Best Consideration in Local Authority Land Disposals

Section 123(2) of the Local Government Act 1972 requires local authorities to obtain the best consideration reasonably obtainable when disposing of land, which involves a defensible commercial judgment rather than a strict focus on price alone. Case law confirms that authorities have broad discretion to weigh price, deliverability, risk, and credibility—provided decisions are evidence-based, properly documented, and compliant with wider public law and procurement constraints.

Section 123(2) Local Government Act 1972

Section 123(2) of the Local Government Act 1972 provides that, unless the Secretary of State's consent is obtained, a local authority must not dispose of land (other than by way of short tenancy) for consideration less than the best that can reasonably be obtained.

The test is not purely price-driven. It requires a defensible commercial judgment that balances price, deliverability, risk and credibility, supported by a clear and auditable decision-making process.

This approach is essential, not only to reduce exposure to legal challenge but also to support transparency obligations, subsidy control assessments, and successful project delivery.

R (Cilldara Group Holdings Ltd) v West Northamptonshire Council [2023] EWHC 1675 (Admin)

In this case, the High Court dismissed a judicial review challenge to West Northamptonshire Council’s decision to dispose of land adjacent to Sixfields Stadium to CDNL. Cilldara alleged, among other grounds, a breach of the duty to obtain best consideration under section 123(2), because the Council had rejected its substantially higher offer for the land.

The court rejected all grounds of challenge, noting that the claimant’s final offer was submitted very late and that adequate reasons were sufficiently clear from the authority’s correspondence, officer reports, and meeting minutes read together. The decision confirms that - subject to compliance with public law and procurement constraints - local authorities have a broad discretion to assess competing bids, and the focus is on whether the statutory requirements are substantively met.

Key principles

Price: important but not determinative

Authorities are not required to accept the highest bid. A lower price may be justified where it offers a more certain or deliverable outcome. In summary:

• professional valuation evidence is highly advisable, although not a legal requirement;
• non-cash elements may be included where they are capable of valuation (e.g. easements or other measurable land benefits); and
• social value that cannot be expressed in monetary or economic terms must not be taken into account.

Deliverability

Authorities are entitled to assess whether a proposed transaction is genuinely capable of completion. This may include consideration of:

• bidder covenant strength and track record;
• whether key development risks (e.g. remediation, flood risk, vacant possession, restrictive covenants) have been identified and appropriately priced; and
• whether the bid reflects a credible development proposal or appears overly optimistic.

The focus is on actual deliverability over theoretical potential.

Bid credibility

A bid must be capable of standing up to objective commercial scrutiny. Relevant indicators include:

• significant divergence from professional valuation without clear justification;
• internal inconsistencies or absence of commercial rationale; and
• potential alternative or strategic motivations (for example, land acquisition to support unrelated objectives).

Bird in hand

In summary, “a bird in the hand may be worth two in the bush”.

This principle was clearly illustrated in R (Lidl (UK) GmbH v Swale Borough Council [2001] EWHC Admin 405, where the Council lawfully preferred a lower offer from Aldi over a higher offer from Lidl because Aldi’s proposal was more advanced and commercially credible. Especially where the market is limited, and land valuation is complex, deliverability, bid credibility, and commercial risk are legitimate considerations in determining what constitutes the best consideration reasonably obtainable under section 123(2).

Decision-making and audit trail

A clear record explaining how price, deliverability, and credibility were assessed is strongly recommended to support a defensible decision.

General Consents and disposals at undervalue

Authorities may rely on general consents issued by the Secretary of State (and Welsh Ministers) where:

• the disposal is intended to promote or improve economic, social, or environmental well-being; and
• the undervalue does not exceed £2 million.

Where reliance is placed on such consents, clear and robust documentation is essential, particularly in relation to the well-being justification and the valuation of any undervalue.

Key compliance reminders

Procedural compliance remains fundamental to ensuring that land disposals are legally sound and commercially secure. In applying the best consideration duty, local authorities should ensure:

• the correct statutory power for the disposal is identified at the outset;
• decision-making is open-minded and free from predetermination;
• consideration is limited to that which has a monetary, commercial, or economic value;
• appropriate professional valuation advice is obtained and properly applied;
• the common law duty of fairness is observed, particularly in the context of safeguarding public assets;
• additional statutory requirements are complied with, including:
  • Secretary of State consent in specified categories (e.g. school playing fields, allotments, or certain undervalue disposals); and
  • compliance with statutory advertising requirements for relevant land (including open space).

Conclusion

The “best consideration” requirement is a structured commercial assessment rather than a mechanical pricing exercise. Local authorities must reach decisions that are defensible, evidence-based, and grounded in deliverability as well as value.

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