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1 Understanding Community Asset Transfer

Understanding

Community Asset

Transfer

A guide for community

organisations

locality.org.uk | powertochange.org.uk

Contents

About this guide

Introduction

Imagination and vision: starting yourownership journey

Discovery: considering your options

Relationships: growing your supporter base

Negotiation: securing the asset transfer

Taking ownership: handover and what towatch out for

3

4

7

9

14

16

21

Understanding Community Asset Transfer

3locality.org.uk | powertochange.org.uk

About this guide

Thousands of spaces across the countryare already owned by communityorganisations – from sports centres,shops and cinemas, to nurseries,health centres and wind turbines.

For community businesses, owning anasset can provide a sustainableincome stream and a secure base forcommunity activities, service deliveryand local enterprise.

Community ownership also enableslocal people to take control of theimportant spaces and buildings whichmatter to them locally, to meet thepriorities and needs of the local area.

Community Asset Transfer is thetransfer of a publicly owned asset(usually land or buildings) to acommunity organisation at less thanmarket value, or at nil consideration(no cost).

This guide provides information andadvice about Community AssetTransfer. It can be a long andcomplex process, and in this guidewe provide support to guide you onyour community ownership journey.

Community ownership of land andbuildings can transform neighbourhoods,support thriving community businesses,and unlock the power of community.

Introduction


All community ownership journeys

will start with a catalyst moment –

the driver that will have prompted

you to start thinking about

Community Asset Transfer (CAT).

As a community organisation, you mightbe thinking about securing premises todevelop your community activities, servicesor community business. Or it might be thata local building is threatened with closure,and as a group of residents you want tosave it.

Whatever your starting point, make nomistake: Community Asset Transfer isusually a long, complex process whichcould take several years. While the endresults are worth it, it requires long-termcommunity commitment, passion andambition.

Some councils will have a CAT policy inplace, which will make the process clearer,but many will not and you may be startingfrom scratch locally in making the casefor community ownership. Some projectswill start with the best of intentions, butwill prove not to be workable in practice.

Understanding these difficulties at thestart of the journey will help to ensure youand your community have the resilienceto see it through to the end. It will alsohelp you to become more informed,confident and equipped to ask the rightquestions and seek the right help.

How to use this guide

This guide takes you through yourcommunity ownership journey in fivephases: imagination; discovery; buildingrelationships; negotiation; and takingownership. These phases are not intendedto be followed sequentially. Many of thesephases will be happening at the sametime, rather than step-by-step, and wehighlight how these overlap throughoutthis guide.

This guide can be used as a companionthroughout your journey. It bringstogether key information, advice andsupport which already exists, and sign-posts you to further resources and areasof research you will need to consider.

What’s the difference betweenCommunity Asset Transfer (CAT) and the Community Right to Bid?1

• CAT only applies to publicly-ownedassets. The Right to Bid applies to somepublic and some private assets.

• CAT is the transfer of management orownership at less than market value. TheRight to Bid provides a six-month pauseon the sale for the community to raisemoney to purchase on the open market.

• CAT is a voluntary process entered intoproactively by public bodies. The Rightto Bid is a legal right and applies to allassets listed as Assets of Community Value.

1 This guide only addresses CAT. For advice andsupport around land and buildings which arecurrently in private ownership see: www.mycommunity.org.uk/take-action/land-and-building-assets/assets-of-community-value-right-to-bid/


Freehold: outright ownership of land orbuildings

Leasehold: where one party acquires theright to occupy land or a building for agiven length of time. This might require a‘peppercorn rent’ – which is a nominal rentused in some lease agreements.

Long lease: a leasehold of at least 25years or more.

Business model: the way the organisationgenerates income or value from itsactivities – eg selling goods and services,rental income, delivering contracts,charging fees.

Business plan: this will include the businessobjectives, the evidence and reasons whythe objectives are achievable, and theplan for meeting these objectives. Itshould be based upon local marketconditions and research.

Feasibility: the ability of the project tomeet its objectives, given its context andthe resources available.

Viability: the ability of an asset to coverall its costs with income over a specifiedperiod. This period is usually 3-5 years,although for larger projects, or wherebigger loans have been taken out, thisperiod will be longer.


Key terms

Imagination

and vision:

starting your

ownership

journey


Ask yourself: What will communityownership look like in practice? What areyour overall objectives and vision for theasset? What are you trying to achievethrough community ownership?

