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(a) on the assumption that they will become lessees under the lease, and

(b) according to the statement of practice on the valuation of property contained in the Appraisal and Valuation Manual published in September 1995 by the Royal Institution of Chartered Surveyors under ISBN number 0 85406 699 3[7]; and

"term", in relation to a lease acquired by a local authority, means - 

(a) where the lease is granted to the authority, the period of the lease; and

(b) where the lease is acquired by the authority otherwise than by a grant, the period of the lease which is unexpired on the date on which the authority become the lessees.

    (2) For the purposes of this Part, any reference to a contract is a reference to a single contract or, where two or more contracts taken together constitute a credit arrangement, a reference to those contracts taken together.

Capital cost of leases
     14 .  - (1) In this Part, subject to regulation 15, a reference to the capital cost of a lease is a reference to the amount which, at the time the authority become the lessees, the authority estimate will be the aggregate of - 

(a) the value of the consideration given, or failing to be given, by them in respect of the lease before or during the financial year in which they become the lessees; and

(b) the value of the consideration falling to be given by them in respect of the lease in any subsequent financial year.

    (2) For each subsequent financial year referred to in paragraph (1)(b), the value of the consideration falling to be given in that year shall be determined by the formula - 

that consideration shall not be regarded as having been given until the undertaking is performed or, as the case may be, the right is exercised.

Consideration to be disregarded
     15 .  - (1) In determining - 

(a) the capital cost of a lease for the purposes of regulation 35 or 36,

(b) the adjusted cost of a lease, or

(c) the consideration given in respect of an earlier leasehold interest in land for the purposes of regulation 35 or 49,

a local authority shall disregard any consideration given or falling to be given in respect of the lease or, as the case may be, the earlier leasehold interest ("the lease") if it is consideration to which paragraph (2), (3) or (4) applies.

    (2) This paragraph applies to any consideration given by the authority before they become the lessees under the lease.

    (3) This paragraph applies to any consideration where - 

(a) the lease is excluded for the purposes of paragraph 11(2) of Schedule 3 to the Act by virtue of regulation 122 or 123; and

(b) the consideration falls to be given by the authority during the period of three months beginning on the date on which the authority become the lessees under the lease.

    (4) This paragraph applies to any consideration in money paid out of a grant made under - 

(a) section 3 of the Civil Defence Act 1948[8];

(b) sections 46, 47 and 48 of the Police Act 1996[9] (police grant and grants for capital expenditure and expenditure on safeguarding national security);

(c) section 20 of the Probation Service Act 1993[10];

(d) section 63(6) of the Rent Act 1977[11] (schemes for appointment of rent officers); or

(e) section 59 of the Justices of the Peace Act 1979[12].

Meaning of private finance transaction
     16 .  - (1) In this regulation, "relevant asset" means any non-housing land or any other asset (including works) which is not land.

    (2) For the purposes of this Part, a transaction is a private finance transaction if - 

(a) the consideration received by the authority under the transaction includes the provision - 


(i) of a relevant asset for use for, or in connection with, the exercise of a function of the authority ("the relevant purpose"); and

(ii) of services in relation to the use of the asset for the relevant purpose;



(b) the authority do not give to any person any undertaking or guarantee in respect of any obligations or liabilities of the person with whom they enter into the transaction (whether incurred under the transaction or otherwise);

(c) the consideration given by the authority under the transaction includes the payment of fees by instalments at annual or more frequent intervals;

(d) the fees are determined in accordance with provisions relating to - 



(i) standards attained in the performance of the services; or

(ii) the extent, rate or intensity of use of the asset for the relevant purpose;



(e) the first instalment of fees falls to be paid after the authority have begun to use the asset for the relevant purpose; and

(f) the terms agreed for the transaction do not provide for any variation in the amount of fees payable, other than variation under the provisions mentioned in sub-paragraph (d), and any provision agreed for increasing the fees by reference to - 



(i) increases in heating costs attributable to increases in the price of gas, electricity or fuel; or

(ii) the figure in Table 2.1 of Economic Trends[13] published by the Office for National Statistics as the most recent percentage change, quarter on corresponding quarter of previous year, of the implied gross domestic product deflator at market prices.

