Buying Land for Resident Community

McTaggus · 10 October 2016 at 3:33PM

Hi There,

I wonder if you might kindly be able to offer some advice.

We live on a small road which currently backs onto open fields and farmland. The owner of one of the areas of land directly at the end of the road has put the land up for auction, and a community group of residents has gotten together to see if we can all collectively raise the funds to purchase the land and keep it as a communal green space. We're not intending to sell the land on, or to do it for commercial profit, but quite simply because we don't want to lose the beauty of the land and instead potentially turn it into a nature reserve.

We have figured out between us we can raise the necessary funds, but what pitfalls might we need to be aware of if we all head down this path to co-owning our own green space? We were considering effectively share-based ownership, proportional to the contribution to the value of the land, but are there any other models that could be adopted?

Any guidance would be greatly appreciated.

Many thanks in advance!
McTaggus

G_M · 10 October 2016 at 3:49PM

I've no experience but would think the best way would be to set up a company (or perhaps a charity?) to own the land, with articles of association specifying how it will be managed, how/whether it can be sold etc.

Otherwise I forsee issues down the lie if, for example

* one joint owner wants to raise some cash by selling their share
* one of them goes bankrupt
* running costs arise but one or more joint owner fails to contribute
etc

Take legal advice.

Have you considered whether ownership will remain with the original investors, or will remain with each property (and thus future owners)?

McTaggus · 10 October 2016 at 4:09PM

Hi G_M,

Thank you so much for your response, it's greatly appreciated.

We only discovered yesterday it was for sale and had a first meeting today, but these points will certainly be added to the list for discussion with the residents group.

I think we would all be keen to address these issues as soon as possible - we had thought about how future ownership should be managed as a question for us all to discuss and work out, as well as the running costs issue (we had initially discussed costs shared dependent on the % input to the land) but hadn't considered the idea of setting up a charity and haven't yet raised what should happen in the event of non-payment of costs, or bankruptcy - which are extremely valid points.

We will certainly be taking legal advice during the next week, and your response also very much helps to add to our thinking. We did also consider whether we could buy the land and potentially donate it to the Parish Council with legal provisions made in terms of how the land could be used in the future, but also need to explore that in a bit more detail as I'm not sure that's even possible!

Thank you so much for your response!

G_M · 10 October 2016 at 6:39PM

I suspect donating it to the PC with strings attached would take about 6 months of negotiations, commitee meetings etc!

My further instinct is that trying to vary the ownership % will complicate matters. Ideally get everyone to contribute equally, and with equal ongoing liability and ownership.

I also think as the presence of the green land is a protection to the value of the properties, ongoing ownership should depend on ownership of the affected /advantaged properties. So when an owner sells, the seller is no longer a shareholder (or whatever) of the land and the new owner becomes a shareholder.

Property prices would reflect this as any buyer automatically benefits
a) from the presence of the green area and
b) from becoming a shareholder

Though of course they'd also become responsible for whatever maintenance costs were involved.

If you DO follow that basic model,unequal shares would be really complicated.

lincroft1710 · 10 October 2016 at 8:02PM

If the land is currently used as agricultural, you may need planning permission to turn it into a nature reserve.

McTaggus · 11 October 2016 at 2:10PM

Great points! Thank you both!!!

eddddy · 11 October 2016 at 10:47PM

One practical challenge that you face is that you may make lots of plans, pay for legal advice etc - and then get outbid at auction.

It's a bit chicken and egg. You want to form a company to buy the land at auction, but you don't want to bother forming a company if you don't win at auction.

So one of you might have to bid/buy the land as an individual, and later transfer/sell it to the company - but that would require a big element of trust, and/or complicated legal agreements...

(... what if the individual decides to keep the land instead of selling it to the company? Or what if the others decide not to form a company to buy the land from the individual?)

Apoorwoman · 11 October 2016 at 11:24PM

eddddy wrote: »

One practical challenge that you face is that you may make lots of plans, pay for legal advice etc - and then get outbid at auction.

It's a bit chicken and egg. You want to form a company to buy the land at auction, but you don't want to bother forming a company if you don't win at auction.

So one of you might have to bid/buy the land as an individual, and later transfer/sell it to the company - but that would require a big element of trust, and/or complicated legal agreements...

(... what if the individual decides to keep the land instead of selling it to the company? Or what if the others decide not to form a company to buy the land from the individual?)

This happened to us. We all had to step in urgently to stop 'undesirables' buying a piece of land, only to then find that the purchaser was keeping it in his name as "too complicated to do otherwise". He has put in his will that we are entitled to part shares but only if we still live in the specified vicinity. We were totally stitched up and this has caused a great deal of bad feeling. So beware.

moneyistooshorttomention · 12 October 2016 at 7:54AM

Think the name of what you're after is a "Community Benefit Society".?

Have you studied the details of these?

Personally - I'd agree with your idea of owning shares in the land. Say every share being worth £100. One of you might own, for instance, 10 shares (as they could only afford £1,000). Someone else owning 20 shares (as they could afford £2,000). I think shares still have paper certificates with the owners name on??

Good luck.

Davesnave · 12 October 2016 at 8:19AM

eddddy wrote: »

One practical challenge that you face is that you may make lots of plans, pay for legal advice etc - and then get outbid at auction.

Another practical challenge might be that some of the original purchasers move on and their successors aren't so keen.

I have a community with 3 acres of shared land close to me, but the caring part of sharing broke down long ago, so the land is now impassable, to humans at any rate. It's a great nature area, I suppose, but not quite what was originally envisaged.

moneyistooshorttomention · 12 October 2016 at 9:24AM

Always a possibility - but I would say the lesser of two evils, ie as compared to having the land built on on the one hand or squatted on by travellers on the other hand.

Re a bit of land I know of that got taken over by a community group and enthusiasm waned a bit and not as many people got involved as was originally envisaged. However, the group changed its nature on the one hand (after it had got going) and rented out portions of the land to a couple of people that had their own particular thing (of a similar nature) they wanted to do with the land. It's all still working well - if in slightly different form to what was originally envisaged.

Meanwhile it's helped protect the land and keep it safe for Nature.

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Buying Land for Resident Community

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