Community asset transfer policy 2025

Scope of the CAT Policy

20. For the purposes of this policy, an "asset" is any real property asset in the ownership of Gateshead Council.

21. The Policy does not explicitly exclude any asset from potential transfer to a VCSE sector organisation. Assets are open for decision, on a case-by-case basis, subject to the operational requirements of the council.

22. The Policy is not restricted to property that the council may deem from time to time to be "surplus to requirements" and includes property attached to the transfer of service provision.

How are potential CATs identified?

23. Council assets may be identified for a CAT in a range of ways, including, but not limited to:

• a VCSE sector organisation currently occupying all or part of a property, providing existing services to the community may want to take over control of the asset
• a VCSE sector organisation may want to deliver services from an asset and take on management and responsibility
• a public interest in community occupation and management of an asset may have been expressed to elected members or officers of the council
• assets that are surplus to the council's operational needs may be identified as part of routine work completed by the council's Property Team
• an underutilised asset is identified by the occupant, a council service, elected members or the public as vacant or underused, offering a potential opportunity for partnership working

24. To enable robust oversight of opportunities for CATs that will add value to our communities and support the delivery of our corporate priorities, all surplus assets (or potentially surplus assets), CAT enquiries and applications are considered by a CAT Working Group. The CAT Working Group is made up of officers from across the council and ensures that CATs demonstrate and balance the priorities and needs of the council from a variety of service perspectives, as well as ensuring the needs of our residents and communities are at the forefront of decision making.

Terms of Reference for the Group are included as Appendix 9.

25. Before any decision is made about a CAT the application process set out in this policy must be followed including the provision of a robust and viable business plan that aligns with the council's corporate objectives.

26. Once approved by the CAT Working Group, the application will progress pursuant to the council's constitution and the appropriate scheme of delegation.

Eligibility

27. The council will consider a community asset transfer to any VCSE sector organisation. Appropriate groups may be area-based, focused on a particular social group or have some other "community of interest". The council will not transfer its assets under this policy to private businesses which distribute profit, or to political parties.

28. Fundamental to the success of any transfer is the VCSE sector organisation demonstrating to the council that they have a proposal with a clear business model backed by a robust business plan. This must demonstrate their ability to manage the asset effectively, including evidencing the financial and organisational capacity of the organisation and outlining the provision of services to be delivered.

29. Any organisation who wants to apply for a CAT will need to demonstrate this by meeting set criteria, including being able to demonstrate:

• they are an appropriately constituted voluntary and community sector organisation or social enterprise
• they have good governance and an appropriate legal structure, for example as:
  • registered charities
  • development trusts
  • community interest companies
  • community benefit societies
  • companies limited by guarantee
  • a constituted body
• that the proposed use has extensive reach into the community and will be open to all. Organisations that serve a particular interest group or area will be expected to demonstrate how they will be inclusive
• they have the skills and capacity to effectively deliver services and manage the asset to be transferred and/or have access to the necessary skills and capacity
• they can build capacity within their organisation and demonstrate how they intend to do this
• they have a viable business plan that covers the costs of holding the property and managing it effectively
• they have an up to date legally adopted constitution or governing document which provides that the organisation can enter into a lease
• they have a robust management committee/board of trustees with defined roles and responsibilities which meets on a regular basis and is elected in accordance with the governing document
• appropriate financial systems and procedures in place
• appropriate policies, procedures, licences and insurance cover in place
• up to date, signed, examined or audited accounts which do not show a deficit
• a robust business plan which demonstrates the organisation's plans for the asset and how these will contribute to Gateshead's corporate goals and objectives
• evidence of community need and support for the proposal

Transfer arrangements

30. "Transfer" is generally considered to relate to leasehold arrangements (in some cases at less than best consideration).

31. In transferring its assets to a VCSE sector organisation, the council will consider the most appropriate type of transfer. This could include:

• licence
• short/medium-term lease, or
• long-term lease

32. The decision on which type of transfer is the best option will be decided on a case-by-case basis. It is informed by an assessment of the application form and the business plan, and which option is best suited to meeting the objectives of the transfer.

33. However, there is a presumption in favour of a licence or lease to allow the council to maintain some control over the asset in order to explore alternative uses for the asset if the venture is not successful.

