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

5. Community Transfer Bodies

5.1. To make an asset transfer request, an organisation needs to be a "community transfer body". This is defined in section 77 of the Act. It can be either a community controlled body (defined in section 19) or a body designated by the Scottish Ministers.

5.2. A community controlled body does not have to be incorporated, but it must have a written constitution, incorporating the provisions set out in paragraph 5.11.

5.3. A community controlled body which wants to make an asset transfer request for ownership must also be incorporated as a company, a SCIO (Scottish Charitable Incorporated Organisation) or a BenCom (Community Benefit Company), with a minimum of 20 members and provision for transfer of its assets on winding up. This is set out in section 80.

5.4. The Act does not require a community transfer body to be incorporated in order to make an asset transfer request for lease or other rights. Since the property remains in the ownership of the relevant authority, it is for the authority to decide what type of legal structure is appropriate, depending on the rights requested. This should be proportionate, taking into account the type of activity, duration of the lease or other agreement and the scale of the responsibilities involved.

5.5. SCVO has helpful advice on its website http://www.scvo.org.uk/setting-up-a-charity/ for groups setting up a formal organisation, including advice on charitable status.

5.6. Model governing documents will be provided on the Scottish Government website for an unincorporated association, company, SCIO or BenCom which meet the requirements for a community controlled body.

5.7. Bodies eligible for community rights to buy are also eligible for asset transfer - see paragraph 5.21.

5.8. An asset transfer request must be accompanied by a copy of the community transfer body's constitution or other governing documents. You should check that it meets the requirements of the Act set out below. Even if they appear to have used the model documents, you should check that they have not deleted any of the provisions necessary to qualify as a community transfer body.

5.9. In deciding whether a community organisation meets the requirements for a community transfer body, either as a community controlled body or in relation to any designation order, you should be aware that this may have an impact on other relevant authorities. If an organisation is accepted by one relevant authority, it will be reasonable for them to expect that they will also be accepted by others. Other community organisations that use the same terms in their governing documents, for example as fellow members of a wider association, may also expect the same treatment. You should therefore be very clear with the community organisation if there is any uncertainty over their eligibility.

Requirements for a community controlled body

5.11. To qualify as a community controlled body, the body's constitution, Articles of Association or registered rules must include the following:

(a) A definition of the community to which the body relates.

The group may represent the community in a particular area or people who have a common interest or characteristic. (See below for more on "communities of interest"). The definition should be clear enough to show whether a person is a member of the community or not.

(b) provision that membership of the body is open to any member of that community

Membership of the body must be open to anyone who is a member of the defined community. There must not be any additional requirements.

It has been queried whether membership is open to all if membership fees are charged. The Scottish Government's view is that fees may be charged, but they should be set at a level that is affordable for members of the community. Membership fees are more common for communities of interest based around a common activity, for example for a sports club to cover insurance, hall hire and registration with the sport's governing body.

(c) provision that the majority of the members of the body is to consist of members of that community

People (and organisations) who are not members of the defined community may be allowed to join the body, but the governing documents must require that those who are members of the community must always be in the majority. The model documents handle this requirement by providing for those who are not members of the community to be Associates rather than Members.

If the asset transfer request is for ownership, the governing documents must require the body to have at least 20 members.

(d) provision that the members of the body who consist of members of that community have control of the body

Having "control of the body" means that the members of the community are in charge of the decisions made by the body. This may be arranged by providing that only Members can vote at General Meetings, a majority of the Board must be made up of Members and the Chair (and Vice-Chair, if any) must be Members, where they have a casting vote in board meetings. If the model documents are not used, you may have to search for measures that implement this requirement.

(e) a statement of the body's aims and purposes, including the promotion of a benefit for that community

The aims and purposes may include activity that goes wider than the defined community, such as raising money for charity, promoting their interest to other people or sharing experience with communities in other areas. But at least one of the purposes of the body must clearly be for the benefit of the community they represent.

(f) provision that any surplus funds or assets of the body are to be applied for the benefit of that community.

Any money or property the body has, after covering its running costs, must be used to benefit the community as a whole. Bodies incorporated as co-operatives, which distribute their profits or dividends to members of the body, are not eligible to make requests for ownership.

If the request is for ownership, and the community transfer body is a company, the Articles of Association must include arrangements for what happens to the body's assets if it is wound up. This must require that the property is transferred:

(i) to another community transfer body,

(ii) to a charity,

(iii) to such community body (within the meaning of section 34 of the Land Reform (Scotland) Act 2003) as may be approved by the Scottish Ministers,

(iv) to such crofting community body (within the meaning of section 71 of that Act) as may be so approved, or

(v) if no such community body or crofting community body is so approved, to the Scottish Ministers or to such charity as the Scottish Ministers may direct.

