Local authority acquisition and disposal of land - July 2019

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Local Authority
Land Acquisitions
and Disposals
Commercial and Public Law Issues

Local Authority Land
Acquisitions and Disposals
Commercial and Public Law Issues
Connect with Richard Barlow
richard.barlow@brownejacobson.com
+44 (0)115 976 6208
Connect with Zo Hoida
zo.hoida@brownejacobson.com
+44 (0)330 045 2551
Connect with Neil Walker
neil.walker@brownejacobson.com
+44 (0)115 908 4127

Powers to acquire land
General powers
• Section 120 Local Government Act
1972
• Land inside or outside area of
principal council
• For purposes of functions OR
benefit/improvement/development

Specific powers
• Powers to acquire land for specific
purposes are often provided, e.g.
housing, education and highways
CPO powers
• LAs have a wide range of powers to
purchase land compulsorily:
Section 121(1) but note limitations

CPO powers (cont)
• Sections 226 and 227 of the Town and
Country Planning Act 1990 also enable
Las to acquire land for development/
redevelopment/improvement
• Section 226(a) powers are subject to
restrictions
• Section 226 acquisition “cleanses”
title (in most respects): affected
parties can claim compensation

Powers to invest
through land acquisition
• GPOC (General Power of
Competence)
• Section 1 of the Localism Act
2011
• Very broad but note Sections 2
and 4
• Section 2 – pre-commencement
restrictions

Powers to invest
through land acquisition
• Section 4 – use company if GPOC
used for “commercial purpose”…
so consider purposes carefully
• Also consider other powers:
Section 12 Local Government Act
2003 … and Section 120 LGA 1972

Other requirements
• 2018 statutory guidance requires
Investment Strategy/inclusion in
Treasury Management Strategy
• Be especially careful when
borrowing to invest…or investing
outside your area
• Essential to have regard to a
number of other matters…

Other requirements
including:
• CIPFA Prudential Code for Capital
Finance in Local Authorities 2017
Edition: Capital Strategy/Risk
• CIPFA Treasury Management in
the Public Services: Code of
Practice and Cross-Sectoral
Guidance Notes 2017 Edition:
Treasury Management Strategy

Other requirements
including:
• MHCLG statutory guidance on
Local Government Investments
Third Edition (2018) which
explicitly includes commercial
property investments
• Statutory guidance on Minimum
Revenue Provision issued under
Section 21(1A) LGA 2003

Potential barriers/
practical tips
• Pre-conceptions will not always
be helpful
• Balancing act
• Delegated authorities
• Buy-in

Solutions
• Manage expectations
• Ensure Heads of Terms are
comprehensive
• Involve legal at early stages

S.203 Housing and
Planning Act 2016
• S.203 – 206 deal with LA power to
override certain rights
• S.203 power to override
easements and other rights (such
as rights to light and restrictive
covenants) when carrying out
building or maintenance work
• Certain conditions/limitations

S.203 Housing and
Planning Act 2016
Key requirements:
• Planning Permission
• Land owned by LA after 13 July
2016
• LA has power to CPO the land
• The building or maintenance
work is for purposes related to
the purposes for which the land
was vested or acquired

S.203 Housing and
Planning Act 2016
Cannot be used for protected rights:
• a right vested in or belonging to a
statutory undertaker for the purpose
of its statutory undertaking;
• a right conferred by the electronic
communications code on the
operator of a code network; or
• rights or interests annexed to land
belonging to the National Trust

Planning
permission

Local authority own
development
• Town and Country Planning
General Regulations 1992 enable
LPAs to determine their own
development proposals on land in
which they have an interest
• Application must be determined
in accordance with the
development plan unless material
considerations indicate otherwise

Local authority own
development
• Key factor is the need to keep
entirely separate the decision-
taking regarding the land
ownership and the local planning
authority functions
• Sounds simple but doing it in
practice is more challenging –
remember the importance of
being seen to follow due process

Planning obligations
• Care needed where Council is
owner and LPA
• Inter-play between land
transaction and s 106 obligations
• One body cannot contract with
itself
• Grampian Condition

Powers to
dispose of land

Powers to dispose of
land
• Government policy that LAs
should dispose of surplus/under-
used land
• Local Government Transparency
Code requires details of
surplus/vacant land to be
published
• LA has wide powers to dispose
subject to…