Standard Terms of CAT Agreements

34. The council has a standard lease template for use for CAT's. The council will however adopt a flexible approach to the lease terms if the circumstances of a particular CAT so require. However, the council will always aim to ensure that there is a balance between what the community organisation reasonably requires and what the council requires in order to ensure that the property asset remains available for the benefit of the community as intended (including, for example, the maintenance, repair and insurance of the property).

35. Typical lease terms are set out below:

• standard lease provisions will include full repairing and insuring obligations
• the lease to be contracted out of the Landlord and Tenant Act 1954, which means there is no automatic right to renew the lease at the end of the term
• mutual break clauses or a council only break clause may be included as appropriate. This will be considered on a case-by-case basis and the drafting of any 'break clause' may need to address funders concerns - for example a 'break clause' may not be triggered until the project life of the funding has expired
• underletting of part will not always be permitted. If the lease allows for underletting, this is subject to obtaining the council's prior consent and will be on the basis of short-term leases contracted out of the 1954 Landlord and Tenant Act, providing such underletting is mentioned in the supporting business plan and the user compliments the purpose of the CAT and will continue to do so. The granting of room hire agreements that do not confer any security of tenure or property rights will usually be permitted without consent
• assignment of part is not permitted. There will be a prohibition on assignment and underletting of the whole. In certain circumstances, though, assignment of the whole may be permitted but only with the council's prior consent, which may be withheld and at the council's absolute discretion, but any permitted assignment would only be permitted to a relevant successor body
• a legal charge (mortgage) on the property asset is not permitted without the council's prior consent and which will be at the council's absolute discretion
• user provisions will be restrictive and clearly defined to ensure the asset is used for the particular community use it was intended. A right to review the rent payable at appropriate intervals (for example on a 5 yearly review basis). However, user provisions may also permit ancillary commercial uses in recognition of the fact that community assets cost money to run and commercial activity is often required to subsidise premises running costs to make premises sustainable for community use. Such commercial activity will only be permitted where it is ancillary to and clearly defined in the lease with any surpluses from commercial activity or rental paid by a third party reinvested in the asset and services delivered within
• where assets sit in a wider public facility, such as a park, or are part of a larger building, lease terms may place certain restrictions on access and activities
• standard forfeiture provisions to enable the council to terminate the lease (for example for non-payment of rent, breach of covenants and insolvency). Forfeiture for insolvency will need to be considered in each case and may need to be tailored, for example, by providing funders with 'step in' rights to accommodate particular funding requirements

36. Any lease or occupation granted under the CAT policy will be subject to regular review to confirm that the tenant is complying with the terms of the lease and that the asset continues to be used for community benefit on a not-for-profit basis.

Partnership agreements

37. A lease or occupation granted under the CAT policy will often be accompanied by a partnership agreement which is intended to provide direction for both the VCSE sector organisation and the council by setting out their obligations.

38. The requirement for a partnership agreement will be reviewed on a case-by-case basis and the agreement will be tailored to the objectives of both the VCSE sector organisation and the council.

39. Partnership agreements specify a review period, and a council officer will be nominated to monitor the partnership. The partnership agreement is non-transferable and is personal between the named parties. Both Parties will comply with good practice and legislation and identify the support resources and working practices required to meet the needs of the community in fulfilling the key goals outlined within the partnership agreement.

Maintenance and operating obligations

40. On completion of the CAT Agreement, the VCSE sector organisation will usually take on responsibility for managing and repairing and maintaining, insuring the property asset and other ongoing operational costs.

41. The VCSE sector organisation should demonstrate through the application process that they can access sufficient funds to cover repairs, maintenance, insurance and on-going operational costs.

42. Some responsibilities, for example compliance with Health and Safety legislations, may require additional technical advice, and VCSE sector organisations should demonstrate through the application process how they will address such issues. By way of example only and not by limitation:

• maintenance liabilities may include maintaining in good order: Electrical, mechanical and plumbing installations, such as lighting and heating/cooling systems; lifts; building safety systems including fire detection and alarm systems and emergency lighting; structural and fabric elements including the roof, windows, doors and cladding; kitchens and bathroom; decoration and floor coverings; external areas such as hard and soft landscaping; security systems including CCTV, alarms or roller shutters
• operational costs may include planned and preventative maintenance contracts; repairs; cleaning and waste management; utilities; business rates; insurance; grounds maintenance, window cleaning and pest control; office costs such as telephone, ICT and printing
• other responsibilities may include complying with regulations for health and safety, and management of fire risk, asbestos, legionella, and electrical and gas safety

43. Under the terms of a CAT lease, the VCSE sector organisation must get written permission from the council's Property Team before making certain changes and improvements to the asset. This permission is called landlord's consent.

