Disposing of the common good

Can Councils Lease Common Good Properties to a Third Party?

The following does not constitute legal advice but a brief outline of the powers of councils to lease common good assets to third parties, in particular to community groups. Many of the points of law are covered in Common Good Law, by Andrew Ferguson (see references)

What is the Common Good?

All 196 former burghs of Scotland have (or should have) Common Good Funds. These are the bundle of heritable (land & buildings) and moveable (cash, artworks, chains of office etc.) property of the former burghs whose Town Councils were abolished in 1975.

Common good land may be of historic origin (forming part of the original burgh charter) or more recent origin (for example, having been gifted to the burgh in the Victorian or Edwardian era or acquired by the burgh up to 1975).

The law surrounding common good is rather opaque, consists mainly of case law, and there is minimal statutory guidance. Common Good Funds are today administered by Scotland’s 32 Local Authorities under the Local Government etc. (Scotland) Act 1994, Section 15(4) of which states that “in administering [the common good] [councils shall] have regard to the interests of the inhabitants of the area to which the common good related prior to 16th May 1975.” Councils therefore administer common good assets as quasi-trustees but with wide powers of discretion.

It has been held that elected representatives have a fiduciary duty in the administration of common good funds to their constituents.

Disposal of Common Good

If a Council wishes to sell, alienate, dispose of or otherwise get rid of a common good asset there are statutory checks which may involve seeking the authority of the courts to do so. Leasing an asset for upwards of ten years has been held to be a “disposal” for these purposes.

Can a Council then lease common good property to a third party?

Yes they can but, depending on the circumstances, they may have to seek the authority of the courts. This is particularly the case where the lease is of long duration (over 10 years) and is to a third party that is not a community group but, for example, a commercial business. In such circumstances, court approval might be required and the rental agreement should be on full commercial terms so as to fulfil the Council’s fiduciary duty to the inhabitants of the burgh.

What about leasing property to community groups?

If it is agreed that common good property should or could be administered by a community group then court approval may be less imperative. The golden rule is to be transparent and enter into full and open consultation with the community. Where the lease is to a community group that is delivering benefits for the whole community, there is an argument for charging a peppercorn rent and/or a full insuring and repairing lease on the basis that the common good asset is being used for the benefit of the community. If handled appropriately, quite long leases (up to 175 years) could be granted on this basis though for leases of anything over 25 years, it may be prudent to seek court approval.

At the end of the day common good assets are the historic property of the burghs, now stewarded by local authorities on behalf of the residents of those burghs. Community benefit can be delivered via the beneficial use of a facility OR in income to the common good fund flowing from that facility’s profitable use. At one end of the spectrum are normal commercial tenants from whom should be sought the best terms to provide a respectable income to the common good fund. At the other end of the spectrum is a community association representing the whole of the community using a facility for community benefit. Here, a peppercorn rent might be appropriate and the community association can run the facility as a community business or however it sees fit for community benefit. Somewhere in between might be a lease to a community group that only provides benefits to a small part of the community and more market-oriented terms may be most appropriate here.

Advice on Best Practice

Councils have a lot of latitude in how they deal with common good. On the one hand this provides flexibility and freedom. On the other hand, though, it provides opportunities for mischief-making and possible legal challenges. Fundamentally, a council’s duty is to ensure that common good assets are a) properly accounted for, b) properly administered and managed, and c) delivering community benefits either by way of income or beneficial use.

Remember that unlike all other forms of publicly-owned assets, common good is substantially free of treasury rules, statutory frameworks and the need for Ministerial approval. Common good is the last bastion of freedom in the otherwise cluttered world of local government administration. That poses huge opportunities but also potential pitfalls.

The key to a successful working partnership between a council and a community is openness, good communications and genuine partnership. Common good assets can be leased and they can be leased to community groups. There are legal implications but most local authority solicitors should be au fait with the legal position.

If councils are open, consult widely, listen, and work closely with communities in former burghs to develop mutually beneficial solutions that respect both the spirit and the letter of the law as well as the historic traditions and role of common good, there should be few problems. Goodwill, trust and respect can deliver a wide range of successful solutions to the management of common good property.

Speak to other authorities such as Fife, Scottish Borders, Perth & Kinross and Angus which have most experience of dealing with common good. Remember that common good is not an administrative inconvenience but a valuable part of our cultural heritage to be celebrated and nurtured.

Finally, remember the Common Good Act of 1491 which remains on the statute book.

Item it is statut and ordinit that the commoune gud of all our souerane lordis burrowis within the realme be obseruit and kepit to the commoune gude of the toune and to be spendit in commoune And necessare thingis of the burght be the avise of the consale of the toune for the tyme and dekkynnis of craftis quhare thai ar

RESOURCES

Ferguson, A. (2006) Common Good Law, Avizandum, Edinburgh. 

Wightman, A. (2009) Common Good. A Quick Guide

www.scottishcommons.org/docs/commongoodguide.pdf

Wightman, A. & Perman J., (2005) Common Good Land in Scotland. A Review and Critique

www.scottishcommons.org/docs/commongood_v3.pdf

Andy Wightman

mail@andywightman.com

June 2011