Assets and Big Local

Big Local funds for the acquisition of an asset are only transferred to a legal entity that is already registered with the relevant regulator (such as the Charity Commission) as a registered charitable company limited by guarantee, charitable incorporated organisation, community interest company or a community benefit society.

In exceptional circumstances, Big Local funds may be transferred to non-charitable companies limited by guarantee and co-operatives where there are good reasons why a charity, community interest company or community benefit society cannot be used and long-term community benefit of the asset is assured.

In such a case, the non-charitable company limited by guarantee or co-operative will also need to provide evidence that a voluntary asset lock is in place and at least a 75% majority of members is needed to approve any amendments to this.

We will ask to see an appropriate written agreement such as a memorandum of understanding (MoU) between the Big Local partnership and the legal entity acquiring the asset before the funding takes place.

LTOs should provide evidence of an appropriate funding agreement that meets Local Trust’s terms and conditions of grant when awarding funding to any third-party organisation.

All assets that are newly acquired with Big Local funding must be protected by an asset lock for the benefit of the local community. This can be ‘automatic’ or may be written into governing documents. (See Appendix II for more information on asset locks.)

We will ask for evidence that an appropriate asset lock is in place. Where the asset is being part funded by Big Local but not owned, we will consider whether this is required on a case-by-case basis.

We will ask whether you have considered placing a restriction on the title deeds and/or having this written into the lease. Restrictions may help protect the asset for the benefit of the community in the event that the legal entity becomes insolvent by helping to make third parties aware of any restrictions on use which already exist over the asset. (See Appendix II for more information on restrictions.)

If the asset is leased, we will ask you to tell us how long a lease you are planning to hold and how this is in proportion to the benefit, opportunity and interest that the community will have by acquiring the asset.

Whilst Local Trust does not specify a minimum lease length, major investment (in asset acquisition or improvement) would usually require a minimum 25-year lease.

We will ask you to demonstrate that a) the length of lease is in proportion to the benefit, opportunity and interest that the community acquires; b) that the Big Local partnership understands the implications of different lengths of lease; and c) that the Big Local partnership has weighed the benefit to the community and understands the implications of a short lease if the lease is less than 25 years.

Local Trust releases funding based on a Big Local plan, which draws on the needs and opportunities in an area and consults with the community on them.

We will check to make sure that the project is in line with the activities and priorities in your endorsed plan.

For asset-related projects we will also ask for additional information on the planning you have done. We will ask for an up-to-date business plan that shows you have considered how the asset/s will be managed and be financially sustainable in the future.

We will ask a specialist assessor to review this and provide feedback to you and Local Trust, including highlighting where further support might be useful.

Local Trust also undertakes due diligence on all LTOs before endorsing plans. Where the funding for an asset is to be transferred from an LTO to a third-party organisation, we will ask the LTO to demonstrate it has undertaken its own due diligence on the recipient of funds as is their responsibility as the legal grantee.

We may decide to complete our own or ask for further due diligence to be undertaken depending on the circumstances of a particular project.

In our role administering the Big Local programme we collect information on aspects of the plans we fund. This is to help us support Big Local partnerships more effectively and monitor and report on the projects we are funding.

As part of funding asset projects, we will ask you to provide information on the ownership and management of the asset, which we will include in a register of assets.

There are a variety of freely accessible online resources and guidance around community ownership of assets, some of which we outline below:

myCommunity have a range of resources and guidance which cover:

• Community Right to Bid
• Community Right to Reclaim Land
• Assets of Community Value
• Community Asset Transfer
• Community Buyouts
• Community-led housing
• Localism Act

Locality have a range of resources and guidance which cover:

• Business planning
• Good governance
• Community Asset Transfer
• Community ownership and development of assets
• Financial management

Power to Change have a range of toolkits and how-to guides.

Shared Assets have a range of tools and guidance on community land assets.

Often, taking on an asset involves setting up a new legal body. If you are planning to set up an organisation to acquire and manage the asset, please read our guidance on setting up a legal body and the duties and liabilities of charity trustees and company directors.

For information on Local Trust support on asset acquisition and management, please see the support partner page on our website. We are currently developing this offer and will announce more support in due course.

An asset lock is intended to protect the assets of an organisation for its community or public purpose, rather than for any private or personal gain of the members of the organisation. The strength of the asset lock differs depending on the legal structure used and some are easier to break than others.

Consideration should be given to the value of the assets held by the organisation; how important it is to protect those assets and what measures a particular structure permits to protect those assets from distribution among the members.

The strength of the asset lock differs depending on the legal structure used and some are easier to break than others. Below you can download a table which outlines the type of asset locks associated with different legal structures.

