The Property Aspects of Academy Conversion
As part of the conversion process, it is recommended for schools to gain advice from solicitors about the transfer of property to their academy trust. How this works in practice will depend on the category of the existing school.
As a general rule, for community schools, where property is currently owned by the local authority, the school will be granted a new lease.
Where the school is a foundation school, there will be a freehold transfer from the governing body to the academy trust. For a foundation school with a foundation, agreement will need to be reached with the foundation which may decide to grant a lease of the land to the academy trust.
For voluntary aided and in some cases voluntary controlled schools, the Diocese is likely to enter in to a Supplemental Agreement for the use of the property owned by the Diocesan Board or Parochial Church Council. Some of the school site (often the playing field) may also be owned by the local authority and in these cases the schools solicitors would also expect to put in place a lease.
In most cases where the local authority is the landowner, there will be a new lease to the academy trust the terms of which are briefly summarised as follows:
- Term – 125 years
- Rent – a peppercorn
- Repair obligations – your academy will take on the buildings in their current condition at the time of conversion but will be responsible for any damage caused from the date of conversion and any deterioration in the condition of the property
- Outgoings – your academy will be responsible for all outgoings
- Alterations and additions – alterations and new structures may be permitted with the consent of the landlord (not to be unreasonably withheld or delayed) provided they do not materially adversely affect the structural integrity of the property or diminish its value
- Other tenant’s obligations: your academy must advise the landlord of any new signage; allow the landlord access to carry out its obligations under the lease; comply with planning laws; and indemnify the landlord against any injury or death or damage to property caused by a breach of the terms of the lease
- Assignments and sub-letting – assignment of the whole or part is prohibited. Underletting of part is normally permitted provided it is consistent with the use of academy
- Insurance – the academy must insure in the names of the academy and the landlord against all normal risks. If the premises are damaged then the academy will look to rebuild using the insurance monies but if it cannot do so within 3 years from the date of destruction, then either party may terminate the lease whereupon the landlord will receive the insurance monies
- Forfeiture – if there is a material breach by the academy which the landlord has given notice of and the academy has not complied with then the landlord can terminate the lease
- Security of tenure – the lease will be excluded from the Landlord & Tenant Act 1954 and so at the end of the 125 year term, there is no automatic renewal of the lease
- User – the property must be used for the provision of educational services. Ancillary uses relating to community fundraising and recreational purposes are normally permitted
- Termination – the lease will terminate if the funding agreement is terminated by the Secretary of State.
Schools and the owners of the school site will need to work with their solicitors to deal with the following matters:
- Identifying all the land used by the school at the time of conversions
- Obtaining title – who owns the land?
- Is any land publicly funded?
- Is the land currently held freehold or leasehold?
- Does the school share facilities with any other organisation (in particular, playing fields off campus etc.)? If so, what arrangements need to be in place on conversion?
- Do any third parties use the facilities (e.g. community sports facilities etc.)? What arrangements are there in existence at present and what is to happen to those on conversion?
- Are there any peculiar aspects to the school site (e.g. access over private land)?
- Is the school in the course of completing any building works and, if so, how are these funded and how will they be completed?
- Are there any PFI schemes?
- Does the school have any loans outstanding secured against the property?
- What contracts do the school have at present (if any) for maintenance, repair, services etc. relating to the property?
The Department for Education requires a land questionnaire to be submitted as part of the conversion process. The school’s solicitors can complete this questionnaire on the school’s behalf and also discuss with the school whether they require searches to be carried out on the school site (for example, local authority and environmental searches). If so, the solicitors will provide the school with a report on the results of these searches.
To discuss any property aspects further in relation to academy conversion, please contact me.