Nottinghamshire County Council (16 006 916)

Category : Other Categories > Land

Decision : Upheld

Decision date : 09 Feb 2017

The Ombudsman's final decision:

Summary: The Council failed to secure the best possible price for land it disposed of. It also failed to give the finance and property committee all the information it needed to make an informed decision. But I cannot conclude that had these faults not occurred Mr B would have been the successful bidder. It has, however, caused him some uncertainty.

The complaint

  1. Mr B complains that the Council failed to follow the correct process when selling agricultural land it owned (land A). He argues that the Council already had a preferred bidder and failed to give his bid proper consideration.
  2. Mr B also argues that the Council failed to ensure that the tenant of land A was paying the market rate in rent.

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What I have investigated

  1. I have only investigated the first part of Mr B’s complaint.
  2. The final section of my report explains my reasons for not investigating the rest of the complaint.

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The Ombudsman’s role and powers

  1. The Ombudsman investigates complaints of injustice caused by maladministration and service failure. I have used the word fault to refer to these. The Ombudsman cannot question whether a council’s decision is right or wrong simply because the complainant disagrees with it. She must consider whether there was fault in the way the decision was reached. (Local Government Act 1974, section 34(3))

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How I considered this complaint

  1. I have:
    • Read the papers submitted by Mr B and discussed the complaint with him.
    • Considered the Council’s comments about the complaint and the supporting documents it provided.
    • Made a third party enquiry to the Council’s auditors.
    • Shared my draft decision with Mr B, the Council and the third party and considered their responses.

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What I found

  1. Local authorities are given powers under the 1972 Act to dispose of land in any manner they wish, including sale of their freehold interest, granting a lease or assigning any unexpired term on a lease, and the granting of easements. The only constraint is the disposal must be for the best consideration reasonably obtainable, unless the secretary of state consents to the disposal.
  2. It is government policy that local authorities and other public bodies should dispose of surplus land wherever possible. It is expected that land should be sold for the best consideration reasonably obtainable. However, it is recognised that there may be circumstances where an authority considers it appropriate to dispose of land at an undervalue.

Council’s constitution

  1. The Council’s constitution sets out the process for disposing of land by informal tender. It states that the “Service Director, Transport, Property and Environment, in consultation with the chairman of the Finance and Property Committee will make arrangements in appropriate cases for properties to be sold by open informal tender which must be preceded by public advert subject to appropriate limits”.

Events leading to the complaint

Council puts land up for sale

  1. On 12 October 2015 the finance and property committee decided the Council should sell land A and use an estate agent to manage the process and advertise the sale
  2. The estate agent’s brochure about the sale said “the land will be sold subject to a development uplift clause. The uplift clause specifies that 25% of any increase in value of the land due to development (as defined in section 55 of the Town and Country Planning Act 1990) will be payable to the vendors or their successors in title such development occur within 50 years from the date of completion”.
  3. The Council advertised the sale on the estate agents website, a third party property website and a farming website.
  4. The Council received two offers for land A, one from Mr B and the other from bidder 2, who was the previous tenant of land A. The estate agent then wrote to both bidders and asked for best and final offers by 12 noon on 18 December 2015. Mr B argues that the Council should have split the land into different lots to attract more bidders. He argues that not doing so favoured bidder 2 who had previously been linked to the Council in a professional capacity. Mr B believes that this has meant that the Council failed to secure the best possible price for the land.
  5. On 18 December 2015 Mr B put in another offer which increased the overage to 35% but kept the cash amount the same (offer X). Bidder 2 placed an escalating bid, to increase any other offers received by £1000 up to a maximum of Y with a 25% overage rate. An overage clause gives the seller of a property the right to share in any increase in value that might occur because of planning permission being granted at a later date.
  6. Mr B then sent a late offer to the Council on 18 January 2016. He increased his cash offer to X+1 and kept the increased 35% overage. He also said some of the land would be available for the community to use.
  7. The Council decided not to put this offer before the property and finance committee because it was late. This is relevant because the Parish Council, on 10 November 2015, raised its concerns with the Council that it was selling land A without any allocation for community allotments. It also raised concerns about the low overage rate because of the likelihood of land A being developed in the future as identified in the local plan.
  8. The property and finance committee considered Mr B’s second offer (X) alongside the escalating offer from bidder 2 on 25 January. The Council’s report to the committee provided the details of both offers. It said that Bidder 2 had the highest offer out of the two bids. When considering overage and development potential the report said “it it thought that there may be limited future development potential...This would however be subject to policy change by the local planning authority”. The committee decided to approve bidder 2 to buy land A because it considered that bidder 2 had the highest offer.
  9. The Council completed the sale with bidder 2 in March 2016.

