What does best consideration mean in a land disposal
30 November 2023
This article was originally published in the Public Law Partnership December newsletter.
Section 123(2) of the 1972 Act provides that “except with the consent of the Secretary of State, a council shall not dispose of land under this section, otherwise than by way of a short tenancy, for consideration less than the best that can be reasonably obtained”.
What does this mean in practice and why is it important?
Making an audit proof decision is important to mitigate the risk of a judicial review challenge by aggrieved bidders or taxpayers resident in the applicable area, to provide sufficient comfort for the successful party to proceed in a timely fashion, to respond to FOIA request, to assess and manage subsidy control issues and generally to ensure greatest likelihood of a successful project which completes as envisaged.
The case of R (Cilldara) v. West Northamptonshire Council  EWHC 1675 (Admin) has helpfully clarified the general principles to be applied when determining best consideration.
Generally, the outcome of applying the principles is more important than evidence that the Council has followed a particular procedure. Provided it applies the principles, the Council has the ability to weigh the evidence subjectively without fear that a court will overturn it, subject only to procurement law.
Here we consider the three dominant principles expressed in the judgment.
Price – The Council is under no duty to approve a transaction with the highest price when making a commercial decision. Other factors may take prominence and the ‘bird in the hand’ doctrine applies. Consideration includes non-cash consideration, for example, valuable easements or anything capable of being valued in monetary terms (preferably by a professional valuer). Social value cannot be valued in monetary terms and therefore does not count towards best consideration.
“A bird in the hand is worth two in the bush” can override the highest price, although in a competitive process the Council may be evaluating more than one bid which meets the ‘bird in the hand’ criteria. Essentially, the receipt of performance (even part performance) confers a benefit over and above the right to enforce performance, which may be costly, cause delay and not succeed in producing the desired project. This assessment comprises of both reliability and credibility.
Reliability – Will the project ever be completed? In addition to the track record and covenant strength of the bidder, has the bidder taken into account all available information including adverse conditions which may require costly solutions? In a land transaction this could include remediation works as in this case, but could also encompass flood issues, release of restrictive covenants, gaining vacant possession of the land. Does it appear that the bidder has simply produced a high price with the aim of securing the transaction?
Credibility – Best consideration requires a bid to be credible. Is it too good to be true? Does it appear irrational? Is there a potential alternative motive for the proposed transaction e.g. to gain control of land to support another transaction? When considering credibility, the Council is dealing with more extreme scenarios than the nuances between subtle price differences and they may be hard to prove. In the case at hand, one bidder’s price was significantly higher than the Council’s professional valuation without obvious justification. This may be the trigger to these further questions.
Recording a decision
Substance and context trumps detail. If an application is late and there is insufficient time to produce a detailed report of reasons why a bidder has failed due to best consideration, this won’t be fatal to the audit trail.
Other matters to consider
While we have focused on price, reliability and credibility, we must also stress the importance of the following.
- Being seen to have a sufficiently open mind and not making a pre-determined decision.
- Satisfying the duty of inquiry through a professional valuation, which should also be worded in accordance with the statutory guidance.
- Satisfying the common law duty of fairness, taking into account context, and the statutory purpose of protecting public assets in the interest of the public, and to a lesser extent procedural fairness.
- Further procedures may apply to certain types of disposal, for example secretary of state approval of the disposal of school playing fields, allotments and transactions with a significant undervalue.
- Advertising the correct statutory disposal notices for amenity land for example, even if the exact use of the land and initial purpose upon acquisition of the land is unclear.
The content of this article is for general information only. It is not, and should not be taken as, legal advice. If you require any further information in relation to this article please contact the author in the first instance. Law covered as at November 2023.