Changes to Asset of Community Value Regime

The government is carrying into effect the proposed changes to the Asset of Community Value regime foreshadowed in its election manifesto. These are contained in clause 60 and Schedule 27 of the English Devolution and Community Empowerment Bill which replaces the existing provisions in Part 5 of the Localism Act 2011.

The current ACV regime is in part contained in the Asset of Community Value (England) Regulations 2012 and these will need to be replaced by a new set of regulations which will have to be more extensive than the existing regulations. Currently there are no draft regulations available and so it is not known what is intended on some important points such as the valuation basis when a valuer determines the price at which an ACV is to be sold. It is not as yet known whether there will be any changes to the exclusions of assets from the ACV regime currently contained in Schedule 1 of the 2012 Regulations.  

The changes are far reaching. They will increase both the administrative burden on local authorities and the costs to be borne by them. They will also introduce a degree of uncertainty into the property market. Greater consideration will have to be given before exchange by prospective purchasers as to the possibility of the asset being listed in the future and the consequences if it were to be.

The main changes are:

(i) Qualifications

Currently two statutory conditions have to be satisfied for an asset to qualify as an ACV. These are contained in either section 88(1) or section 88(2) of the Localism Act 2011. The first condition requires either there is a current use which furthers the social wellbeing or social interest of the local community or there has been such a use in the recent past. This must not be an ancillary use. In section 88(6) it is provided that social interests include cultural interests, recreational interest and sporting interests and this is repeated in the new legislation.

Then secondly if the qualifying use is a current actual use it must be realistic to think that there can continue to be a non-ancillary use which will further the social wellbeing or social interests of the local community. This may be a use which is not the same as the current use. If the qualifying use was in the recent past then the second condition is that it must be realistic to think that there is a time in the next five years when there could be a non-ancillary qualifying use whether or not the same use as the qualifying use in the recent past.

Two significant changes to the qualifying conditions have been introduced in the Bill. A qualifying use is no longer to be limited just to uses which further the social wellbeing or social interest of the local community. It is to be extended to include uses which further the economic wellbeing or economic interest of the local community. Separately the second statutory condition applicable when there is not an actual qualifying use is no longer to be determined by whether there has been a non-ancillary qualifying use in the recent past. It will be enough that there has been such a qualifying use at “a time in the past”.          

I would expect both of these changes to have a profound impact.

(a) economic wellbeing or economic interest of the local community – much of the discussion in the last year leading up to the introduction of the Bill has made reference to unused High Street shops. This is similar to the discussions leading up to the consultation on changes to the security of tenure provisions in the Landlord and Tenant Act 1954. With both despite the focus on the state of High Streets in the country the scope of the proposed changes are much wider.

“Economic” has a wide meaning. The meanings ascribed to it in a variety of dictionaries make reference to trade, industry, money, profit and the development of wealth. The term does not just go far beyond shops but extends qualifying use far beyond community assets as that term has been understood until now.

When the qualification test combines economic with social what is left out? In particular will the word “economic” embrace “environmental”. For instance, if land is subject to a planning agreement protecting the local environment will that suffice? Currently an actual use furthering the social wellbeing of the local community or one in the recent past would need to be proved for the land to be listed as an ACV. This was the case in Ali v Rother DC [2022] UKFTT 495 (GRC) which concerned land to be held as ancient woodland pursuant to a section 52 planning agreement. Will the existence of a planning agreement preventing development or requiring that the land is retained in a particular state for environmental reasons be enough to justify an ACV listing. Probably not and this would require “environmental” to be added to economic and social.

Nevertheless the addition of “economic” is a radical extension. A local factory will further the economic wellbeing of the local community by providing employment for local residents and training for local youngsters. The same may be the case with offices within the local community. If that is the test does the number employed matter? Could a business with a few local employees qualify just as a large scale employer? It is likely that the numbers employed at a particular asset will not be a determining factor.

Public houses have been determined to qualify as an ACV even though the number of customers was small. Failing public houses have been listed as well as successful ones. Public houses which attract customers from outside the local community as well from the local community have been listed. In one case the ACV listing was upheld on appeal in relation to a public house which relied for its custom on office workers and visitors and which closed at weekend as there were very few local residents. Will this approach flow over to the economic test so that it is enough that the business brings employees into the area from outside the local community?      

This change will not just impact the first of the statutory conditions. The satisfaction of the second statutory condition does not require that the anticipated future use is the same as the qualifying use satisfying the first condition. The current or past use satisfying the first statutory condition may be one which furthers or furthered the social wellbeing or social interests of the local community whilst the anticipated use could be one furthering the economic wellbeing or economic interest of the local community. Equally the converse would also be possible.