Information on asset locks

A covenant records what has been agreed between two or more parties: what can and cannot be done on land (or a building) affected by the covenant.

Positive covenants are obligations to do something, such as to contribute to a maintenance fund. Restrictive covenants show that something must not be done.

Covenants are usually contained on the title deeds or in a separate deed of covenant, entered as a notice on the register of title. The type of covenant used affects their enforceability so legal and professional advice should be taken in any scenario using covenants.

Placing a restriction on the title deeds and/or having this written into the lease may help protect the asset for the benefit of the community in the event that the legal entity becomes insolvent by helping to make third parties aware of any restrictions on use which already exist over the assets.

These protections usually need to be put in place on acquisition and so professional legal and commercial advice should be sought.

The length of a lease can range from 1 day to 999 years, although typically commercial leases are for a period between 1 to 25 years.

Big Local partnerships need to decide whether the costs (initial premium, yearly rent and operating costs) and length of lease are in proportion to the benefits that would be gained from taking that lease. It’s an important decision to make that will involve understanding and weighing up the pros and cons.

Considering the implications of different lease lengths can be quite complicated and there are nuances to lease lengths that need to be understood.

For example, a long lease (25 years plus) with no break clauses may be problematic for a tenant that knows they want to relocate or expand in the near future. However, a long lease could be helpful for raising funding. Whilst a short lease (one to two years) may not be appropriate where a tenant is making substantial investments into the property or requires a specific location.

In addition, the length of lease and amount of rent will have tax consequences which need to be considered.

Big Local partnerships are advised to seek professional legal and commercial advice about the implications, both positive and negative, of different lease lengths (and the premium/rents and other costs involved) before coming to an agreement.

This guide, available on the Locality website, includes an overview of leases but should be used alongside seeking such advice.

Asset – something you own, such as land, a playground or a building.

Asset lock – a legal agreement that prevents the sale or transfer of an organisation’s asset to private individuals or to an organisation that will use them differently.

Big Local ethos – our way of working: long-term, resident-led, non-prescriptive, patient and non-judgemental, and accompanied by flexible and responsive support.

Big Local outcomes – communities will be better able to identify local needs and take action in response to them; People will have increased skills and confidence, so that they continue to identify and respond to needs in the future; The community will make a difference to the needs it prioritises; People will feel that their area is an even better place to live.

Big Local partnership – a group of at least eight people who guide the overall direction of Big Local in a particular area.

Charity Commission – a non-ministerial government department that registers and regulates charities in England and Wales. It stores charity information and makes it available to the public.

Companies House – an executive agency sponsored by the Department for Business, Energy and Industrial Strategy that incorporates limited companies. It stores company information and makes it available to the public.

Conflict of interest – a situation in which someone is able to benefit from a decision they make in an official capacity or has conflicting loyalties to more than one organisation.

Council for voluntary service (CVS) – a charitable organisation that acts as an umbrella body for the voluntary and community organisations in their borough or district. Typically, they offer a wide variety of information and training as well as networking opportunities.

Dividend – a sum that a limited company pays out to its shareholders.

Financial Conduct Authority (FCA) – the registering authority for ‘registered societies’ under the Co-operative and Community Benefit Societies Act 2014 (the Act).

Governing document – a written legal document that sets out the rules by which an organisation operates, including its purpose and activities.

Incorporation – Incorporation is a process through which an organisation goes from being a collection of individuals, (in the eyes of the law), to a single entity which is legally separate from the individuals involved.

Legal body – a formal structure identified by the law; it defines the type of organisation.

Legal entity – another term for legal body.

Liability – a legal responsibility for, for example, financial losses, breaches of contract, injuries on organisational property or offences committed by employees.

Limited liability – provides a layer of protection for legal bodies and means that a creditor can only take assets or finances belonging to the company. Limited liability applies to most types of companies.

Locally Trusted Organisation (LTO) – the organisation chosen by a Big Local partnership to administer and account for the distribution of its funding and may deliver activities or services on behalf of the Big Local partnership.

Objects or Objectives – official wording that defines the activities of the legal body and the community it is set up to benefit.

Regulatory body – a public or government body, like the Charity Commission, that oversees an industry or practice.

Service level agreement – a contract that sets out the services a provider delivers to a client or customer and the standards the provider has agreed to maintain.

Structure – the particular way an organisation is set up (who runs it, how it is governed) when it becomes a legal body.

Trustees – a group of people who are officially appointed to use their skills and experience to lead a charity and ensure it is run in line with its governing document and the law. Sometimes known as directors (where they are also company directors) or board members.

Unincorporated association – a group of people who come together for a reason other than to make a profit. This is a simple structure which you can set up without registering with anyone. All you need to do is write and agree a constitution.