Academies: do you take the leasehold or freehold route?

The lawyer’s immediate answer is it depends! It largely depends upon the type of school which is becoming an academy.

Formost community schools, the conversion to academy status will involve the academy trust company being granted a long-term, 125 year lease from the localauthority which is the freehold owner of the school land.  This lease will be substantially in the formof the Department for Education’s (“DfE”) model form.  Therefore certain provisions in the leasesuch as the peppercorn rent or the term are generally not negotiable.  However, site specifics such as access rightsand existing third party users may need to be negotiated into the lease.

Universitytechnical colleges, university training schools and studio schools usually alsotake a long leasehold interest from the current landowner.  Whilst this is normally based on the DfE’s125 year lease, depending upon the freehold owner, there can be variationswhich need to be negotiated such as a market rent payable or a shorter term.

Takinga long-leasehold interest may not be an attractive or suitable option forfoundation, trust or independent status schools.  For example, for foundation schools without atrust it is probable that the governing body, rather than the council, is thecurrent freehold owner of the land. There is therefore a possibility for these types of schools to transferthe freehold, rather than leasehold, to the academy trust company.  In addition to the usual conveyancingtransfer, the Secretary of State for Education can issue a statutory directionto the current owner, such as the trust or governing body, to transfer thefreehold ownership to the academy.

Thereare more specific requirements relating to voluntary aided/controlled schoolsand their freehold and leasehold interests in the context of an academyconversion.

Irrespectiveof the type of school becoming an academy and whether the freehold or leaseholdroute is taken, the usual range of property due diligence such as reviewing andreporting on title, carrying out the usual range of property searches andcompletion of the DfE’s land questionnaire is also required well in advance ofthe conversion date.

Givenall of the above and it being an outline only, it is important to seek furtheradvice prior to becoming an academy.

 

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