In considering whether the second statutory has been satisfied this change may increase the need to consider interesting questions as to whether there will be planning issues to be overcome in order to adopt a new hoped for use.

(b) deletion of recent past from second statutory condition – once this change is enacted it will be enough that there has been a qualifying use at some time in the past and this need not be in the recent past. Many old buildings will have had a number of different uses during their history. No matter when the use was in that history it will be enough that there has at some point been a use which furthers the economic or social wellbeing or economic or social interests of the local community and which is not an ancillary use.

It will no longer be the case that a building which has been unoccupied for a long period cannot qualify as an ACV. It will be necessary to look back past that closure to see what use was made of the asset before then. Closure of public houses for longer periods will not prevent the building qualifying. In such cases use as a public house at some point in the distant past will suffice to satisfy the first statutory condition.

It means that buildings which previously failed to qualify as an ACV may now do so and fresh nominations can be made without having to face the hurdle of showing a qualifying use in the recent past. It will also mean that more community nominations are made following the removal of an asset from the ACV list at the end of the five year period.

Prospective purchasers will need to investigate the full history of the use of a building if an assessment is to be made of the potential application of the ACV regime to it. This may deter disposals in the open market and will introduce a degree of uncertainty.

(c) changes that are not being made – the changes still retain the need for two statutory conditions to be satisfied if the asset is to qualify as an ACV. It is not enough that the asset has the potential to be used for a qualifying purpose unless also there is or has been a qualifying use.

More specifically no power is conferred on the local community to acquire abandoned, neglected or detrimental land as exists in Scotland. Nor is there a power to acquire land for sustainable development as also exists in Scotland.

As discussed above it is noteworthy that there is no express addition of environmental along with economic. Nor do the changes seek to extend the ACV regime to assets which are historically or architecturally important within the context of the local community.

(ii) Sporting asset of community value

A separate category on an authority’s ACV list is to be created for sporting assets of community value. Such an asset will appear both in the ACV general list and this specific category. To do so the asset must qualify both as an asset of community value and as a sporting asset of community value.

To qualify as a sporting asset of community value it must in the opinion of the listing authority comprise a sports ground within the meaning of section 17 of the Safety of Sports Grounds Act 1975. This section provides that ““sports ground” means any place where sports or other competitive activities take place in the open air and where accommodation has been provided for spectators, consisting of artificial structures or of natural structures artificially modified for the purpose”.

It does not cover a building in which sports or other competitive activities take place inside. It would not seem to cover unused sports facilities such as closed football stadiums. It will not cover sporting facilities which do not accommodate spectators. A field which has not been modified to provide accommodation for spectators will not be a sporting asset of community value but can still qualify as an asset of community value.

A specific duty is imposed on listing authorities to carry out a review as to whether there are any assets in its area which qualify as assets of community value and as sporting assets of community value. These are not restricted to assets which are already listed on the ACV list but may include grounds that have already been listed as an ACV. The operation of this duty is not triggered by the service of a community nomination on it.

This review is to be carried out within the six months following the changes coming into force and then reviews are to be carried out at five yearly intervals. If the authority considers an asset satisfies both qualifications then it must add the asset to the ACV list and the category for sporting assets of community value. It appears that other than in accordance with such a statutory review the listing authority cannot add sporting assets of community value to the ACV list unless there has been a community nomination. It may be that it is intended to issue regulations which confer such a power or a more general power to list other than in response to a community nomination.

Separately from this review procedure the authority must consider whether any asset to be added to the ACV list following a successful community nomination is also a sporting asset of community value and if it considers it to be one then must add that to the category for sporting assets of community value.

In addition a listing authority may list a building or land as an asset of community if “the actual current use of the building or other land provides support for the use of other land as a sporting asset of community value”. Some facilities supporting a sporting asset of community value may themselves also be sporting assets of community value. For example training facilities will be if they accommodate spectators but will not be if they do not although they can still be an asset of community value. No community nomination is needed for this listing by the listing authority. There will be a number of regulations issued which govern whether an asset is excluded from being listed in this manner.

The importance attaching to this new category of sporting asset of community value is that it will remain on the two lists “indefinitely” rather than for five years. In consequence a sporting asset will not be removed from the ACV list at the end of five years and only go back on if there is a fresh successful community nomination.

The terms of the new regulations that will need to be published are not known as yet. However, from the wording relating to what the regulations will cover it would appear that the current power to remove an asset from the ACV list if it ceases to qualify as an ACV will be repeated. This would be the only means by which a sporting asset or community value could be removed from the ACV list.

