Cinemas as ACVs?


Author: Mark Saunders, Roy Perrott


This article was previously published in Screentrade Magazine on 1 March 2015

Once closed, how may cinemas become ACVs, or ‘assets of community value’? What does it mean anyway, and what are the limitations and likely realities when enabling community groups to bid for these properties?

There have seen some recent high profile examples recently of local community groups, taking advantage of a right enshrined in the Localism Act 2011, to apply for historic local buildings to be listed as an ‘asset of community value’ (ACV). This right, existing since September 2012, has been enthusiastically embraced by local communities. And whilst pubs have received more applications than any other type of building, cinemas – such as the Bexhill Playhouse, the Crystal Palace Rialto and the Stockport Savoy – have also been nominated. Once listed, the owner is unable to sell or lease the building for five years without first notifying the community group. There then follows a six-month moratorium, during which the owner may continue to market the property but it will be unable to sell (or lease) it to anyone other than the community group until the six month period is up. The moratorium is designed to give the community group time to raise finance to purchase the property.

Reality

It’s important to stress that the owner is not obliged to sell the property to the community group. This is a right to bid, not a right to buy. At the end of the moratorium, the owner is free to sell to whomever they choose, and at whatever price. In reality, though, unless it is a particularly public-spirited owner, the right to bid is only likely to be effective if the community group matches or exceeds the price that the owner could fetch for the property in the open market. There is also no restriction on what the owner can do with the property during the moratorium. If the owner decides not to sell or lease it but, instead, to strip it out or redevelop it – or even to demolish it, assuming the property isn’t a listed building or in a conservation area – then they are allowed to do so.

So, what is the effect on cinema operators? The future of Cinema lies largely with multiplexes, of course, with independents enjoying success principally in territories where their target audiences are well-known or where they appeal to a specific demographic. With stand-alone cinemas in decline for many years, very few of the sites now being listed as ACVs are still functioning. Most were closed long ago and have since been converted to alternative uses such as retail or bingo halls. For those still trading, however, exhibitors may well have a lease with little, if any, capital value. A cinema that is financially unviable will eventually be closed and, where possible, the lease surrendered back to the landlord. Whether it becomes an ACV will, therefore, usually be the landlord’s problem, rather than the exhibitor’s. Where however a cinema is trading successfully it can still be listed as an ACV and the moratorium would cause delays for an owner or operator wishing to sell. The delay would be more problematic still if the sale represented part of a disposal of a larger group of trading cinemas all intended for simultaneous sale.

Local residents are to be applauded for their wish to see their local cinema returned to its former glory, but in very few cases is this a realistic prospect since the desire is often driven by nostalgia. Today’s movie-goer expects top-notch sound and picture presentation along with a well-appointed café or bar that may well be beyond the reach of many community operators. That said, a dedicated community group might find a future for the cinema as a mixed-use cultural space – a format unlikely to trouble the majors.

In the vast majority of cases, it is believed that the Localism Act will bring very few cinemas back to working life. These cinemas were closed down for commercial reasons: they were not making money and once the surge of goodwill has subsided, it is easy to imagine that the local community would find it hard to raise the necessary funding to reopen the cinema and run it on as a financially independent concern.

Mark Saunders, Partner, Fladgate LLP (msaunders@fladgate.com)

Roy Perrott, Professional Support Lawyer, Fladgate LLP (rperrott@fladgate.com)

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