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Division(s): N/A

ITEM EX14

EXECUTIVE - 28 OCTOBER 2003

DISPOSAL OF SURPLUS LAND FOR LESS THAN MARKET VALUE

Report by the Director for Resources

Introduction

  1. This report describes the provisions of the new Local Government Act 1972: General Disposal Consent (England) 2003, and how they apply to County Council property disposals. The changes will allow the County Council to sell property for less than full open market value (without first seeking the Secretary of State's consent) where such a sale includes a contribution to the County's economic, social or environmental well-being, and where the undervalue does not exceed £2 million. This report describes the new powers, explains the existing policy where sales include a non-monetary consideration, and provides some guidance on how the new provisions should be applied.

    2. The General Disposal Consent

  2. The County Council's sale procedures are subject to Section 123 of the Local Government Act 1972. This specifies that except with the consent of the Secretary of State, a local authority shall not dispose of land "for a consideration less than the best that can reasonably be obtained". The Act explains that "consideration" includes not only money but other elements which have a commercial or monetary value to the County Council but which are capable of being quantified financially. The Secretary of State's approval to a sale at less than best consideration was required in all cases except short tenancies and where a disposal was exempt because it fell within a group of "General Consents" approved by the Government in December 1998. These "consents" and the process that had to be followed have proved complex, time-consuming and inflexible, and the 1998 General Disposal Consents have now been revoked and replaced by the new General Disposal Consent (England) 2003. This does not override Section 123 of the 1972 Local Government Act; it limits its effect (as described below).

  3. The 2003 General Consent came into force on 4 August this year. The accompanying Circular (06/2003) notes that it is still Government policy that local authorities should dispose of surplus land wherever possible and that generally such sales should be for the best consideration possible. However, it is recognised that there may be circumstances where an authority considers it appropriate to dispose of land at an undervalue and the Consent has been issued to give local authorities more autonomy and flexibility to carry out their statutory duties and fulfil their objectives. It seeks to do this by providing that-

        1. The Secretary of State's specific consent is no longer required for the disposal of any interest in land which the County Council considers will help it to secure the promotion or improvement of the economic, social or environmental well-being of its area. In coming to a decision on sales at an undervalue, the criteria in the relevant Council's Strategies and Policies will have to be considered.

        2. In all cases, disposal at less than best consideration is subject to the condition that the undervalue does not exceed £2 million.

        3. The Circular reminds Councils of their fiduciary duty to local people and specifies (inter alia) that they should comply with normal and prudent commercial practices. Thus, the view of a professionally qualified valuer will be required to determine whether a disposal for less than best consideration falls within the terms of the Consent.

        4. The Circular gives general guidance and a Technical Appendix which recommends a methodology for determining the extent of any undervalue. This will include valuing the benefits of any conditions or other non-monetary contribution (such as operational savings) and adding this to the financial consideration where applicable, and then comparing the total with an unrestricted market valuation. Supporting documentary evidence will need to be kept to demonstrate that a consistent approach to sales has been adopted.

        5. The County Council will be responsible for deciding whether a disposal requires the specific consent of the Secretary of State under the 1972 Act, and the Circular describes the information needed by the Secretary of State if an application for consent is submitted.

        6. The County Council will need to show that it has complied with relevant statutory procedures and European legislation including, if appropriate, the European Commission's Communication on State Aid.

    Proposed Approach

  4. The Capital Programme and Asset Management Steering Group has previously considered what approach should be adopted in deciding whether a particular surplus property should be disposed of with part of the consideration being by way of services or provision of accommodation which has a value to the Council. The view of the Group was that non-monetary consideration should only be accepted:

    • if the service or accommodation provided in lieu contributes to one of the Council's priorities; and

    • provided that a case is made in effect justifying the 'expenditure' of the foregone receipt in accordance with the normal processes for the allocation of capital resources.

  1. This principle could be applied to any proposals for the disposal of surplus property at less than full value under the terms of the 2003 General Consent. It would be for the Capital Programme and Asset Management Steering Group to consider any specific proposal and be satisfied that it meets the criteria in (a) and (b) above. The Executive would then make the formal determination whether to dispose of the property in the light of the Steering Group’s advice.

  2. The Capital Programme and Asset Management Steering Group support the above proposals.

    3. RECOMMENDATION

  3. The Executive is RECOMMENDED to endorse the approach and procedures set out in paragraphs 4 and 5 of the report.

JOHN JACKSON
Director for Resources

Background Papers: Nil

Contact Officer: Neil Monaghan, Head of Property (01865 815712)

October 2003

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