While much of your early focus andattention will be on acquiring the buildingor land itself, you should also be thinkingin detail about the range of activities thatwill eventually take place within it. Theasset itself is not ‘the business’ and you willneed to consider how to generatesufficient funds to maintain the bricks andmortar and provide the services within.Even if your key goal and motivation is tosave a building from demolition or closure,its long-term sustainable future needs tobe at the forefront of your vision.

Involving your community in imagining andco-creating this vision is essential, togenerate ideas and support. We discussthis engagement further in ‘buildingrelationships’ on page 14.

While it is important to have aclear vision and purpose for theasset, you should also bear inmind that this vision may need

to change throughout the process.Community views or advice from thecouncil might cause you to change track,or detailed feasibility work might proveyour original idea unworkable.

Flexibility is key. Don’t become so fixed onyour original idea that it scuppers thewhole project. It is important thereforethat you keep your vision under reviewand make sure that your board, membersand wider community are with you as youshape and re-shape your vision.

Throughout your journeyremember to learn from yourpeers: there is much learning andinspiration to be had from the

many communities who have trod thecommunity ownership path before you.Network with your peers and learn fromtheir experience. Visit www.locality.org.ukand www.powertochange.org.uk

Your community ownership journey should begin by thinkingabout the end goal: imagine owning the land or building andbeing responsible for its ongoing maintenance and management.


Discovery:

considering

your options


Get to know the asset

It is essential you find out as muchinformation as possible about the potentialasset.

Who currently owns the land or building?Remember CAT is only an option if the siteis publicly-owned and the owner isprepared to negotiate.

Are there planning restrictions orcovenants in place? The local authorityshould be able to supply this information,however a legal review may incur a cost. What are the building conditions? Youshould undertake an initial site visit,preferably with a surveyor to give you anassessment of the asset.

What are the current management andrunning costs? Think about managementand maintenance costs early on. Watchout for hidden costs which can turn anasset into a liability.

Is community asset transfer apossibility?

Different councils have different approachesto CAT, so it will be important to identifyany policies your council might have.

Does your council have a CAT policy?This will be your key starting point. If itexists, it is likely to be published on thecouncil’s website.

Is the asset currently under considerationfor CAT? The public body might considerCAT for a range of reasons including: theasset is too expensive for them tomanage; the services that used to bebased there are going to be relocated;they want to achieve greater social valueby somebody else managing the asset.

Is the asset currently registered as anAsset of Community Value (ACV)? Youcan find the current ACV list through yourcouncil’s website.

If it is not currently registered, you couldconsider a registration process. This mightbe helpful to support communityengagement, raise awareness of the assetlocally, or put pressure on the council topreserve the building for community benefit.

Find out more about how toregister an ACV:

www.mycommunity.org.uk/takeaction/land-and-building-assets

Read a short guide on asset managementand ownership models:www.locality.org.uk/catresources

Developing plans for an asset is a process of discovery,considering all the options and practical steps required to turnyour vision into reality.


How will you make the assetfinancially sustainable?

You will need to start developing asustainable business model.

There are a range of options to consider,including:

Community business and trading: theasset might provide premises for a new orexpanded community business. You canfind inspiration on potential communitybusiness ideas on Locality and Power toChange's websites.

Venue hire and commercial rentalagreements: including for functions andevents. See for example, communityspaces such as Toynbee Hall in Londonand Hebden Bridge Town Hall, which hireout their venues for wedding receptions2.

Community-led housing: the transfer ofan asset could provide opportunities forcommunity-led housing developments. See for example, Bristol Community LandTrust which transformed a former schoolbuilding into 12 new affordable housing units.3

2 https://locality.org.uk/love-is-in-the-air-locality-members-do-weddings/ 3 https://www.powertochange.org.uk/research/bristol-community-land-trust-case-study-1/

Case study: The Burton StreetFoundationThe Burton Street Foundation providesvital services for 300 disabled adults andchildren in Hillsborough, Sheffield. Set inthree Victorian school buildings, thecommunity hub also accommodates over20 small businesses and charities – includinga café, a bar and restaurant, a conferencecentre, a gym and sports hall and arecording studio – that employ 72 localpeople. All these facilities are used by thelocal community and Sheffield businesses.