If the organisation is a SCIO or BenCom, there will be similar provisions to ensure that remaining property is transferred to another body with similar structure and aims.

Communities of interest

5.12. Unlike community right to buy, the legislation on asset transfer does not define what a "community" can be. It simply requires a community transfer body to define the community it relates to, and ensure the body is open to and controlled by members of that community, and uses its assets to benefit that community. Whether an organisation is eligible to make an asset transfer request depends on their constitution meeting the requirements, not on what community it represents.

5.13. A community can be any group of people who feel they have something in common. In many cases, it is that they live in the same area. However, it can also be that they share an interest or characteristic. Communities of interest could include faith groups, ethnic or cultural groups, people affected by a particular illness or disability, sports clubs, conservation groups, clan and heritage associations, etc. They may be very specialised or local, ranging up to national or international groups with thousands of members.

5.14. Large charities or Non-Governmental Organisations may qualify as community controlled bodies, but you will need to check their governing documents to ensure they relate to a defined community, that the members of that community are always in the majority and in control of decision-making processes, and that at least one of the purposes of the body is to provide a benefit to the community they represent.

5.15. An asset transfer request should be judged on the benefits it will deliver, not on the community it represents. However, relevant authorities may also take into account the impact on other groups, such as any loss of facilities, and any wider benefits or potential for conflict. Bodies representing communities of interest should be encouraged to engage with and seek support from the local community.

Designation

5.16. The Scottish Ministers can designate a body to be a community transfer body. They will do this by making an order. Ministers can either designate an individual body, or could designate a class of bodies, if they decided in future that all organisations of a particular type should be able to make asset transfer requests. A designated community transfer body is only entitled to make a request for ownership if the designation order states that it is allowed to do so.

5.17. The criteria for community controlled bodies are there to make sure the organisation truly represents the members of its community and is open and inclusive. It must also be clear that the organisation uses its assets and resources for the benefit of that community as a whole and not, for example, for the private benefit of those individuals who are members of the organisation. Ministers will normally only designate a body (or a class of bodies) if it works in a way similar to a community-controlled body, and there is a good reason why it is not able to meet the requirements in the Act. Examples could include a charitable trust which cannot change who is on its Board, or an organisation representing a small community which could not reasonably get 20 members.

5.18. Due to the responsibilities involved in dealing with any property, it is unlikely that unconstituted organisations will be accepted for designation. Organisations seeking to be designated to buy property should be incorporated.

5.19. Ministers may consider designating a class of bodies as community transfer bodies if the rules for being that type of body are similar to the requirements for a community controlled body. Examples could include members of an umbrella organisation, or bodies which are regulated under particular legislation. This could be used to avoid the need for other legislation, or the rules of the umbrella organisation, to be amended to match the asset transfer requirements.

5.20. The guidance for community transfer bodies includes instructions on applying for designation.

Bodies eligible for Community Rights to Buy

5.21. The Scottish Ministers have made an order designating organisations that meet the requirements for the community right to buy or the crofting community right to buy under the Land Reform (Scotland) Act 2003 as community transfer bodies which can make asset transfer requests, including for transfer of ownership. Their constitution, articles of association or registered rules will need to meet the requirements set out in:

• subsection (1), (1A) or (1B) of section 34 of the 2003 Act (community right to buy), or
• section 71(a) to (h) of the 2003 Act (crofting community right to buy),

5.22. Further guidance and model governing documents are available at http://www.gov.scot/Topics/farmingrural/Rural/rural-land/right-to-buy. The text of the legislation is available through www.legislation.gov.uk.

5.23. Bodies seeking to use this designation to make an asset transfer request do not require a confirmation letter from the Scottish Ministers. (This letter is needed to confirm that the main purpose of the community body is consistent with sustainable development, before registering an interest in land for the purposes of community right to buy.) It is for each relevant authority to decide whether a community organisation which does not have a confirmation letter is eligible to make an asset transfer request, either as a community controlled body or as a designated body. The Scottish Government will not give views on the eligibility of community bodies in relation to asset transfer requests.

5.24. We expect that bodies eligible for the right to buy abandoned, neglected or detrimental land, or the right to buy land for sustainable development, will be designated when those parts of the legislation come into force.