Transactions which are credit arrangements

Private finance transactions
     17 . A private finance transaction which, apart from this regulation, would not be a credit arrangement is prescribed for the purposes of section 48(1)(c).

(a) a local authority shall be deemed to have entered into another arrangement with the same person, or an associate of his, if they have acquired a lease under which that person or associate is the lessor; and

(b) two persons are associates of each other if, for the purposes of the Companies Act 1985[14], one of them is a subsidiary of the other, or they are both subsidiaries of some other person.

Leases under which the consideration given mostly in first year
     19 . A lease is excluded from section 48 (credit arrangements) if, on the date on which the authority become the lessees, the authority estimate that the value of the consideration which will have been given by them in respect of the lease at the end of a period of one year comencing on that date, is not less than 90 per cent. of the capital cost of the lease.

Operating leases
     20 .  - (1) In this regulation - 

(a) "operating lease" means a lease by a local authority of any vehicle, vessel, plant, machinery or apparatus; and

(b) in relation to an operating lease - 


(i) "arrangement" means any arrangement (whether or not a credit arrangement) which is entered into in connection with the lease;

(ii) "the asset" means the asset which is acquired by the authority under the lease; and

(iii) "the commencement date" means the date on which the authority become the lessees under the lease, or, if earlier, the date on which the arrangement is made.

    (2) An operating lease and an arrangement, if it is a credit arrangement, are excluded from section 48 if the termination value of the asset is not less than 10 per cent. of its value on the commencement date, and the lease, or the lease and the arrangement, does not provide, or do not together provide, for - 

(a) the transfer of the property in the asset to the authority;

(b) the renewal or continuation of the lease or the arrangement on terms which provide for a transfer of the property in the asset to the authority;

(c) the renewal or continuation of the lease or the arrangement for any period for a consideration which is materially less than the amount that would reasonably be regarded, on the commencement date, as the open market rent for that period; or

(d) the receipt by the authority of any consideration which is equivalent, or determined by reference, to the value of the asset when the lease expires, the arrangement terminates or the period of any renewal or continuation of the lease or the arrangement terminates.

    (3) For the purposes of paragraph (2), the termination value of the asset is the amount which, on the commencement date, the authority estimate will be the value of the asset

(a) when the lease expires, or the arrangement terminates; or

(b) where the authority have a right to renew or continue the lease or the arrangement, on the latest date on which the lease or arrangement could expire or terminate if the authority exercised that right.

Contracts with residuary bodies
     21 .  - (1) In this regulation, "residuary body" means - 

(a) the Local Government Residuary Body (England)[15]; or

(b) the Residuary Body for Wales or Corff Gweddilliol Cymru[16].

    (2) A contract between a local authority and a residuary body is excluded from section 48 if it provides for a transfer of land to the authority.

Licensing contracts
     22 .  - (1) In this regulation - 

"dwelling" means any building or part of a building which is occupied as a dwelling, or is a hostel providing accommodation for persons who, for the purposes of Part VII of the Housing Act 1996 (homelessness)[17], are homeless, or persons who have a special need for accommodation arising from physical or mental disability, age, infirmity or other special social disability or disadvantage;

"long lease" means a lease which is a long tenancy for the purposes of Part IV of the Housing Act 1985 (secure tenancies and rights of secure tenants)[18];

"shared ownership lease" means a lease of a dwelling granted on payment of a premium which is calculated by reference to a percentage of the value of the dwelling or of the cost of providing it, and is not less than 25 per cent. of that value or cost; and

"public body" means a local authority, a new town corporation or an urban development corporation established under Part XVI of the Local Government, Planning and Land Act 1980 (urban development)[19].

    (2) A contract to which paragraph (3) applies is excluded from section 48.

    (3) This paragraph applies to a contract which provides - 

(a) for the construction or enhancement of a dwelling, or the provision of a dwelling by the conversion of a building or part of a building, for the authority on land in which the authority have a freehold or leasehold interest; and

(b) that the authority are required, after the carrying out of the works, to grant a shared ownership lease of the dwelling or to dispose of the freehold or grant a long lease of the dwelling to any person other than a public body or a company which is a regulated company within the meaning given to that expression in article 1(4) of the Local Authorities (Companies) Order 1995[20].