This generates income for Burton Street torun 30 regular sessions for adults andchildren with learning difficulties, andmany other activities and events for thelocal community.https://www.powertochange.org.uk/get-inspired/stories/burton-street-foundation/


Funding and investment options

Asset transfer and ownership will oftenrequire a ‘cocktail’ of funding, and you willneed to consider how you will accessfunds for different stages in your journey.

Discovery and Planning: the cost offinding out about the building and thenpaying for any refurbishment designs andcosting your plans.

These development costs are often thehardest to finance as, if the CAT does notproceed, then this money will be lost. It isimportant to secure non-repayablefinance for this stage.

Acquisition and refurbishment: there maybe a price for acquisition even under aCAT and there will often be a need torefurbish a building to allow better or newservices to be delivered.

These capital costs can often be spreadover time through using share capital orloan finance.

Operational Finance: to cover costs(losses) during the early stages whileactivities develop and income grows. Known as working capital this providesadequate cash to pay bills while income iscollected.

Funding sources:

Community support. A crowdfundedappeal for donations, soft loans orcommunity shares may provide importantfinance at various stages and is awonderful way to demonstrate communitysupport.

Council support: often an importantsource of discovery information, somecouncils may offer grant support with theplanning phase and even grants or loansto help with the capital phase. They mayalso be a source of service contracts tomeet operational finance needs.

Pro bono support: professionals, such aslawyers or architects, that could offer theirwork for free or at risk.

Grants: a variety of grants are availablefrom the National Lottery award bodiesand independent foundations for all thestages of CAT, as well as from councils.

Loan finance: Available both from normalcommercial sources and specialist socialfinance lenders, usually for a proportion ofthe capital costs.


Forming your organisation

Knowing your options for a legal structureand governance model is an importantpart of the discovery phase. Your legalstructure should be considered alongsideyour business planning. How you plan torun your asset will determine whichgovernance model is right for you.

For example, if you want to raise moneyfrom community shares, you will need tobe a co-operative society or a communitybenefit society. If the volunteers drivingthe project also want to work for it, thenyou will need a legal structure thatenables directors to be paid. Or if you areseeking a high level of capital grant, thenbeing a charity might be beneficial.

You need to think about yourgovernance options and legalstructure early on, but youshould only decide which model

to adopt once you have settled on yourbusiness plan.

If you are a new organisation, start with asimple constitution to enable you to raisefunds for any early-stage developmentwork, and decide on a final structure onceyou have chosen your business plan.

As a minimum, you will need to be anincorporated organisation, with a legalidentity which provides limited liability toits members.

Read Locality's guide tochoosing your legal structure formore information and advice:

www.locality.org.uk/catresources

Capacity, skills and leadership

You should spend time in the early stagesidentifying your existing skills within yourorganisation or group. A skills audit can bea useful exercise – whether your group isnew, or an established community business.

This will help you identify what resourcesyou already have at your disposal, andwhat you will need to develop or sourcefrom elsewhere.


Relationships:

growing your

supporter

base


Community engagement

Community engagement is an essentialpart of building support for your projectlocally. Whether your project is aboutsaving a much-loved amenity fromclosure, or developing vacant land foraffordable housing – you will need tomobilise support from local residents.

If open conversations and engagementwith the community do not occur, thenthere is a risk that your project couldgenerate mistrust or opposition locally.

You will need to have a communicationsand marketing plan to drive forward yourengagement with the community.

Community engagement can range fromproviding information and collecting viewsand opinions, to active participation andcollaboration. At this end of the spectrum,you are more likely to recruit newvolunteers and community champions,and develop a shared sense of ownershipwith the community over the project.

Find out more about adviceand support for communityengagement from Locality:


Councillor relationships

Identify who your key political allies mightbe locally. This could be your ward councillor,or others within the council that mightsupport your plans or your organisation.

These relationships will be very importantin getting CAT negotiations off the ground,and through to a successful conclusion.Research shows that engaging withcouncillors increases the chances of asuccessful asset transfer.

When building your case withindividual councillors, you canuse Locality and Power toChange’s ‘Guide for councillors

on Community Asset Transfer’, whichcontains lots of information on thebenefits of community ownership and howthey can support it:www.locality.org.uk/catresources

Relationships within yourorganisation

Making sure that your trustees areinvolved in creating the vision for yourproject will be very important. Making surethey are supported to engage with theprocess, rather than just informed, willmean you are far more likely to achieveyour long-term aims for the project.

Developing and maintaining relationships will be a key theme ofyour community ownership journey.


