Council assets register and Common Good funds

 by LESTER CROSS

An unspecified number of operational buildings 'owned' by Scottish Borders Council but which occupy Common Good land may have to be transferred out of local authority ownership following a landmark court ruling which applies throughout Scotland.

The issue is highlighted in the annual external audit report on the Borders council's 2020/21 accounts by public spending watchdog Audit Scotland. It shows SBC is in the process of reviewing the legal and accounting implications of the judicial ruling and expects to conclude the process by March 2022.

As Audit Scotland points out: "A judicial review, published in August 2020 relating to Angus Council, concluded that all council assets built on Common Good land cannot be considered as owned separately from the land they stand on and are therefore Common Good assets. This is a new legal ruling with wide ranging impact on all Common Good funds across Scotland. Scottish Borders Council has a number of operational assets which stand on Common Good land."

Following the decision by judges in the Court of Session which centred on a sports centre in Forfar, Angus Council has proposed Common Good transfers from the authority's General Fund to Common Good funds worth a total of £13.648 million. The buildings concerned will be added to local funds in Arbroath, Brechin, Forfar and Montrose. Similar exercises will be necessary throughout Scotland.

Basically the judicial review concluded that all council assets built on Common Good land cannot be considered as owned separately from the land they stand on and are therefore Common Good assets.

The issue in Angus came to light when objectors took legal action to block the demolition of the disused Lochside Leisure Centre in Forfar Country Park, part of the Common Good.

But the council claimed the decision in question did not relate to any disposal or change in use of the common good fund, but rather the demolition of the non-operational leisure centre that sits on land forming part of the common good fund. 

Angus Council argued the land in question is part of the common good fund, but the building constructed upon it never has been. Each was held on different accounts and a notional “rent” was paid to the common good fund. 

The land upon which the leisure centre and adjacent caravan park, car parks, all weather tennis courts, play park and football pitches are situated is held by the respondents [the council] as common good land, and recorded as such in the common good asset register and balance sheet but the buildings and other uses thereon are held as assets in the Council’s general fund asset register land balance sheet and have been since at least 2008. 

In his written Opinion Lord Menzies said: "The Community Empowerment (Scotland) Act requires the local authority to publish details about any proposed disposal of, or as the case may be, the use to which the authority proposes to put the property, and on publishing details about its proposals to notify the relevant community council and other community bodies. 

"Again in deciding whether or not to dispose of any property held as part of the common good or to change the use to which any such property is put, the local authority must have regard to representations made by the relevant community council, other community bodies, and other persons. The aim is transparency, and encouragement of community involvement. 

"In the present case there is no dispute that the land on which the leisure centre was built forms part of the common good of the local authority. It follows that the leisure centre also forms part of the common good. The respondents argue that when the leisure centre was constructed, the local authority had no intention of donating the building to the common good. That may be, but in this respect intention seems to me to be neither here nor there. The leisure centre buildings are property held by the respondents as part of the common good."

Audit Scotland's report to members of Scottish Borders Council says: "The full list of affected assets is still to be determined. The council is in the process of reviewing the legal and accounting implications of the judicial ruling and expects to conclude the process in time for the preparation of the 2021/22 accounts. Risk – the Common Good Funds omit assets which rightly belong to them."