Tue 26 Aug 2014

Common good land - what is a disposal?

There have been a few court cases in recent years involving disputes about whether a local authority has the right to dispose of, or to change the use of, "common good land".

Generally, inalienable common good land cannot be disposed of or appropriated by the local authority for another use. The law does give the courts discretion, on an application from a local authority, to allow a disposal of such land in certain circumstances. No such court power applies, however, if the local authority is only proposing to change the use of the land (or, to use the legal terminology, to appropriate it for another use), but not to dispose of it. So it is crucial for a local authority to create a disposal situation, if it wants to change the use of such land.

The most recent case this month, a petition to the Court of Session by East Renfrewshire Council, concerned part of a public park which the council wanted to use for development of a new school. The land was to be leased to a developer and then sub let back to the council. The court decided that this was not a disposal by council and that therefore the court had no power to permit the proposal.

What is inalienable common good land?

Sometimes, land and/or buildings held by a local authority for the common good of its inhabitants cannot be disposed of or appropriated by the local authority for other uses - so that it falls into the category of inalienable common good land.

This can arise in at least three ways:

  • the title deed, in which the land was sold or given to the local authority, expressly stated that it was to be used for a particular public use or
  • the local authority imposed the restriction itself or
  • the appropriation is implied from evidence that the land had been so used and enjoyed for time immemorial.

For the purposes of this article, I am looking at the first situation ie the title sets out the position clearly.

Court powers relative to a "disposal"

Section 75(2) of the Local Government (Scotland) Act 1973 applies in situations where a question arises as to the right of a local authority to alienate (ie dispose of) land forming part of the common good.

It permits an authority to apply to the courts to authorise disposal. The courts have discretion as to whether or not to grant that authority - and can do so subject to conditions.

Nothing in the 1973 Act allows a court to permit a local authority to change the use of common good land - or, to use the legal terminology, to appropriate it to another use.

Decision in the East Renfrewshire Council case

This case, which is available to read at the Scot Courts website involved a proposal by the council to build a replacement for the existing Barrhead High School - as the existing school is in poor repair. The school is located beside Cowan Park - which is owned by the council, but the title to it states that it is:

"... to be used in perpetuity as a public park for the use and enjoyment of the inhabitants of Barrhead, and maintained and properly equipped as a public park by the [council] in all time coming."

The council's proposal was to build a new school on a part of Cowan Park, and then to demolish the existing school, landscape its site and incorporate it into Cowan Park.

Funding for the development was partly from the public sector (including the council), partly from Scottish Futures Trust and partly from the private sector. In order to allow adequate security for the funders' investment, the way in which the deal was to be structured was a 25 year lease by the council to a company set up to do the development followed by an immediate 25 year sub lease back by that company to the council - rent payable under each lease being just £1.

The council argued that this was a "disposal" by it, and that there was a genuine commercial purpose behind the lease arrangement (ie to allow the grant of a security for the external funders) - but its petition was unsuccessful.

The court looked at the significant features of the proposed arrangement, which were:

  • the council is currently the owner of the part of Cowan Park on which it was intended that the new school would be built ("Site") - and would remain owner during construction, whilst the 25 year lease and sub lease were in place and following the expiry of such lease and sub lease;
  • the council is currently in possession of the Site - and would remain so during construction, whilst the lease and sub lease were in place and after they had expired (subject to the usual rights of the building contractor to occupy the Site during the construction of the new school);
  • the Site would cease to be used by the council for the intended common good purposes as soon as construction commenced; and
  • the court could not envisage any circumstances in which the council would ever be deprived of possession of the Site.

On that basis, the court could find nothing that would constitute a disposal by the council for the purposes of Section 75(2) - and considered that the proposals were properly to be characterised as appropriation of inalienable common good land, permission for which appropriation was not within the court's power to grant.

Substance over form

This case is a reminder that just because a deal is structured in a certain way ie the form of it - this does not mean that the law will treat it as such. Sometimes, as here, the more important factor is the substance of the transaction. Courts will often look through a circular arrangement or one in which one or more steps might have no commercial purpose.

In this case there was a commercial purpose to the structure, but that was not enough to save it from the triumph of substance over form.


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