Negotiation:

securing the

asset transfer


Key tips for starting yournegotiation

• Refer to the CAT policy as a startingpoint if your council has one. It willguide you in what to expect.

• Contact the council’s propertydepartment in the first instance todiscuss the possibilities for transfer. Thismay lead to an invitation to submit aninitial expression of interest, beforemore detailed business plans arediscussed.

• Identify your champions and positiverelationships in the council - how canthey help you get negotiationsstarted?

• Do your plans for the asset tie intowider council objectives such as onservice delivery, the local economy, orcommunity development? Use this toshape your case.

• If possible, identify a key contact in thecouncil who will be able to provide youwith updates and guidance throughoutthe process.

Negotiation is likely to takeplace with a number of councildepartments and councillors.You may not always keep the

same key contact and you may spend alot of time repeating your case! Theprocess can feel long-winded andfrustrating, but try to retain positiverelationships with the council – it will helpyou in the long run.

Strengthening your plans:

As the negotiation progresses, you willneed to refine and strengthen the plansyou developed during your initialdiscovery phase.

Make sure you have all the keyinformation about the asset, includingpotential liabilities.

The local authority should provide youwith information about the asset. Thisincludes: possible TUPE (Transfer ofUndertakings and Protection ofEmployment) implications, current tenancyarrangements, and running costs.

The local authority is unlikely to give anywarranties as to the state of the asset andtherefore all liabilities will pass to thecommunity group. A full conditions surveyneeds to be commissioned to flagimportant issues, such as structuraldefects, land contamination, asbestos orlisted building status.

If you are planning buildingworks, do not rush into payingarchitects for detailed plans tooearly on. This can be expensive.

At this stage, it is more important to gainan understanding of the basic structuraldesign of the existing building and themain remodelling options.

Negotiating the asset transfer with the council can be a longprocess, with several rounds. At points it might feel that you aregetting nowhere fast.


Develop maintenance and managementplans.

Understand how much your asset mightend up costing you to operate andmaintain in the long term.

Some items of expenditure occur on acyclical basis – such as electrical equipmenttesting and gas checks – whereas others areunplanned. Therefore it is good practice toset aside a budget for emergency repairs,for example 5-10% of annual income.Using volunteers will keep your costs lower,but do not take short cuts whereprofessionally qualified people are required.

You should also assign responsibility foroverall maintenance management andhealth and safety considerations.

Use Locality's 'BuildingCalculator' to understand yourpotential operational andmaintenance costs:

www.buildingcalculator.org.uk

Find out more about facilitiesmanagement:


Refine your business plan andsecure your funding options:

A detailed business plan will be anessential part of securing the agreementwith the council. It will also form the keydocument for your funding applications.

What should a business planinclude?

As well as key information about yourorganisation and mission, your businessplan should include:

• Product/services pricing and projectedsales/outputs

• The current market and operatingenvironment

• Risk analysis • Resource needs and business

operations • Income and cost projections• Funding and finance needs• Cashflow forecasts

Always be prepared to walk away oradjust your original vision if itisn’t right or the numbers aren’tworking. An asset that turns intoa liability could land your

organisation in troubled waters.


Forecasting and cash flow.

You must forecast your income, capitalcosts (such as structural and buildingworks) and revenue costs (such as ongoingfacilities and maintenance costs).

Some of this will be based on‘guesstimates’ but it is important not to getcaught by ‘optimism bias’ – always errtowards lower income and higher costs inyour predictions.

Cashflow is key! Project failure is oftendue to poor cashflow, rather than overalllack of profitability.

Once you have forecasted your incomeagainst your costs, you should make surethat surplus is forecasted as cashflow.Your forecasting will also show you whereyour gaps in cashflow are likely to be, andtherefore how much working capital youwill require for your day-to-day operationsto get you up and running.

You will need a ‘whole life costing’ foryour asset to help you plan.

This requires considering all the long-termrelevant costs and revenues associatedwith an asset (over the period of the leaseif a leasehold agreement). You will needsurveyor estimates for the operational,repair, upkeep, building and landscapeelements of the asset. You can use theLocality Building Calculator to support youin this process.

More advice and support onbusiness planning is availablefrom Power to Change:

www.powertochange.org.uk/support-and-resources/startingout/business-tools/

Read step-by-step guides on how to getstarted with your business plan:

www.mycommunity.org.uk/takeaction/getting-started/step-by-step/

Negotiating your leasehold orfreehold agreement

Getting to the point of negotiating theterms of transfer is a key achievement. Thisis an important stage, and the terms ofyour agreement will have a huge impacton the viability of your plans for the assetin the long term.

