9. Discounts and Proportionality
9.1 Any mechanisms used to protect the relevant authority's interest must be appropriate and proportionate. Excessive requirements for repayment or conditions on development or change of use could make a project unviable, or restrict the ability of the community transfer body to increase its capacity and develop new projects over time. Proportionality should take into account:
- the value of the concession granted
- the scale of the authority's contribution within the overall project, and
- the time within which benefits are expected to be delivered.
9.2 In some cases the contribution provided by funding bodies may be substantially greater than the value of the concession granted by the relevant authority, or even greater than the value of the property, especially when there is significant redevelopment or new-build planned. Any mechanisms used should therefore recognise the scale of the relevant authority's interest within the overall project.
9.3 It is therefore important that the relevant authority establishes funding arrangements are in place with the community transfer body at the earliest opportunity, and ideally before a final asset transfer is agreed where this is possible, ensuring that robust steps have been taken by the community transfer body to secure funding, the breakdown and levels of this funding, and what clauses (if any) the funders have placed on these arrangements. Some funding arrangements cannot be made prior to an asset transfer agreement, for example when accessing the Scottish Land Fund who cannot consider acquisition funding in advance of a decision notice.
9.4 The duration of the protection mechanism should reflect the amount of discount compared to the expected benefits. It may be appropriate for the amount to be returned to reduce over the period within which the benefits are expected to be delivered. Any mechanism which restricts the use of the property should take account of the community body's need to develop in the longer term; for example, it should not last longer than the expected remaining life of a building which is transferred.
9.5 Authorities must also consider the level of risk that the benefits will not be delivered, and how effective the chosen mechanism is likely to be in enabling the authority to recover its investment. If the risk of non-delivery is considered to be particularly high, it may be necessary to revisit the decision to agree the asset transfer request. (Any conditions on the transfer should be included in the Decision Notice, and therefore considered before the decision to agree the request is final.) The community body may need to provide more assurance of its ability to deliver, or more support may need to be provided. In the case of a project failure where it is not possible to recover the full amount funded, a robust, documented process will help to show that the initial decision was taken appropriately.
9.6 A range of legal mechanisms are used by authorities seeking to protect their interests, including standard securities, and minutes of agreement, which may contain a range of provisions and be linked to standard securities. Some relevant authorities also have powers to create certain types of real burden on title, under the Title Conditions (Scotland) Act 2003 A different range of options will be needed to reflect the individual circumstances of each case.
9.7 Relevant authorities seeking to create real burden should consider carefully whether it will be appropriate and effective in line with asset transfer legislative requirements, and also the aspirations of the Community Empowerment (Scotland) Act 2015. Guidance for creating real burdens is available from Registers of Scotland.
Part 3: Best Value
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