Community right to buy legislation in Scotland: Selling to an unwanted purchaser
Legislation intended to protect and advance the cause of crofters and small rural communities may have serious implications for commercial developers and other parties involved in real estate in Scotland.
Legislation exists to provide Community Bodies with the opportunity to register an interest in rural land in Scotland and to buy the registered land when it comes to be sold. This may result in a requirement to sell to a community body against the wishes of the seller or his intended purchaser. The definition of rural land may affect commercial development.
Registrable Land
All land in Scotland is capable of being subject to registration as a community interest except land excluded by reason of being in a settlement of over 10,000 population and foreshore areas adjacent to excluded settlement areas. Definitive maps are available detailing the boundaries of the settlements.
Any potential purchaser of non-excluded land should consider whether there is a registered interest or indeed if a Community Body may potentially register such an interest.
Registering an Interest
A Community Body (which must be a company limited by guarantee) is first identified by reference to an area of land covered by a full post code(s) in which the community body is situated. Residents in that community who are on the local electoral roll from an address in that community may be part of it. Each Community Body may demonstrate its “community” – so householders further away from the specific land may rightfully be included due to a connection with the land in question.
Provided it satisfies various conditions, the Community Body can register an interest to buy the land at any time, even if the landowner is not looking to sell the property. The interest remains on the Register, ready to be activated when the seller looks to sell. Registration lasts for 5 years and may be renewed on application.
The conditions relate to the timing of the application, community support, sustainable development and public interest. The Community Body must demonstrate a certain level of community support and the the extent to which the main purpose of the Community Body is consistent with furthering the achievement of sustainable development. The proposed acquisition must demonstrably bring real benefits to the whole community. Public interest is not defined and so Ministers have a degree of discretion and decide on a case-by-case basis.
It is possible for late registration where an application is made after land comes on to the open market (or has been otherwise advertised for sale). Applicants must demonstrate good reasons why the application is late and show a significantly greater level of support as well as a strong indication that registration would be in the public interest. There is some comfort for the seller and his intended purchaser in that Ministers must have received the application for late registration before the date on which missives (the contract for sale) are concluded or an option to buy the land is conferred.
The Right to Buy
When the owner looks to sell the property, it must be valued and a ballot be held in which at least half the community members voted (if less than half the members voted, the proportion that did vote must be sufficient to justify the right to buy proceeding) and the majority of those voting voted in favour. The Community Body then has six months to raise the funds and conclude the sale.
The Holmehill Judgement and the Midmar Inn Registration
In the Holmehill case, the issue was the refusal of a late application. There was a perception that the community’s plan to acquire ownership was an attempt to thwart the planning process. Sheriff McSherry suggested that a strict approach to late registration was justified, as granting late applications as of right would be “akin to an automatic right of pre-emption and direct intervention in the live land market”.
This will provide some comfort to potential purchasers. However, if an application is made timeously and meets the conditions then the consequences for businesses looking to buy land could be severe. When the landowner does signal an intention to sell, the right to buy is activated. If the Community Body meets all the conditions at this stage then they are entitled to buy the property and anyone else interested in the property loses out.
This “lying in wait” for the property to be sold can be seen in the recent decision affecting the Midmar Inn, near Echt in Aberdeenshire. The owner closed the pub and sought planning permission to redevelop it as his family home. A Community Body was established and has been granted permission by the Scottish Ministers to register its interest. The Community Body cannot force the owner to sell, and the right to buy will not apply unless and until the property comes onto the market. As it happens, the owner has declared that he has no intention of selling to the Community Body and, amidst what has been described as a bitter feud, the owner has declared that the property will not be put up for sale as long as he is alive. A stand-off, perhaps, but one with potential ramifications for the security of the property. Would a bank lend money on the strength of a property that it could not easily sell, should the security be called up?
Conclusion
Community purchase of land is not an easy option for a Community Body, which may be hindered by a lack of organisation and raising funds or sufficient support may not be straightforward. However, businesses (and developers in particular) need to be aware of the potential impact and to ensure that any contracts or deeds provide protection against the consequences of proceeding with the purchase of land where there is a registered interest. As yet there is no standard practice to deal with registered interests in land which means there will continue to be an element of uncertainty while the law develops.
