s123 LGA 1972

Alongside the 2018 Budget was a small announcement about an obscure piece of legislation that probably passed most people by.  Buried in a consultation entitled “Planning Reform: Supporting the high street and increasing the delivery of new homes” were proposals to reform the General Consent Order for s.123 Local Government Act  1972. S123 prohibits the disposal of local authority land for less than best consideration without the consent of the Secretary of State.  The General Consent Order, last updated in 2003, gives general consent for such disposals provided the undervalue is less that £2m. It is proposed to increase this amount to £5m or £10m in line with the inflation in property values.

Hewdon has been campaigning for reform for over 15 years, ever since we were asked to advise a local authority on a complicated and contentious development scheme that involved a land disposal. While we welcome the reform proposals as an improvement, they rather miss the point. The real trouble with the General Consent Order is not the threshold value, it is working out whether s123 applies and then quantifying the undervalue.  If you are undertaking a simple disposal, it is easy enough. However, if there is a development or promotion agreement of some kind in place, working out whether you have actually disposed of an interest in land for consideration or granted an option that will in time generate contractual profit share rather than a share of disposal proceeds is tricky.

There is also the question of whether the constraints that give rise to the undervalue are legitimate planning conditions or non-planning conditions that favour a particular party. On top of that there are different considerations for land held for planning purposes, disposals using well-being powers and land subject to Crichel Downs rules.  Then everything is subject at the moment (and probably for the foreseeable future) to European state aid rules that take a slightly different perspective and have different case law.

We have never quite understood why the government cannot repeal s123 and let local authorities  rely on their  general requirement to provide value for money and satisfy their external auditors. Until repeal happens, s123 will continue to be a bureaucratic encumbrance for local authorities who observe the rules (and will continue to be ignored by those who do not care).