Powers to dispose of
land
• Sections 123 and 127 of the LGA
1972 – best consideration –
principal and parish councils
• Sections 87-89 Localism Act 2011-
ACVs
• But special rules in relation to
some land types e.g. allotments,
housing and planning land…

Pre-conditions
relating to the
disposal of land

Section 123 LGA 1972
• Subsection 1 – principal councils
have wide powers
• Subsection 2 – (unless a short
tenancy) consideration must be
the best that can reasonably be
obtained or Secretary of State*
consent required
*or Welsh Ministers

Section 123 LGA 1972
• Short tenancy = grant or
assignment of term not
exceeding 7 years
• Be careful with open space land
and playing fields
• Subsection 2A

Playing fields in Wales
• Playing Fields (Community
Involvement in Disposal
Decisions)(Wales) Measure 2010
and Regulations 2015 add a
further hurdle to Section 123 for
disposal of playing fields in
Wales…

Playing fields in Wales
• Prohibit disposal of playing field
where used as sports or
recreational facility within last 5
years…
• …without complying with impact
assessment, notice and
consultation provisions of the
regulations…tread carefully!

Section 123(2A) LGA
1972
• Applies to any land consisting or
forming part of an open space
• In addition to best consideration
requirements, notice of intention
to dispose:
• must be advertised for two
consecutive weeks
• in a newspaper circulating in
the relevant area

Section 123(2A) LGA
1972
• …and Council must consider
objections
• Does not apply to Welsh playing
fields – see above

Getting best
consideration
• Get a valuation
• Expose property to the market
• Consider competing bids
• Not always necessary to accept
the highest price
• Other aspects of bids can be
taken into account

Getting best
consideration
• But some benefits can’t – not
straightforward
• Must have quantifiable
financial/economic value
• Take account of the case law

General Disposal Consents
(England) 2003 and
(Wales) 2003
• Does not apply to ALL land
• Not land held for planning
purposes/housing land - disposal
powers dealt with under
planning/housing law (note
General Housing Consents 2013)
• Where it DOES apply SoS/WM
consent not required for disposal
at an undervalue …

(England) 2003 and
(Wales) 2003
• … where LA considers disposal will
contribute towards promotion or
improvement of …
• economic or social or
environmental wellbeing of the
LA’s area…and
• … the undervalue is less than £2m

(England) 2003 and
(Wales) 2003
• Undervalue? You need to compare
the “unrestricted value” with the
actual consideration
• Valuation evidence very important
if you wish to rely on the GDC

And don’t forget…
• Other public law areas…
• Even if the GDC allows a disposal
at an undervalue…consider state
aid implications
• … and notification requirements
• … and public procurement law…is
the disposal really just a land
sale??

A capital receipt or a
revenue stream?
• Expectation from disposal
• Revenue/Capital
• Lease/Freehold
By retaining the freehold, a local
authority will potentially be benefiting
from both revenue streams (i.e. rental
income) and capital growth.

Development vehicles
and options
• Is a straight sale or acquisition
the best route?
• Is development envisaged?
• Development agreement
• Joint venture – contractual
• Joint venture – corporate vehicle
(options)
• Land pooling/trust

and options
Procurement (acquisition/disposal
and development)
• Flensburg
The mere right for the public authority to
(re-)purchase the land in case of non-
construction is not, in the Commission's
view, a sufficient sanction that could give
rise to a legal obligation to execute the
work

and options
Procurement (acquisition/disposal
and development) (cont)
• Faraday
In this case, by contrast, the development
agreement is a contract in which a
mechanism has been put in place for the
implementation of works of development
by St Modwen, to give effect to the
council's intended regeneration of the
industrial estate

and options
Joint Venture
Haringey
• Could use a limited liability partnership
(LLP) for this purpose since the council
was acting for a commercial purpose
under section 1 of the LA 2011 and did not
therefore have to use a limited company
• Duty of consultation under s.3 LGA 1999
applied

Who do you need to
be able to satisfy as
to the legality of
land transactions?

Who do you need to
satisfy?
• Disgruntled parties
• Disappointed bidders
• Local Government Ombudsman
• Auditors
• Questions in Parliament
• Individual Challengers

Local authority acquisition and disposal of land - July 2019

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Local authority acquisition and disposal of land - July 2019

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