Community Rights to Buy: consultation analysis

3.6 Option agreements

Q14: Should the existence of option agreements (although not their details) be something that an asset owner must make known to community groups that have applied for a right to buy the asset?

This question firstly invited respondents to choose from Yes/No/Unsure. The accompanying free text box also invited additional comments.

There was a total of 48 standard responses to this question with 47 respondents selecting a voting option and 24 providing additional comments in the free text box.

Regarding the voting options, the breakdown was as follows:

Summary

A strong majority of respondents were in favour of the existence of an option agreement being known upfront, mainly in the form of a public register. The main reason was to encourage transparency and to prevent a lot of work being wasted.

Those against cited the fact that there may be legal barriers that would first need to be investigated further.

Themes

Respondents made a range of comments. The main themes were:

• It encourages transparency and would take forward the Scottish Land Commission’s past recommendations on this.
• It assists community groups to have all the relevant information available to them and minimises the risk of them wasting time and effort on applications where an option agreement is in place.
• A public register of such agreements should be considered.

“This is in line with the Scottish Land Commission's recommendation in 2021 that the Government should introduce "A new transparency obligation that would require options agreements and conditional contracts over land to be disclosed on a public register” (Individual respondent)

“Yes, the existence of an option agreement should be made known to community groups as early as possible, especially if it will result in the application being automatically declined. If the legal position is that a Community Right to Buy (CRtB) application must be rejected where such an agreement exists, then it is only fair and practical that this information is disclosed upfront.” (Community Enterprise)

“This would save community groups for wasting a lot of precious time and resources.” (Go Girvan: Community Led Tourism)

“Surely better for the community to have all relevant information” (Individual respondent)

Those in opposition to this made the following comments:

• There are legal reasons, along with commercial confidentiality considerations, that will very often prevent the disclosure of the details surrounding option agreements, including the fact there is one.
• The existence of option agreements may not be known at such an early stage and may instead only become known when title deeds and agreements are examined in due course.

“We believe that this is an area where there is a lack of understanding of the legalities of option agreements and the commercial confidentiality elements... it is difficult to reconcile without interfering with valid legal agreements. As well as this, landowner parties to option agreements are sometimes legally bound to not disclose details of the agreement.” (Scottish Land and Estates)

Q15: Rather than automatically requiring that an application is declined, should an application for a right to buy proceed through assessment, and then, if approved, take second place to the option agreement, meaning that if the option is not taken up, then the community body right to buy will apply?

This question first invited respondents to choose from Yes/No/Unsure. The accompanying free text box also invited additional comments.

There was a total of 47 standard responses to this question with 46 respondents selecting a voting option and 22 providing additional comments in the free text box.

Regarding the voting options, the breakdown was as follows:

Summary

A strong majority of respondents were in favour of community right to buy applications, if approved, taking second place where an option agreement exists. Most reasoned that it avoided wasted work without interfering with an option, but others did caution against it affecting the value of the first ranked option.

Themes

Respondents made a wide range of comments. The main themes were:

• Community right to buy process should take effect automatically once an option agreement expires.
• It would give some value to work undertaken by community groups who may not know an option agreement is in place.
• Some respondents noted a perception that option agreements might be created to frustrate the community right to buy process and that the proposition in the question would help address that.

“This is an essential and highly desirable change. Most option agreements have a relatively short life. If a CRtB application is approved, then its start date could simply be deferred until the end of the option period.” (Individual respondent)

“This would ensure that community rights are preserved in the event that the option is not exercised, which is particularly important in cases where the option is conditional (e.g. on securing planning permission).” (Community Enterprise)

“If the community has gone through the work and process to apply then the application should be considered if the option is not taken up. A limit to the timescale for options to be taken up may need to be introduced.” (South of Scotland Enterprise)

Many respondents noted their uncertainty on this matter and a small number were opposed. Comments tended to reflect points made elsewhere but it was noted that this would likely require further investigation to understand the viability of the suggestion.

“We do think that this is worthy of consideration. However, most option agreements are secured by a standard security which will be registered against the title. Any ranking of the right to buy application would also have to be behind any other standard security rather than automatic second place to option agreement.” (Scottish Land and Estates)

Q16: Should there be a limitation on the types of option agreement that cause an application to be declined? For example, should they only be relevant if not between members of the same family, or companies within the same group?

This question first invited respondents to choose from Yes/No/Unsure. The accompanying free text box also invited additional comments.

There was a total of 48 standard responses to this question with 47 respondents selecting a voting option and 18 providing additional comments in the free text box.

Regarding the voting options, the breakdown was as follows:

Summary

A majority of respondents were in favour of limiting the types of option agreements that could prevent a right to buy, citing those between family members or linked companies. Others pointed out that these types of transfers were already excluded.

Themes

Amongst those supporting the idea of limitations on option agreements the following were recurring themes:

• Agreements between family and between connected companies should not prevent community right to buy.
• Concerns that option agreements are put in place to frustrate community right to buy and so narrowing their potential for impact should be considered.

“Options agreements between people or companies connected through the Register of persons holding a controlled interest in land, or Companies House, or related/family members for example should be excluded.” (Community Land Scotland)

Amongst those opposing:

• Option agreements are legal agreements and therefore can’t be set aside for convenience.
• It is legitimate to have option agreements between family members.
• In terms of any future legislation, it would be difficult to define categories of option agreements.
• No evidence that they are used to frustrate community right to buy.

“Agreements that have legal effect can't be set aside because they are inconvenient.” (Individual respondent)

“It is legitimate for family members to hold option agreements” (Atholl Estates)

Many respondents were unsure for the following reasons:

• Other changes proposed in the consultation may make this suggestion redundant e.g. community right to buy proceeds upon the expiry of an option agreement.
• Not clear which types of option agreements are within the scope of the question and the consultation. There is existing legislation which covers some aspects of what might be covered.

“It is already the case that transfers between spouses and companies in the same group are exempt (whether there is an option agreement or not) per S40(4) and there is an exemption for transfers not for value which would likely cover other family members.” (Scottish Land Commission)