As regards new administrative tasks listing authorities will need not only to carry out the reviews as to the sporting assets of community value in its area but will need also to ensure that the requisite notices with the correct content are given in relation to them to owners, occupiers and if appropriate nominators.

(iii) Reviews

Currently only the owner of a listed ACV can request a review of a decision to list and there can be no review if the decision is not to list. In such circumstances the only route by which to challenge a refusal is by judicial review which is a course which is rarely adopted. The new legislation changes that and a nominator will be able to request a review. It is to be expected that the right of appeal to the First Tier-Tribunal conferred on the owner of a listed asset by the current regulations will be extended by the new regulations to nominators challenging a confirmation on review of a refusal to list.

There will normally be reluctance on the part of nominators to commence judicial review proceedings. However, it is likely that a refusal to list will be met by a review request and possibly an appeal to the FTT if the review does not result in a listing. On such appeals there would only be an adverse costs order if the nominator has acted unreasonably so the financial risks are much diminished.

This will mean longer uncertainty for owners of assets which have been nominated as a decision not to list will no longer bring the uncertainty to an end.

(iv) Moratorium provisions

The disposals of listed assets which are not caught by the operation of the moratorium provisions remain the same save for a small change. The importance of this aspect of the ACV regime is increased due to the pre-emptive right to buy to be given to community interest groups when the moratorium provisions do apply. In particular this means that a sale of the asset as part of a sale of a business as a going concern will still not be subject to the moratorium provision.

Currently an owner of a listed asset can sit out a moratorium and not engage in negotiations and then once the moratorium period has expired can sell to whoever the owner wants. With the changes this will no longer be the case.

Once a notice of the owner’s wish to enter into a relevant disposal is given (“owner’s notice”) this will trigger the operation of a more complex procedure. In outline it is as follows:

1. the requisite information regarding the owner’s notice must be entered on the ACV list by the listing authority;
2. notice must be given by the listing authority to the nominator setting out the same requisite information;
3. notice must also be given by the listing authority to the local MP and any councillors in whose electoral area the ACV is located;
4. the information must be publicised within the area in which the ACV is located;
5. the listing authority has 14 days from the receipt of the owner’s notice to comply with (a) to (d). On occasions under the current regime the giving of notice by the listing authority is overlooked. That is a serious matter and usually adversely affects the nominator rather than the owner. That will no longer be the case under the new regime as the new procedure has time limits running from the date that the listing authority takes the necessary steps. Dealy will, therefore, extend the moratorium. Consequently, it is more likely that the owner will suffer if there is an oversight and that will expose the listing authority to claims for compensation under the CIL regime.
6. If the nominator is a community interest group it has six weeks from notification of the owner’s notice in which to serve on the listing authority a notice of its intention to buy the asset. If it qualifies as a community interest group and satisfies the notice requirement it becomes for these purposes the preferred buyer. The listing authority must give notice of this to the owner and enter it on the ACV list within 14 days from the end of the six week period running from the giving of notice to the nominator of the owner’s notice.
7. If the nominator is not a community interest group or does not satisfy the notice requirement a separate community interest group may give notice to the listing authority of the group’s intention to buy. This notice must be given within the eight week period beginning with the date that the listing authority updates its ACV list regarding the owner’s notice (“the period of expressions of interest”). The notice must explain why the group wishes to buy the asset. Such a group will be described as the alternative community group. If there is only one then it will be the preferred buyer. If there is more than one then the listing authority must determine which will be the preferred buyer.
8. The authority must give notice to the owner of an alternative community group if it is the only one. Notice must be given to all the alternative community groups as to the decision which is to be the preferred buyer. Such notices must be given within 14 days of the end of the period of expressions of interest.
9. When there is an owner’s notice and a preferred community buyer the authority must as “far as reasonably practicable” arrange a joint meeting between the owner and the preferred community buyer. Regulations are to be issued regarding the absence of one of the parties, the conduct of the meeting and information to be provided by the authority at the meeting. If at the end of an eight week period running from the date the owner is given notice as to who the preferred community buyer is (described as the negotiation period) there is no offer to buy which has been agreed with the owner then the process moves on to valuation.
10. If the negotiation period does not result in an agreed sale and purchase then the authority must appoint a valuer. This will be a valuation officer or a district valuer or in circumstances to be specified in new regulations an independent valuer. This appointment must be made within 14 days of the expiry of the negotiation period. The expense of the valuation will be borne by the authority. The valuer’s task is to determine the open market value of the relevant estate in the asset at the date of the owner’s notice. New regulations will prescribe the valuation method to be used, any matters to be taken into account or to leave out of account and the circumstances in which written representations can be made to the valuer. The concern for owners is that hope value will be excluded from being taken into account. It may also not allow for an overage to be included in the price.
    The valuer must determine the value within eight weeks from appointment and then as soon as reasonably practicable give written notice to the owner and preferred community buyer. If it wishes to buy the relevant estate in the asset the preferred community buyer must offer to buyer at the determined value before the end of the period of twelve months from the owner’s notice. If there is no value determined by the end of that twelve month period then the preferred buyer has nothing to accept and it would appear that the owner in such circumstances would become free to sell on the open market.
11. Whilst the negotiation period and the valuation is being carried out the authority is required to check on progress. The first time is at the end of the six months period running from the owner’s notice. The owner must request the review in writing not less than two weeks before the end of the six month period. The authority must determine whether the preferred community buyer has both met the progress requirements which are to be specified in the new regulations and provided the evidence required by the new regulations. A second review of progress must take place at the end of the twelve month period for which no request from the owner is needed. Again the authority is required to determine whether the progress requirements have been met. In the event that on either review of progress it is considered by the authority that the progress requirements have not been met then the moratorium is lifted and the owner is free to sell to whomever the owner wishes before the expiry of the period of eighteen months from the giving of the owner’s notice.

