Local Authority Powers

Whilst we all talk about a "Peppercorn Rent" it is time for us to use the concept "Nominal Rent." A "Peppercorn Rent" actually refers to an agricultural peppercorn and not a £value sum. A Nominal Rent of e.g. £2 would be payment in the currency of the realm (thus avoiding any clever legal arguments that you cannot have a rent review if the rent is a peppercorn - yes we have heard that one before!).

Nominal Rent is what Community Associations ask their local authorities to consider as part of Neighbourhood Renewal Partnership.

Local Authorities - PLEASE - if you move from Occupation Licences to real Security of Tenure Agreements (LEASES) - you do not have to move away from "Peppercorn/Nominal Rents!"

Local Authorities have the Discretionary Powers:

• To charge Nominal Rents to Charities occupying premises for Recreational Charitable Purposes - the introduction of this discretionary power was particularly aimed at Community Associations, Village Halls, Women's Institutes, and such other charities,
• To enter Leases on such Nominal Rent agreements for any period of time,
• No permission, for leases in excess of a seven year period (with rents at less than the Market Rent) need to be sought in these circumstances from the Minister.

Your Legal Reference point for these Discretionary Powers is:
Local Government (Miscellaneous Provisions) Act 1976 Appendix 19 Sections A & B.

This Act is still in place - the Discretionary Powers are sill there.

NOTE: Local Authority Executive Discretionary Powers were also introduced under the Local Government Act 2000 which could extend discretion to other voluntary and community sector organisations and groups irrespective of charity status or purely Charitable Recreational Use of Premises.

A good case can be made for Nominal Rents for the whole of the Voluntary and Community Sector. Undoubtedly any positive "Review of the Occupation of Local Authority Premises by Voluntary/Community Sector Organisations" undertaken by a local authority would address the whole subject.

To make a case for Nominal Rent/Partnership Lease this section will deal with the example of Community Associations.

Community Associations - The Case for Nominal Rent

Community Associations are autonomous lay volunteer managed local community charities. They are not "Departments" of local authorities or controlled extended arms of Local Government (although historically and contemporarily they are often treated as if this were the case). Community Associations provide the many services that "fill the gap," "extend upon mainstream services," as a partnership with local authorities in providing services to the local Neighbourhood/Community.

Community Associations do not provide one service - they are diverse multi service providers. More and more these charities are being called on to take responsibility for provision of services that used to be considered "mainstream." More and more these charities are being called on to enter into "Service Delivery Contracts." All of these new services are additions to the many service needs identified by the local community for local service delivery where no other agency is a provider.

Who, at the end of the day, finances these charities in their multi service delivery? As a preface to answering the question one thing needs to be made abundantly clear - the overwhelming majority of these charities could not independently self finance the charity/businesses they run. If one looks at the characteristic income self generation possibilities of these charities the following becomes clear:

1. Room and Hall Hire/Sub Lets

• Commercial hiring is both against the charitable objects of the charity (at any realistic activity level) and generally tightly controlled by the Occupation Licence/Lease Covenants. Thus, the major income potential that a private sector business would receive is not even a possibility for this charity/business because of its charitable nature and the fetters of a host of regulations.
• Sub letting of vacant space is equally under severe controls both in charity law and restrictive covenants in Occupation Licences/Leases.
• Whilst for private property owning individuals, and businesses owning property, PROPERTY is a financial money spinner, for these charity/businesses it contributes little to making them viable self generating income organisations.
• Income from hiring is based on low charges to supporting local community/voluntary sector organisations and groups who occupy no premises and events for individuals and families i.e. Weddings, Births, Birthdays, Wakes, etc.
• The benefits of Corporation Tax Relief needs to be set against the fetters on maximisation generation of income. These so called Charity/Businesses were certainly not included in Adam Smith's "Wealth of Nations."

2. Service Charges.

• CA's provide so many services directly in Arts, Sport, Education, Leisure, culture, Information and Advice, Entertainment, Advocacy.
• More and more CA's are taking on mainstream services such as ESOL, UK online, etc - at the end of the day they provide the space in the community centre free of charge for delivery by e.g. a College - who pays for the space/overheads - the CA! Another subsidy for charitable purposes forced on the CA. If this progresses to the "nth" degree, CA's will be in a situation of being invoiced for everything but unable to charge for anything!!
• Question: Who do they provide these services for?
• Answer: All in their Community!
• Question: You mean this includes those who cannot pay the commercial rate for these services?
• Answer: Yes - specifically those people!
• Question: You mean CA's provide services that may not make a profit, just cover costs, or actually make a loss?
• Answer: Yes - you have got it - that's what they are
  about!
• Question: But you cannot run a business like that unless you have financial support! How do CA's survive?
• Answer: Absolutely correct! Fascinating that these charities
  are treated as businesses by the host of legal enactments and central/local
  government agencies but not allowed to be businesses! CA's have existed (many
  in an on-going wobbly position) for many years because of a combination of:
  partnership support from local authorities/massive voluntary investment of
  local people giving their time, skills, finance/fundraising events held locally/fundraising
  with local business and charity trusts, etc. At the end of the day, many CA's
  exist on purely the total commitment of local people that they will (come
  what may) continue to provide much needed local services and will find the
  way to do it! This is the biggest "Risk Business" of all - the investors often
  being local lay people who can least afford to take such risks but put "Active
  Citizenship" and "Community Responsibility" higher than anything else.

