What is a community land trust?
The first article in a new series, Back to Basics in Community-Led Housing, examining the key concepts in community-led housing.
In this article Nick Dunn and Peter Parker look at what a community land trust is and why they are popular for community-led housing projects.
Back to Basics in Community-Led Housing: What is a community land trust?
A community land trust (CLT) is not a particular legal structure; companies limited by guarantee, community interest companies and community benefit societies (to name but a few) can all be established as CLTs. Instead, the CLT (like charitable status) acts as a wrapper which attaches to organisations provided they meet the necessary tests (as outlined below).
How community land trusts work: the two tests
The requirements and principles of the CLT wrapper are enshrined in the organisation's constitution, ensuring that the organisation is constitutionally bound to follow the requirements of being a CLT.
The two tests which must be satisfied in order for an organisation to be a CLT are set out in section 79 of the Housing and Regeneration Act 2008:
- The purpose test
- The CLT must be set up expressly for the purpose of furthering the social, economic or environmental interests of a local community by acquiring and managing land and assets in order to:
- Provide a benefit to the local community; and
- Ensure that the assets are not sold or developed except in a manner which the CLT's members think benefits the local community
This means that the objects of the organisation, as set out in its constitutional documents, must cater for the above. In addition, whilst an asset lock is not a strict legal requirement of a CLT, it will help to demonstrate satisfaction with the above test and with obtaining grant funding. However, having an asset lock and being a registered provider of social housing are not compatible.
- The control test
- The CLT must be set up under arrangements which are expressly designed to ensure that:
- Any profits are used to benefit the local community (but not through the payment directly to the CLT's members);
- Individuals who live or work in the specified area have the opportunity to become members of the trust; and
- The members of the trust control it.
As above, whilst an asset lock is not a strict legal requirement to meet the definition of a CLT, it will help to demonstrate that this test is satisfied.
Engagement with and establishment for the benefit of its local community (being those individuals who live and work, or who want to live and work, in the CLT's specified area) is critical to an organisation becoming a CLT.
The CLT wrapper is designed to facilitate community engagement with housing projects and, through such engagement, to create more resilient communities before, during and after the project. CLT wrappers are therefore, by their very nature, prevalent in community-led housing projects.
Establishment as a CLT can also provide access to additional funding and advice for community-led housing projects. Organisations such as the National CLT Network can provide guidance as to the availability of such funding and advice.
Sign up to our mailing list for a free copy of our Guide to Legal Structures for Cohousing.