A big change within this new process is that there is no longer a fixed moratorium period. Unless the disposal is to the preferred community buyer there is a prohibition in section 86M(3) on entering into a relevant disposal. That prohibition will cease to apply if any one of three sets of circumstances occur. These are:

1. there is no preferred community buyer; or
2. the progress requirements have not been met on the first or second review period; or
3. The preferred community buyer does not offer by the end of the negotiation period to purchase the relevant estate in the asset at the price agreed or does not offer to buy by the end of the offer period at the price determined by a valuer.

In the event that one of these sets of circumstances occurs then the owner is free to sell to any person within the permitted sale period which ends on the expiry of the period of eighteen months from the date on which the owner gave notice of intention to dispose. If the preferred community buyer does offer to buy at an agreed or determined value then the owner cannot sell to anyone else. On my reading there is no obligation on the owner to sell but there will be no protected period as there is currently in which the owner is free to sell to someone other than a community interest group.

In such circumstances where the preferred community buyer has made an offer and the owner does not want to sell to it the eighteen month period will expire without the owner having the ability to sell on the open market. Once that period expires the process will have to be started again by the service of an owner’s notice if the owner wishes to sell.

It is likely that these changes will lead to increased numbers of community nominations. Separately there will be the reviews regarding sporting assets of community value. The number of reviews of listing decisions (whether to list or refusing to list) will also increase and possibly the number of requests for oral hearings as part of such a review. The process triggered by the service of an owner’s notice is significantly more elaborate requiring greater engagement by the listing authority. It will be important that authorities have prepared for both this increase in the work load and the increase in complexity. Meeting time limits will be a more demanding task. Failure to comply with time limits will be more likely to lead to compensation claims than under the current ACV regime.

For owners it means that the period during which the listed asset cannot be sold will be longer. The uncertainty caused by the ACV regime will be increased. The owner will not know whether or not an opportunity will arise to sell on the open market. At present it is not possible to assess whether the reviews of progress by authorities will provide a real protection or merely be a box ticking exercise. It is possible that an owner will not achieve the best price for the asset particularly if hope value is not to be taken into account.

(v) Compensation

Until the new regulations are published it will not be known if the current provisions are to be repeated or whether changes are to be made. It must be expected that the number of compensation claims and the amounts claimed will increase. If still to be borne by the listing authority then that could be a heavy and unwelcome burden particularly for cash strapped authorities.

The lengthening of the moratorium period will inevitably cause the owner to incur increased expenses which might have been avoided if the moratorium had not applied. There will be the question whether it will it be possible to claim for the difference between the price the asset would have sold for on the open market and the value determined by the valuer if lower? Sales will be lost due to the longer process if it does not result in a sale to the preferred community buyer and if they are can a claim be made?

When the ACV regime was introduced it was estimated that the average claim would be £2000 and local authorities were supported for a few years by a central fund if the aggregate of claims payable by an authority exceeded £20,000 in a year. Experience has shown that claims can be for amounts which greatly exceed that original estimate and could substantially deplete the budgets of authorities. Will a central fund be put in place to protect authorities? Authorities will in any event face a need to increase the resources allocated to the application of the ACV regime in its area when these changes come into effect.     

ChristopherCant©2025