Community Empowerment (Scotland) Act 2015: asset transfer guidance for authorities

11. Price, Valuation and Non-financial benefits

11.1. The Act does not say how much should be paid to purchase an asset or in rent, whether it should be at market value or at a discount. The community transfer body has to state in the asset transfer request how much they are prepared to pay, alongside the benefits the project will deliver, and the relevant authority has to decide whether to accept that price. This can be a difficult area for both sides. The Scottish Government brought together a Short-Life Working Group to look at the issues of Valuation and Assessment of Non-Financial Benefits, and they have developed the guidance in this chapter. Details of the group's membership and a link to its papers are provided at Annex B.

11.2. All relevant authorities have a duty to secure Best Value in their operations, including when disposing of or letting property. However, it has long been recognised that best value does not always mean the highest possible price, and all authorities have the ability to dispose of property at less than market value where there are wider public benefits to be gained. This is set out in the Disposal of Land by Local Authorities (Scotland) Regulations 2010, and in the Scottish Public Finance Manual for other relevant authorities. It is a question of balancing the financial and non-financial impacts, both positive and negative, of the different options.

11.3. The likely price of the asset is something the community transfer body will need to consider at an early stage in developing its proposals, along with the initial and ongoing costs of the project. It will be helpful for relevant authorities to give an indication of their expectations in terms of price at an early stage in discussions, if possible. Community transfer bodies should not assume that asset transfers will be at a nominal sum.

11.4. For purchase or lease, both parties are likely to need a formal valuation for accounting and funding purposes. Chapter 12 explains how this could be done on a joint basis.

11.5. Most asset transfer requests are for property which is unused or to be closed. If a request is made for a building or site which is in use, there may be costs to the relevant authority for relocating staff and services, which may offset the value of the non-financial benefits of the proposal. On the other hand, there may be savings from the community transfer body taking over maintenance or other responsibilities. Similarly, a request for use of a property outside normal hours, for example, may incur additional costs such as safety and security arrangements. It may be possible to make arrangements with the community transfer body to reduce these costs and make the transfer more feasible.

11.6. If the community transfer body decides to offer a price that is less than the market value, the relevant authority will need to assess whether the non-financial benefits offered by the proposals justify that reduced price. Chapter 13 provides guidance for relevant authorities in doing this. Chapter 14 deals with circumstances where the relevant authority may wish to include arrangements to protect any discount in case the proposed benefits are not delivered.

State Aid Considerations

11.7. All asset transfers must comply with State Aid rules. A disposal at less than market value may constitute state aid, if it provides an economic advantage to a trading entity. There are four key tests that need to be met in order to establish whether a measure constitutes state aid, this includes whether any intervention is likely to affect trade between Member States .

11.8. The relevant authority will have to consider whether any reduction from market value is allowed under the state aid rules. However, if any assistance is found to have breached the rules, it is the organisation that received the assistance that has to pay it back, so it is important for both parties to be clear about the position in relation to State Aid.

11.9. If assistance is considered to be state aid, there is a "de minimis" rule that allows small amounts of assistance to be given over a rolling 3-year period. The threshold is for all state aid from any source; where a discount involves state aid the community transfer body will be required to demonstrate that this will not exceed the limit. Assistance should always be considered to see if it is state aid, before considering whether it is "de minimis".

11.10. Asset transfer projects often receive assistance from more than one public authority, for example by a discount and a grant. In such cases it would be helpful if the authorities could come to an agreed position on whether the project meets the state aid tests.