Shepherd and Wedderburn LLP
  March 3, 2006 - Scotland

Community Right to Buy
  by Karen Shaw

In June 2004 legislation came into force giving Scottish communities a right to purchase land for sustainable development. The legislation is complicated. Even the Scottish Executive's guidance for community bodies states such a purchase is no easy option and requires commitment and patience. It suggests community bodies may wish to consider buying the land by agreement without the use of the legislation. However, the legislation is being utilised and as at 31st January 2006 the Register of Community Interests in Land disclosed seven registered interests and five pending applications. As the legislation can prevent landowners selling land for development, they ought to be aware of the following key issues. The community right to buy is only triggered by a proposed sale of land. A landowner cannot be forced to sell land to the community and must be a willing seller. To be able to exercise the right to buy, a community must have a population of 10,000 or less, and set up a community body (CB). A CB must be a company limited by guarantee, have the support of at least 10% of the community and, except in certain circumstances, have no fewer than 20 members. Before the landowner is notified of the application the CB will already have overcome a number of hurdles. For example the CB must satisfy the Scottish Ministers that the application is in the public interest and the proposed use, development and management of the property supports the sustainable use or development of the land. Once the application has been submitted, the Scottish Ministers will send a copy to the landowner, and any heritable creditor, seeking responses within 21 days. From the date of receiving the Scottish Minister's notice the landowner is prohibited from taking any action to sell until the Ministers approve or refuse the application. If the application is successful details will be registered in the Register of Community Interests in Land. For five years from registration the landowner is prohibited from transferring or taking any action with a view to transfer of the land except to the CB unless the transfer is specifically exempt. Examples of exempt transactions are transfers for no value, between spouses, within the same group of companies or to a statutory undertaker. Transfers can also proceed if a contract was concluded before registration of the community interest. If a landowner wishes to dispose of land subject to a community interest the landowner must inform the Scottish Ministers and the CB. The Scottish Ministers give the CB 30 days to confirm whether it wishes to exercise its right to buy. If the CB does not reply within 30 days, the landowner is free to dispose of the land unless of course a further interest is registered. If the CB wishes to exercise its right it has six months to conclude the sale at a price agreed by the landowner and the CB. If agreement cannot be reached, the Scottish Ministers appoint an independent valuer to determine the market value of the land. The CB can only proceed to buy the land if it has approval of the Scottish Ministers and the community which is demonstrated by a ballot of the local community. If a landowner transfers or attempts to transfer the land in breach of the legislation, the transfer has no effect. Any notification under the legislation requires careful consideration, and should not be ignored.


Footnotes:
Karen Shaw is a partner specialising in property with commercial law firm Shepherd and Wedderburn. +44 (0)141-566 8504