Rent

44. Subject to compliance with legal requirements and assessments, including land and property valuations, CAT properties may be leased at less than market rental. Although some projects may make financial surpluses this may not result in a rental being payable as long as there are robust and clear provisions in place to the effect that any surpluses are reinvested into the project and/or for community benefit, and lease provisions will be tailored for the particular circumstances.

45. The amount of rent (if any) payable under leases granted though the CAT process will be assessed on a case-by-case basis. Criteria used will, by way of example, include:

• any rent payable by the council under an existing lease of leasehold premises - only in exceptional circumstances will the rent payable under the CAT be less than the current rental payable or a pro rata proportion thereof in the case of a CAT of part of an asset
• any capital or revenue investment the vcse sector organisation is making into the asset
• the extent/level of services provided and the social, economic or environmental benefit of the same
• the extent to which the transfer supports gateshead council's corporate objectives
• the extent to which the use of the asset benefits the wider community
• the extent to which the asset is made available for other groups to use
• how well the asset is managed and maintained
• if the use of the asset changes, with the council's prior approval and in which respect the council will have an absolute discretion whether to give that approval or not, from the original business case to include commercial uses (other than commercial uses which are strictly ancillary to the main CAT use) and where any profit is reinvested in community uses, the council shall have the discretion to review the rent up to the market rental asset depending upon the degree of commerciality.

46. Any rent at the commencement of the lease and any rent payable where the use of the asset is varied as detailed above, shall be subject to five-yearly reviews.

Principles of CAT

47. To enable balanced decision making, the following principles inform our approach to CATs (from identifying CAT opportunities, to expressions of interest, to full applications) and our decisions to progress an asset transfer or not.

A transparent and consistent approach

48. The council endeavours to have a transparent corporate process, as outlined in this policy, for dealing with an asset transfer together with clear stages in the process for each party to follow.

49. The council will follow the established processes for assessing the suitability of a CAT and the alignment with Corporate goals and objectives.

50. The lease clearly sets out the legal responsibilities of each party.

51. Where a partnership agreement is granted alongside the lease, this will set out how the parties will work together once the asset has been transferred.

52. The transfer proposal will be approved pursuant to the council's Constitution and the appropriate scheme of delegation.

Best value

53. The council take a strategic approach to its estate through regular reviews of the community asset transfer potential of its assets, and the establishment of priorities linked, for example, to priority wards, delivery of corporate goals and objectives, or the potential of high-profile cases.

54. Organisations wishing to take on a CAT must demonstrate they are financially sustainable to ensure they are able to maintain the asset and their service delivery.

55. Where deemed appropriate, following the assessment process, the council may opt to include restrictive covenants in relation to the use of the site to prevent an asset being used or transferred on for excessive financial gain.

56. The test on whether to pursue restrictive covenants may be whether the disposal is in the interest of the public. For example, a disposal that enables cash to be reinvested in a local individual would not.

57. The council has a statutory obligation and fiduciary duty to obtain the best consideration reasonably obtainable for its assets.

58. However, best consideration can be obtained by money or monies' worth and therefore if the council considers that the community benefit derived from a community asset transfer represents monies worth then this can be taken into account when assessing the rent to be paid, as it can be seen as an alternative to monetary rent.

59. In determining if the proposed use of the property provides a benefit to the council that constitutes monies' worth and thereby enables the council to let the premises at a reduced monetary rent, the council will assess those potential benefits that will be gained by transferring the asset to the community.

60. In making this assessment the officers will have due regard to the provisions of council goals and objectives and the following: The community benefits to be realised by the transfer: will the interests of local people be better served by the transfer?

