Public houses and the ACV regime: the latest rulings

May 7, 2021

Christopher Cant analyses the latest appeal decisions in relation to the listing of pubs as assets of community value, covering issues including the recent past, financial viability and compensation.

Attempts to list public houses as an asset of community value have always been one of the fiercest fought areas of the ACV regime. The staged lifting of the lockdown restrictions will bring public houses back into the public eye. The question as to whether individual public houses are financially viable in the future will be more acute. With some that have already been listed the statutory five year period may have recently expired or be about to raising the question what is to happen going forward. There has been an increasing consideration of possible compensation claims and the amounts of such possible claims will increase if the business prospects for public houses have deteriorated.

A number of relevant issues have been considered in recently published appeal decisions. One in the Upper Tribunal regarding a compensation claim establishes a binding precedent whilst those in the First Tier-Tribunal provide guidance albeit that they are not binding.

1. Recent past

The question as to what will constitute the recent past will be especially important when the relevant public house has been closed for a long period particularly if it has just come off the ACV list or is about to do so. Will the long period of closure mean that the public house no longer qualifies as an ACV on the ground that it has not furthered the social wellbeing of the local community in the recent past.

As has been noted in previous appeals the term “in the recent past” has no statutory definition and has been left deliberately imprecise. In Sandhu v South Oxfordshire DC CR/2019/0008 Upper Tribunal Judge O’Connor sitting as a First-Tier Tribunal Judge emphasised that the term “is a flexible concept and must depend upon all the circumstances of a particular case” (para. 15). As with earlier appeals the judge highlighted as one material factor the length of time the public house had operated before the closure. In that case it “was for over 100 years in a very small community area”. The White Lion had in fact been run for about eight years as a restaurant until it closed in August 2013. It was listed as an ACV in October 2013 and came off the list in October 2018. The Parish Council nominated it again in May 2019 which is just short of six years since the closure of the business. It was held that the activities prior to that closure were within the recent past. The same judge adopted a similar approach in Roffe v West Berkshire Council CR/2019/0010. As the closure in that case was only just over two years before nomination it was unsurprising that the activities relied on were held to be within the recent past.

In contrast in Milton v North Devon DC CR/2020/0001 the White Hart in Bratton Fleming had closed in December 2012, been placed on the ACV list on 19th September 2014 and removed from that list on 19th September 2019. Upon the expiry of the statutory five year period the Parish Council made a fresh nomination which as the public house had never re-opened directly raised the issue as to whether the activities relied on to establish the qualifying use for the satisfaction of the first statutory condition in the recent past with regard to the first nomination could still be relied on for that same purpose in relation to the second nomination. Judge J. Findlay adopted the same approach to the term “in the recent past” as that expressed in the Roffe case. The judge stated that she relied on the ordinary meaning of the word “recent” stating that in her “view the word refers to something that happened not long ago” (para. 16). Even though the White Hart had been a public house since 1812 the judge did not accept that something that happened nearly eight years ago can be described as recent (para.15).

With public houses that have just come off the ACV list but have not operated since the earlier nomination this decision indicates that even though not a binding decision there is scope for the owner to oppose a fresh nomination when the fresh nomination relies on the same evidence as the earlier nomination. In such circumstances those wanting to preserve the public house for the local community may need to explore the more difficult route of compulsory purchase.

2. Financial viability

The viability of a public house is unlikely to be a real issue if it is still in actual use. It can become a real issue when the public house has been closed. It is relevant to whether the second statutory criterion is satisfied. To qualify as an ACV it must be realistic to think that within the next five years there can continue to be a non-ancillary use which will further the social wellbeing or social interests of the local community.

The restrictions imposed on public houses by the Covid regulations will have increased the general uncertainty facing such businesses. This was acknowledged by Judge O’Connor in the Roffe case. In such circumstances it can mean that it is not possible to identify the likely future use of the building but the judge spelt out that the well-established task of the judge is to determine whether one realistic future non-ancillary use of the property would lead to the furtherance of the social wellbeing or social interests of the local community (para. 35). In that case the Winterbourne Arms had been on the market for nine months but no bid had been made by a local community group. Notwithstanding this and “a dearth of evidence” it did not prevent the judge finding that it is realistic to consider that the pub could “resume its position as a social meeting place or events space for local residents as previously.” (para. 36).

