that not all buildings that are portrayed as assets are assets. Many are liabilities and local social enterprises should be cautious of what they take on.
Caroline Forster, Communitybuilders Director
It’s important that organisations plan and research what they would do when taking on an asset and making sure that it helps them as an organisation as awhole and doesn’t become a liability. It should help them become more sustainable as an organisation and give them the opportunity to develop new and diverse income streams. In essence, this is about business planning.
Annemarie mentioned the importance of patient and mixed capital finance. Through both ACF and the Communitybuilders programme we have been able to help organisations both research and plan use of assets and then make larger investments that help them to implement their plans. As the investments are a mixture of both loan and grant over a long term and are tailored to the needs of individual organisations, this gives them a good platform from which to grow.
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