• the opportunity to support and build capacity within voluntary organisations and encourage greater organisational sustainability and development of community enterprise activity
• the impact on the council's proposals in terms of environmental and economic regeneration and social and economic wellbeing
• improvements to safeguarding or creating new local services and activities whilst ensuring that existing activities, services or facilities already provided in the local community are not duplicated
• supporting Gateshead Council's efficiency gains and co-location of service providers

61. In assessing the rent to be paid over the term of the lease the council may consider it prudent to make provision for the rent to be reviewed.

Balanced decisions

62. The council will have an open and transparent corporate process for CATs which includes a clear point of first contact and clear stages.

63. The council will balance the benefits of any transfer against corporate priorities and the potential for wider community benefit or social value.                                      

64. Where there are multiple VCSE sector organisation bids the council will consider all bids on their own merits and they will be assessed against the Assessment Criteria. Assessment criteria are set out in Appendix 2 (Expression of Interest) and Appendix 5 (Full Application). Where possible, competing groups will be encouraged to work together.

65. If the VCSE sector organisation anticipate that their plans for an asset require a 'change of use' or alterations to the asset they may need to seek a formal pre-application consultation to determine whether Planning Permission would be required before a decision about the CAT can proceed.

Communities first

66. Organisations are required to show there is a demonstrable need for their service within the community and that they have considered how they would be able to continue to meet these needs in the future.

Growth

67. Organisations are required to articulate how, by taking on the community asset, they will be able to positively contribute to the services delivered within the community.

Sustainability

68. Organisations are required to demonstrate how they have considered the environmental impact of their plans for the asset.

A corporate resource

69. Any proposed CAT must evidence that they support the priorities and aims of the council.

Collaboration

70. Decisions around how the CAT will be progressed will be agreed collaboratively between Gateshead Council Officers and the Community. This will include, as appropriate, speaking with any incumbent organisation, local community groups, or advertising the CAT publicly.

Fit for purpose

71. A CAT may be accompanied by a partnership agreement identifying the benefits and how these will be monitored and measured, together with the remedies available to both parties if the partnership agreement conditions are not met. This partnership agreement will be, in effect, a contract for provision of services.

72. The council will reserve the right to include some or all the following conditions on any transfer, whereby the asset could revert to the council:

• if the organisation ceases to exist
• in the case of bankruptcy or dissolution
• in the case of corruption
• if the anticipated benefits of transfer are not realised
• if there is a material breach of lease covenants or restrictive covenants
• if a building does not remain open for the use of the intended community
• if the organisation loses its charitable status or there are changes to its legal structure
• if there are significant reduction or changes of service to the community
• if the council or the charity commission are made aware of an issue or concern regarding a VCSE-sector-organisation-run asset
• for VCSE sector organisations the presumption should be that a transfer of assets will be by a lease arrangement, except in exceptional circumstances. restrictions would be placed on any transfer at less than market value, requiring the organisation to:
  • limit the use to a specific community use
  • seek approval from the council for any future sale, assignment or sublease
• the council have a right to first refusal should the asset be transferred in the future

73. It is the presumption that, once a temporary licence is put in place or the community asset transfer is complete (whichever is sooner), the organisation will assume responsibility for the maintenance and financial sustainability of the asset, subject to the formal agreement to the terms of the licence/community asset transfer.

74. VCSE sector organisations that complete a CAT are required to produce an annual update, in line with the annual review requirements outlined as Appendix 7.

Risks of CAT

75. There are risks that may arise from a CAT and we accept that these are inherent to asset transactions and community-led services or initiatives. The risks associated with property occupation will pass in whole or in part from the council to the VCSE sector organisation at the time of licence or transfer, whichever is sooner.

76. Potential risks may include:

• the asset becomes a financial liability for recipient
• uncertainty around capacity of recipient to manage the asset
• capacity of recipient to deliver proposed services/outcomes
• knowledge of required compliance and legislative requirements
• conflict with other legal, planning or other regulatory constraints
• an ongoing council liability remains
• conflict with other funding recipients
• a possible unfair advantage for one group over another
• perception of a loss of the use of a community facility by certain sectors of the community

77. It is important to note that this list of possible risks is not exhaustive. To mitigate against these risks and others that may be identified, we will ensure risks are robustly considered through the CAT process.

Download the Community asset transfer policy as a PDF (PDF, 1 MB)