This issue arose in another recent case in which no bid had been made by a local community group - Annakut Limited v East Herts Council (CR/2019/0009). In that case Judge Simon Bird QC stated the relevance of the absence or presence of a business plan in establishing the viability and sustainability of a qualifying use “will be highly fact sensitive.” (para. 72). The judge indicated that there is a wide spectrum of case. At one end of that spectrum will be recently closed public houses in a reasonable condition with accounts going back over a number of years with good levels of profitability for which there will be less need for a business plan. Whilst at the other end of the spectrum a clear demonstration of how a qualifying use could be delivered in the five year statutory period is needed if there has been a number of years of commercial failure, extensive unsuccessful marketing with the building having fallen into disrepair and when it benefits from a planning permission for a new non-qualifying use.

In that case there had already been an unsuccessful planning appeal in which the inspector on the basis of very similar evidence had held that it had not been established that the public house was no longer viable taking into account the level of local commitment and the planned expansion of the local catchment area. The judge took account of this and upheld the ACV listing.

These decisions illustrate yet again that it is not an easy task to establish that a future qualifying non-ancillary use of a closed public house is not a realistic possibility. However, it is not impossible as was shown by the earlier decision in Fernwick Limited v Mid Suffolk DC(CR/2015/0024) and the more recent decision in Carsberg v East Northamptonshire Council (CR/2020/0004 and 0005). In the former appeal an ap plication for change of use had been refused albeit the planning officer had supported a grant. In the latter no planning application had been made for a change of use.

The Carsberg case concerned the Samuel Pepys public house in Slapton which had closed in January 2019. Judge Finlay considered the absence of a definition of “realistic” in the ACV regime was deliberate and went on to say that “ I find that the term “‘realistic’ should be interpreted as it is used in everyday conversation and language and I rely on The Oxford English Dictionary definition of ‘realistic’ as having to showing a sensible and practical idea of what can be achieved or expected and representing things in a way that is accurate or true to life.” (para. 15).

No plans or details had been put forward to explain and support how any of the nominator’s aspirations for the building would be achieved nor how funds could be raised to undertake the necessary building and refurbishment work. No sensible or practical idea of what can be achieved or expected had been shown (para. 19). In consequence although a business plan is not a requirement there was on the evidence no indication that the aspirations are realistic. An important factor in the case may have been the viability report provided on behalf of the owner showing that the continuation of the public house business was neither commercially viable nor a realistic prospect for the local community (para. 4(c)).

The judge further considered that it was necessary to show that the anticipated future qualifying use will be more than “trivial or temporary” (para. 21).

With the appropriate evidence this decision shows that it is possible to establish that it is not realistic to anticipate a future qualifying use of the nominated building even without a fresh planning permission for a change of use having been granted.

3. Compensation

Due to the current trading difficulties consideration of the possibility of making a compensation claim in relation to a listed public house is likely to increase. This will be a cause for concern for listing authorities which are obliged to pay out if there is a valid claim. It has been confirmed in the Upper Tribunal decision of Fielder v Harrogate BC [2020] UKUT 288 (AACC) that a fall in capital value due to an ACV listing is in principle recoverable as compensation under regulation 14 of the Assets of Community Value (England) Regulations 2012 approving the decision of Judge Simon Bird QC in St. John Ambulance v Teignbridge DC CR/2018/0003.

Great care has to be taken on behalf of the claimant as such a claim must be made within thirteen weeks of the listing decision and not any later date such as the date of the review decision or any appeal. This is a strict requirement and the time limit cannot be extended as outside that period the Council will have no statutory authority to make a compensation payment. It was contended in the Fielder case that the Council had led the claimant to believe that a compensation claim could be made at a date after the expiry of the thirteen week period and it was argued that this invoked the doctrine of legitimate expectation. This was rejected on the ground that the authority had no power to make such an award and the authority could not modify the legislation.

It is not just the claim that needs to be organised within that short period but also the supporting evidence although there is a possibility of supplemental evidence being put forward later provided that it does not introduce a new head of damage.

In the Fielder case the claim arose because due to the ACV listing the owner lost the ability to change the planning use under the Permitted Development Rights regime without having to first obtain an actual grant of a fresh planning permission. The owner had intended to change the use of the building from a public house to an estate office with a view to subsequently converting to residential use. The nomination and then listing of the public house blocked this due to the taking of listed public houses out of the PDR regime. The owner sought compensation for a claimed fall in capital value of the public house and loss of anticipated development profits. This was treated as a claim for a once and for all loss which had been incurred at the date of the listing rather than one which was a continuing loss. In consequence the claim was out of time being made more than thirteen weeks after the ACV listing.

Christopher Cant is a barrister at Clerksroom.