Statutory transfers for academies

On 26th October 2023 the Levelling-up and Regeneration Act 2023 received Royal Assent. The Act covers such various matters as nutrient pollution standards and for a body to replace the Health and Safety Executive as the building safety regulator. It is what those in the business of drafting legislation call a “Christmas Tree” Act, for the number of various baubles of new law which get added. Of particular interest and importance for academies is section 235 which amends the Academies Act 2010 inserting a paragraph 9A into schedule 1 to create a requirement on local authorities to transfer land to trustees of school sites, as and when the school moves to a new site acquired or already held by the local authority. This new duty is similar to the one which has existed for maintained schools since the 1940s but there are some important differences. In particular it applies ONLY to replacement sites (and perhaps replacement part-sites) and NOT to extensions to existing sites. For the legislation to apply the trustees must be giving up part or all of their existing property.

The provision has not yet been commenced.

We have seen no reference to the “FactSheet” provided for the purposes of this legislation when it appeared in the Schools Bill. We advise that clients should take careful account of that information in case the DfE intends to stand by it – or indeed not stand by it. It contained for example significant statements about the continuity of the purposes of the historic trust which site trustees should insist on as noted below.

What is the obligation?

The local authority must transfer their interest in the land to the trustees of the school “on trust for the purposes of the Academy school”. That is interest in the land that they hold, not some lesser interest such as a lease, and it is our opinion that they should transfer it free of any unnecessary encumbrances such as restrictive covenants. Trustees should ensure that such replacement land is transferred to them to be held on their existing trusts. Otherwise, it is likely that the transfer will create a new and different trust.

When is the obligation to transfer triggered?

When all four of the following conditions are met:

Condition A is that a local authority make premises (“the new premises”) available to be used by an Academy school.

Condition B is that the new premises are made available as an alternative to premises (“the existing premises”) which have previously been used by (a) the Academy school, (b) or a maintained school, Academy or sixth form college that has been or is to be discontinued and that the Academy school replaces.

Condition C is that the existing premises are held on trust by a person or persons (“the trustees”) for the purposes of (as the case may be) (a) the Academy school, or (b) the discontinued maintained school, Academy or sixth form college.

Condition D is that the trustees— (a) having sold the existing premises, pay to the local authority a sum that— (i) is just, having regard to the value of the local authority’s interest in the new premises, but (ii) does not exceed the total of the proceeds of sale and any interest that has accrued to the trustees on those proceeds, or (b) if the local authority agree to accept the trustees’ interest in the existing premises, transfer that interest to the local authority.

What is the extent of land that must be transferred?

It is all of the premises “available to be used by an Academy school” which could (inter alia) include buildings, hardplay, landscaping, roads, and car parks. However, “references to premises do not include playing fields”. Playing fields unfortunately are not defined for the purposes of this provision but the interpretation accepted by the Department for Education for the purposes of statutory transfers for maintained schools under the School Standards and Framework Act 1998 should apply. For the purpose of that Act it is accepted that playing fields are grass pitches or artificial grass marked out for the playing of organized games but not hardstanding playgrounds. Notice also that school houses are not specifically excluded as they are in the definition of “premises” used in Schedule 3 to the School Standards and Framework Act 1998 and elsewhere.

Who is responsible for the costs of the transfer?

The provision requires that local authority must pay to the trustees to whom the transfer is made their reasonable costs in connection with the transfer. That will include legal costs, but it may also include other professional costs.

In the case of disagreement, the matter may be referred by the local authority or the trustees to the Schools Adjudicator.

Practical considerations

The legislation has the appearance initially of good news for Church of England schools and other trusts with a charitable foundation as it removes one of the old disadvantages of converting from a maintained school (where wide obligations to transfer applied) to an academy school (where none do). However there are some significant practical differences:

No provision is made for the transfer of land to extend academy sites, which is a very common occurrence for maintained schools. As worded the section MIGHT enable an exchange of land (for example for an extension onto a playing field) but even this may not be intended.

Unfortunately the legislation does not provide for the academy trust’s own costs to be recovered, although we consider that these would be part and parcel of the transfer of the freehold.

Unlike statutory transfers for maintained schools where the obligation to pay proceeds of sale from former premises sold follows a statutory transfer of a replacement site, for academies the transfer of the replacement site is conditional upon that payment. This means that determining the value to be paid over to the local authority, recording that as credited against the trustees’ value in the replacement site and getting all the necessary valuations, will need to be agreed to allow the transfer of the replacement site to take place in the first place.

While the provision could be argued mean that an outstanding statutory transfer of a complete new site at a maintained school need not hold up the conversion of a school to an academy (where formerly this meant that the statutory duty would fall away and the land would be lost), actually we consider that the statutory transfer should conclude while the school is still open as a maintained school. This is because (i) if the local authority delayed in concluding the earlier statutory transfer, what confidence is there that it will discharge it while the school is an academy, (ii) a statutory transfer at an academy may be on less favourable terms as for a maintained school because of the extra conditionality that the Levelling-up and Regeneration Act introduces and (iii) strictly a local authority should not be excused from its earlier statutory obligations merely because there are similar replacement ones in the new legislation. This provision will have no effect on outstanding transfers of extensions to sites. These should still be completed prior to academy conversion or they will never happen.

The consequence of this legislation is that academy buildings will commonly over time come occupy partly trustee land and partly local authority land. Different regimes will apply (eg for SoS consents) and trustees must be careful NEVER to spend their funds on improving premises erected on local authority owned land.