Erosion of Discretionary Support to CA's - More red tape

Ironically, at just about the time (1980's) the National Council for Voluntary Organisations had produced their excellent publication "Getting in on the Act" which advised community/voluntary sector organisations of the plethora of Central Government/Local Authority support in mandatory and discretionary rights - the process of either removing or withdrawing from providing this support commenced in earnest.

Over the past 23 years the scene for CA's (and all voluntary/community sector organisations) has significantly changed - no longer the "hands off" (we love you) approach - but the "you are businesses and must be treated the same as every other business." Examples include:

• Bar provision in Community Associations/Village Halls - defined as "non charity trading" and non charitable activities/subject to Corporation Tax - massive costs in "Bar Separation techniques, loss of control of income, duplication costs of running two organisations."
• Greater difficulty in achieving the 20% Discretionary Rate Relief application,
• Pressure to move from "Occupation Licences" (at peppercorn rent) to Leases (at commercial market rents with full maintenance and repair covenants),
• Loss of Discretionary Refuse Collection Charges,
• Loss of reduced Employers National Insurance Charges,
• Redirection of responsibilities in Performing Right Society (PRS) and Phonographic Performance Ltd. (PPL) added costs and licencing requirements,
• Insurance costs escalation in terms of the plethora of insurance requirements including: Property, Fire, Employers liability, Public Liability, Professional Indemnity, Trustee Indemnity, Directors and Officers Liability, Hiring Organisation's Liability, Equipment and fittings liability, Terrorism Covenants, etc.
• Investment in Disability Access Compliance Liabilities Oct 2004,
• Responsibility for overall Health and Safety Management requirements,
• Responsibility for overall Health, Hygiene and First Aid Management requirements,
• If you want a lease, Incorporate as a Company - that is a requirement of local authority grant aid - you pay the solicitors - you pay incorporation costs,
• Yes Charity Law says that under £250k income you can have an "Independent Examination of Accounts" - the local authority says as part of its' contract terms that you must have a "Professional Audit" - yes, that means it costs you more money!
• Pressurised to incorporate - it costs the CA's "mega bucks."
• Advocacy on Leases - CA's have to take on "independent Lawyers" - dealing with local authorities there is a massive time feature - the "Solicitor's professional 'cab Fare' is increasing and increasing."
• EEC laws on Part Time Working and Fixed Term Contracts - major issues for CA's - major costs in seeking information specific provision - major costs in adapting to compliance on new regulations.
• "Contract Design Management (1990)" requirements in Building Regulations - effectively the end of "voluntary action self build projects."
• Employer's National Insurance 1% (2003) increase - major impact of CA's.
• Data Protection Act, extension of areas of compliance - major impact on CA's.
• Child Protection Act compliance requirements - major impact on CA's.
• Employment Law amendments - major impact on CA's.
• Monitoring and Evaluation Requirements associated with grants/service delivery agreements - major impact on CA's.
• Community Transport licensing - major impacts on CA's.
• Consumer protection - major impacts on CA Charity Shops,
• VAT - continued £350million (per annum) loss to voluntary sector in irrecoverable VAT.
• The list of losses in relief and introductions in new "red Tape" requirements (with major cost implications) is seemingly endless

If you really want to see the extent of loss of Discretionary relief and imposition of new "red tape" situations, then refer to the "Charity and Voluntary Sector Deregulation Committee Report" - under the Conservative Government - it makes incredibly (if extensively long) good reading.

Neighbourhood Renewal Partnerships

The Local Government Act 2002 heralded in a new culture of "real and meaningful" partnership relations with community organisations and citizens within all communities. Nobody is naïve, to have such a change in political culture requires the most massive "paradigm shift" ever seen in socio/political/economic history.

Nonetheless, this is the time for "real and meaningful" partnership development relations. There could be none more strategic than with Community Associations (Community Development/cutting edge development agencies with the wider local community sector and local inhabitants).

Now is the time for Local Authorities to be considering their meaningful relationships with Community Associations (and for that matter with the whole voluntary/community sector).

If you want these organisations as meaningful partners - how do you work with them as meaningful partners?

You will need to look in earnest at how you can provide support to these organisations - not as some distant organisations potentially creating a bottomless financial liability pit - but as real partners.

Local Authorities need to either commence or revisit the development of a "Community Development Cross Cutting Policy."

Local Authorities need to either commence or review policies in regard to:

• Voluntary/Community sector occupation of local authority/private sector premises,
• Comprehensive community development cross cutting review policy,
• Ensure that voluntary/community sector representation is available during consultation/review processes

A Starting Point for all Local Government Reviews:

1. Partnership Lease Policy,
2. Nominal Rent £2 p.a.
3. Long Leases,
4. Eradicate, burdensome and unduly restrictive covenants,
5. No Full Maintenance and repair covenants.