Mr B complains to the Council

  1. Mr B wrote to the Council about the sale of land A in February 2016. He said the Council had not followed the correct process and had failed in its statutory duty to secure the best price for the land. Mr B said the Council had failed to:
    • Give his overage rate proper consideration because some of land A featured in the Council’s local plan for possible development.
    • Advertise land A in line with legislation.
    • Review rental rates in line with market rates.
    • Give the current tenant timely notice so any buyer could not take the land until Autumn 2017. This would be a disadvantage for anyone wishing to buy the land except the existing tenant.
  2. In response to Mr B’s concerns, the Council said it only reported bids it received within the deadline to the property and finance committee. The committee then approved the sale to the highest offer, bidder 2. But even if it had accepted Mr B’s late offer (X+1) it was still lower, in monetary terms, than bidder 2’s offer. It said that planning permission does not exist for the land and therefore there was no uplift or overage to quantify.
  3. The Council said it openly marketed land A in the national press and many property portals and the Council was in no doubt that it marketed the land openly and fairly. It also explained that the committee took the decision to sell the land after the tenancy renewal date. It said there would have been no advantage in the Council serving notice between the committee date and the anticipated sale date. This is because the buyer of the land can still serve notice with the same effective 2017 date.
  4. Mr B remained concerned about the Council’s consideration of his offer, especially the overage rate. He provided the Council with details of case law which supported the view that the Council should have taken overage into account when it disposed of land A. Mr B asked for the Council to review the sale before it completed the sale.
  5. In response to Mr B’s concerns and complaints the Council again said that it was satisfied that it had followed the correct process when selling the land. It explained that the committee considered his increased overage offer but decided that bidder 2’s offer was of a higher value than his. The Council also said that it would be wrong to accept late offers and the Council ethically took the correct approach.
  6. I have seen evidence that following Mr B’s complaints the Council also completed a report to consider the potential future income from overage claw back if development did take place on land A. This report explained that the neighbourhood local plan was still in development but the Council had identified part of land A for potential development. It said if the development went ahead as planned a 35% overage rate, instead of 25%, could result in the Council receiving another £8769. But it reminded readers that no planning consent exists for land A because the Council was still developing the neighbourhood plan.
  7. This report was written after the finance and property committee made its decision in January 2016. Therefore the committee did not have access to any detailed analysis about potential development opportunity or overage estimates. The Council also failed to tell the committee that some of Land A had been identified for development in the draft local plan.
  8. Mr B filed a number of freedom of information requests about the sale of land A. In response, the Council provided Mr B with details of bidder 2’s escalating bid and more details of its overage consideration. It explained that “because there was no development scheme in place or known timeframe for its delivery the uplift is unquantifiable. Bearing this in mind, a decision to recommend the best value bid was taken”.
  9. Mr B sent a formal complaint to the Council in June 2016 after receiving all the information he sought from his freedom of information requests. He remained dissatisfied with the Council’s responses to his queries and said the Council had failed to secure the best consideration for land A. The Council did not uphold Mr B’s complaint and directed him to the Ombudsman.

Analysis

  1. When the Council decided to put land A up for sale it did so through its proper process using the finance and property committee. The committee met, and decided it should sell land A, after the tenancy renewal date. So although the terms of sale may not have been convenient for Mr B, he was aware of them at the time he placed his offer. Therefore, I have found no fault with the Council about the timing of its decision to serve notice on land A’s tenant. The Council also followed its constitution when it advertised the land.
  2. Although there were no formal restrictions about escalating bids, accepting such an offer has resulted in the Council failing to secure the best possible price. Bidder 2 said they were willing to raise any offer by £1000 up to the value of Y. Therefore bidder 2 was willing to pay Y for the land. When the Council asked for best and final offers it should have gone back to bidder 2 and asked what their final offer was. If the Council had done this I consider that it would have been more likely than not that bidder 2 would have given Y as their best and final offer.
  3. Mr B submitted his second offer of X+1 after the deadline but before the finance and property committee, the decision makers, met. It is the Council’s statutory duty to ensure that it secures the best possible price for the land. Therefore the Council should have put the late offer in front of the committee, explaining that it was late. The committee would then have had the opportunity to weigh up whether to accept the late bid, taking its statutory responsibilities into account. The committee should have also had access to the Parish Council’s comments about the sale. Had the Council done this, I consider that it is more likely than not that the committee would have accepted Mr B’s late bid. But this does not mean that Mr B would have been successful because his bid of X+1 was still lower, in financial terms, than bidder 2’s Y offer. It does, however, mean that the Council would have secured significantly higher amount for the sale of the land.
  4. The Council gave the property and finance committee details of overage offers from both parties. But the report to the committee only contained limited details of potential development for the land. After Mr B’s complained to the Council it completed a more detailed report about overage which weighed up the potential financial gain of accepting a higher overage offer. But it should have ensured this report was completed before the committee met to enable it to reach an informed decision, not after Mr B complained to the Council.
  5. Mr B complains that the overage report underestimates the value of the land and contained factually incorrect information. But the Council failed to put this report before the committee therefore it was not taken into account. But in any event, if it had been put before the committee, the committee would have been the appropriate body to scrutinise the content of this report.
  6. Therefore the Council was at fault for failing to properly consider Mr B’s increased overage offer and failed to secure the best possible price for land A. But I cannot conclude that had the committee considered this information it would have approved Mr B’s offer instead of bidder 2’s. This is because it relates to an unconfirmed financial value. I do not know how much weight the committee would have given to the differing overage rates had it had all the relevant information. It has, however, caused him some uncertainty about whether he would have secured land A and time and trouble in pursing his complaint.
  7. Mr B states that the Council failed to follow the correct process because of bidder 2’s previous professional involvement with the Council. I have not seen any evidence to support this view. But, because of this, the Council should have taken special attention to ensure that it followed the correct process. Failure to do so has caused Mr B some additional uncertainty about the Council’s impartiality when it made its decision.

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Agreed action

  1. In recognition of the faults identified above the Council, within six weeks of my final decision, has agreed to:
    • Apologise to Mr B to the uncertainty and time and trouble he has experienced.
    • Pay Mr B £500 to recognise this uncertainty and time and trouble he has experienced.

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Final decision

  1. The Council failed to secure the best possible price for land it disposed of. It also failed to give the finance and property committee all the information it needed to make an informed decision. But I cannot conclude that had these faults not occurred Mr B would have been the successful bidder. It has, however, caused him some uncertainty. The Council has agreed to my recommendations and therefore I have completed my investigation.

Parts of the complaint that I did not investigate

  1. I have not investigated Mr B’s complaint about rental rates because there is no evidence to suggest that this caused him any injustice.

Investigator’s decision on behalf of the Ombudsman

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Investigator's decision on behalf of the Ombudsman

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