Try to secure a ‘heads of terms’document early in the process.This will provide clarity on whatis to be transferred, to whom,and on what terms.


For leasehold agreements,remember

The longer the lease, the more secure theasset: a secure lease should be at least 25years, preferably longer. Anything less andyou may struggle to use the asset asleverage for external funding and loans.

Beware of restrictions on use: forexample, limiting the use of a building to aparticular service stops you from beingflexible in how you can meet local needs.

Make sure you can sublet: it is likely thatyou will want the ability to sub-let parts ofthe building to other organisations – forexample letting rooms to other communitygroups or local enterprises. It is importantthat your lease allows you to do this.

Avoid ‘reinstatement terms’:reinstatement leases often contain aclause that requires the building to be‘reinstated’ at the end of the lease term –even if 25 years later. This requires thetenant to put the property back into thesame condition that it was in when thelease commenced.

For freehold agreements,remember

An ‘asset lock’ clause is often required:this will give the council reassurance thattransferring the freehold will not result inprivate profit-gains. This is an importantway you can demonstrate to the councilthat you will help to safeguard the assetfor community purpose.

Really ‘know what you’re getting:’ this isimportant for freehold or leasehold, butabsolute clarity for freehold owners isessential – including access andboundaries, any restrictive covenants,environmental information and existingdevelopment plans.

Overage: the seller may insist on an‘overage’ provision in the sale terms toensure that they will benefit from any futuredevelopment gains. It is important to getexperienced advice if this is the case.

Read a technical toolkit on CATnegotiation from AnthonyCollins Solicitors:


This is not a substitute for legal advice.Your lease is a complex legal documentand you may require external supportfrom a solicitor to get the best deal.


Takingownership:

handover

and what to

watch out for


The gates are open, you’ve been handed the keys. This is a time tocelebrate your success with the community. But this can also feellike a challenging time, and there are a number of key risks thatyou need to watch out for.

Regular board meetings: duringthe first few months, it will beimportant for trustees to meetmore regularly so that key risks

can be discussed and mitigated against.

Tight cost controls and stable cash flow:micro managing your finances during thisperiod is key to having working capitaland achieving success. This will help tomake sure you can keep cash-flowpositive and ensures you can take actionto improve situations as soon as possibleif necessary.

Snagging clauses: if you have had anybuilding works carried out, make sure thatthe contract includes a ‘snagging’ periodof snagging to follow up on any issues thatmight arise. For example, you could makesure that you have a clause that holdsback a proportion of the contract value(eg 10%) to ensure that the contractortakes action on any faults emerging in thefirst few months.

Keep talking to the council: ideally regularcommunication will be a key part of thecouncil’s post-transfer support. Make sureyou secure a named contact for follow-up,keep them updated on your progress, andkeep in touch with any councillors whowere champions through your assettransfer journey.

Learn from your peers: don’t close thedoors behind you. While managing theasset will keep you extremely busy,remember that joining networks withothers who have been through the samejourney can be extremely valuable.


Locality central office,33 Corsham Street, London N1 6DR1 0345 458 83360 [email protected]

Locality is the trading name of Locality (UK) a companylimited by guarantee, registered in England no. 2787912 anda registered charity no. 1036460. ©Locality March 2018

locality.org.uk

Find out more at: locality.org.uk

Build power in

your community

through

Community

Asset Transfer

About LocalityLocality supports local community organisations to unlock thepower in their community to build a fairer society. Our membernetwork of over 550 community organisations creates theservices their community needs most in spaces where everyonebelongs. Locality provides specialist advice, peer-learning,resources, and campaigns to create better operatingconditions for our members.

About Power to Change

Power to Change is an independent trust thatstrengthens community businesses across England.

We received our endowment from Big LotteryFund in 2015. At a time when many parts of the UKface cuts, neglect and social problems, we arehelping local people come together to takecontrol, and make sure their local areas surviveand stay vibrant.

No one understands a community better than thepeople who live there. In some areas, people arealready coming together to solve problems forthemselves, and we support them as they runbusinesses which help their whole community andrecycles money back into the local area. Communitybusinesses revive local assets, protect theservices people rely on, and address local needs.

www.powertochange.org.uk

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