Investments made for the purposes of a superannuation fund
     23 . A lease or a contract is excluded from section 48 if the authority become lessees under the lease or enter into the contract as an investment for the purposes of a superannuation fund which the authority are required to keep by virtue of the Superannuation Act 1972[21].

Other leases excluded from section 48
     24 .  - (1) A lease of any property is excluded from section 48 if it is - 

(a) assigned to the authority by a new town corporation; or

(b) granted to the authority in accordance with regulations made under section 100 of the Housing Act 1988 (tenants continuing as tenants of public sector landlord)[22].

    (2) A lease of any property is excluded from section 48 if a local authority become the lessees by virtue of - 

(a) the Local Government Changes for England (Property Transfer and Transitional Payments) Regulations 1995[23];

(b) article 9 of the Police and Magistrates' Courts Act 1994 (Commencement No. 5 and Transitional Provisions) Order 1994[24];

(c) a combination scheme under the Fire Services Act 1947[25];

(d) the Local Government Reorganisation (Wales) (Property etc.) Order 1996[26]; or

(e) article 15 of the National Park Authorities (England) Order 1996[27], or an agreement under section 76 of the Environment Act 1995 (agreements as to incidental matters)[28] or an award under subsection (3) of that section.

Other contracts excluded from section 48
     25 .  - (1) A contract to which paragraph (2) applies is excluded from section 48.

    (2) This paragraph applies to a contract which would not constitute a credit arrangement if the authority, in making the relevant estimates, disregarded an amount of consideration equal to three per cent. of the total value of the consideration falling to be given by them under the contract.

    (3) In paragraph (2), "relevant estimates" means the estimates which the authority make under section 48(1)(b) for the financial years during which they are to receive any consideration under the contract and the financial year immediately following the last such year.

[8] 1948 c. 5. Part of subsection (3) of section 3 of the Act was repealed by Part I of Schedule 10 to the Police Act 1964 (c. 48) and subsection (4) was repealed by Part XIII of Schedule I to the Statute Law (Repeals) Act 1986 (c. 12). back

[9] 1996 c. 16. back

[10] 1993 c. 47. back

[11] 1977 c. 42. back

[12] 1979 c. 55. Subsection (6) of section 59 was amended by section 12(10) of the Local Government Act 1985 (c.51) and further amended by section 189 of the Local Government and Housing Act 1989. Subsection (1) was amended by, and subsection (8) was substituted by, paragraph 19 of Schedule 8 to the Police and Magistrates' Courts Act 1994 (c.29). back

[13] Available from the Office for National Statistics or from The Stationery Office. back

[14] See section 736 of the Companies Act 1985 (c. 6) so far as that section is of continuing application, or that section as substituted by section 144(1) of the Companies Act 1989 (c. 40). back

[15] The Local Government Residuary Body (England) was established by article 3 of the Local Government Residuary Body (England) Order 1995 (S.I. 1995/401). back

[16] The Residuary Body for Wales or Corff Gweddilliol Cymru was established by section 39 of the Local Government (Wales) Act 1994 (c. 19) on 1st February 1995 pursuant to the Residuary Body for Wales (Appointed Day) Order 1995 (S.I. 1995/103 (C. 5)). back

[17] 1996 c. 52. See section 175 of that Act. back

[18] 1985 c. 68. See section 115 of that Act. back

[19] 1980 c. 65. back

[20] S.I. 1995/849; amended by S.I. 1996/621. back

[21] 1972 c. 11. back

[22] 1988 c. 50. Section 100 was repealed by section 222 of, and paragraph 1 of Part I of Schedule 18 to, the Housing Act 1996 (c. 52) subject to the savings contained in paragraph 12 of the Schedule to the Housing Act 1996 (Commencement No. 3 and Transitional Provisions) Order 1996 (S.I. 1996/2402 (C. 62)). back

[23] S.I. 1995/402. back

[24] S.I. 1994/3262 (C. 83). There are amendments which are not relevant to this regulation. back

[25] 1947 c. 41. back

[26] S.I. 1996/532. back

[27] S.I. 1996/1243. There are amendments which are not relevant to this regulation. back

[28] 1995 c. 25. back