The Local Authorities (Capital Finance) Regulations 1990

Leases and contracts which are not credit arrangements

6.—(1) A lease is excluded from section 48 if–

(a) at the time the local authority become the lessees, they estimate that the consideration which has been or falls to be given by them in respect of the lease at or before that time, or within one year thereafter, is not less than 90 per cent. of the capital cost of the lease;

(b) it is an operating lease of any vehicle, vessel, plant, machinery or apparatus;

(c) the local authority become the lessees by virtue of an order made under section 168 of the Education Reform Act 1988(1);

(d) it is a lease of land which is part of the housing stock of a new town corporation; or

(e) it is granted to the local authority in accordance with regulations made under section 100 of the Housing Act 1988(2).

(2) For the purposes of paragraph (1)(b) above, an operating lease of any vehicle, vessel, plant, machinery or apparatus (“the asset”) is any lease where–

(a) the lease or any arrangement (whether a credit arrangement or not) entered into in connection with the lease does not provide or do not together provide for–

(i) the property in the asset to transfer to the local authority under the lease or arrangement or any renewal or continuation of the lease or arrangement; or

(ii) the renewal or continuation of the lease or arrangement for a further period for a consideration which is materially less than what would be regarded, on the date on which the authority become the lessees or, if earlier, the arrangement is made (“the commencement date”) as the open market rent for that further period; or

(iii) the value of the asset at the time of the expiry or termination of the lease or arrangement or of the period of any renewal or continuation of the lease or arrangement to accrue directly or indirectly to the authority; and

(b) the termination value of the asset is equal to or exceeds 10 per cent. of its value on the commencement date.

(3) In paragraph (2)(b) above, “termination value” means the value, as estimated by the authority on the commencement date, of the asset on the date on which the lease or arrangement is due to expire or terminate or, where provision is made for the renewal or continuation of the lease or arrangement, on the latest date on which it would expire or terminate if any right to renew or continue it were exercised.

(4) A contract is excluded from section 48 if–

(a) it is a contract entered into by a local authority and a new town corporation which–

(i) provides for the transfer to the authority of all or part of the housing stock of a new town corporation; and

(ii) is entered into by the new town corporation by virtue of section 36 of the New Towns Act 1981(3) or in accordance with regulations made under section 172(1);

(b) it would not constitute a credit arrangement were the authority to make the estimate required by section 48(1)(b) in respect of each relevant financial year leaving out of account an amount of consideration equal to three per cent. of the value of all the consideration which has been or falls to be given under the contract by the authority; and, for this purpose, a “relevant financial year” is any relevant financial year (within the meaning of section 48(1)(b)) up to and including the last financial year during which the authority are to receive any consideration under the contract and the immediately following financial year; or

(c) it is a licensing contract.

(5) For the purposes of paragraph (4)(c) above, a licensing contract is any contract under which–

(a) the construction or enhancement of a dwelling or the provision of a dwelling by the conversion of a building or part of a building is carried out for a local authority on land the freehold of which or a leasehold interest in which is owned by the authority; and

(b) the authority are required, after the carrying out of the works,–

(i) to dispose of the freehold or grant a long lease of the dwelling to a person other than a public body or a company which, for the purposes of Part V of the Act (companies in which local authorities have interests), is under the control or subject to the influence of a local authority, or

(ii) to grant a shared ownership lease of the dwelling.

(6) In paragraph (5) above,–

“dwelling” means any building or part of a building which is occupied as a dwelling or which is a hostel providing accommodation for persons who are homeless within the meaning of Part III of the Housing Act 1985 (housing the homeless) or 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 creating a long tenancy within the meaning of section 115 of the Housing Act 1985;

“shared ownership lease” means a lease granted at a premium, calculated by reference to the value of the dwelling or the cost of providing it, of not less than 25 per cent. of the figure by reference to which it was calculated;

“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(4) (urban development).

(7) Any lease or contract is excluded from section 48 if–

(a) it is entered into by a local authority as an investment for the purposes of a superannuation fund which the authority are required to keep by virtue of the Superannuation Act 1972(5); or

(b) the local authority estimate, at the time they become the lessees or enter into the contract, that the value of all the consideration which has been or falls to be given by them in respect of the lease or contract does not exceed £10,000.

(8) In this regulation,

(a) “new town corporation” and “housing stock” have the same meaning as in section 172; and

(b) any reference to a contract is a reference to a single contract or, where two or more contracts taken together would constitute a credit arrangement, a reference to the two or more contracts taken together.

(1)

1988 c. 40.

(2)

1988 c. 50.

(3)

1981 c. 64.

(4)

1980 c. 65.

(5)

1972 c. 11.