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Forming a CLT

CLTs provide long-term solutions to meet a variety of local needs. You will begin with some form of visioning which brings the community together to agree that 'something must be done' and to set out the solution. You will then need to build a consensus and find a group of people to form a steering group to turn the vision into practical action.

From an early date you will need to create a formal organisation to apply for and hold funds and to be the basis for membership and decision making. The legal definition of a CLT will need to be considered as only CLTs meeting the definition can secure CLT Fund and Homes & Communities Agency (HCA) grants. You could begin by being an unincorporated society but bear in mind that its members will have individual liability. Quite soon you will need a legal structure and legal entity which has its own 'personality' and limited liability for shareholders, usually £1 per shareholding member, which provides protection from any losses the CLT might incur.

Charitable registration will be essential if you choose to be a company limited by guarantee and want an 'asset lock' to protect the asset you have created from being sold other than for the purpose for which it was first developed. Charitable registration also has tax advantages. If you opt to be an Industrial and Provident Society (IPS) for community benefit, the Financial Services Authority’s requirements for voting at special general meetings on any change of rules provide a partial asset lock: IPSs will also have to register as charities in the near future. If you choose to have an IPS so that you raise finance through shares, you will have to forfeit charitable status.

To keep the support of the community from whom the vision for your project has been derived you will need to maintain community engagement as the work becomes increasingly detailed and the CLT takes on a life of its own. The membership structure and forming a board will be an important part of this process. The board should both be a means of democratic control and a vehicle to recruit the range of local knowledge and expertise you need to run the organisation.

A CLT has several characteristics and these are set out in Section 79 of the Housing and Regeneration Act 2008 (the 'Act').

Under the Act, a CLT is a corporate entity established for the purpose of furthering the social, economic and environmental interests of a local community by acquiring and managing land and other assets in order:

  1. to provide a benefit to the local community, and
  2. to ensure that the assets are not sold or developed except in a manner which the trust's members think benefits the local community.

As such, the CLT’s legal structure must also include provisions that are designed to ensure that:

  1. any profits from its activities will be used to benefit the local community (otherwise than by being paid directly to members),
  2. individuals who live or work in the specified area have the opportunity to become members of the trust (whether or not others can also become members), and
  3. the members of the trust control it.

The combination of these provisions create an “asset lock”. It is the “asset lock” that enables a CLT to deliver long-term solutions for the community it serves; by taking the land “off the market” and ensuring that it is retained for the community’s benefit.