Operating Models That Work: Who Runs the Building After?
Matching ownership and management to purpose
Defining a future use for a stranded asset is only half the challenge. The other half - often underestimated - is working out who will own it, who will run it, and how it will sustain itself over the long term.
This question is not a technicality to be resolved once funding is secured. It shapes everything: the types of use that are feasible, the funding routes available, the level of ongoing council involvement, and whether the building will still be thriving in ten years or quietly struggling within three.
Too often, conversations about operating models happen too late. A concept is developed, a design is commissioned, funding is pursued - and only then does someone ask who is actually going to run the thing. By that point, the options are constrained. Getting the operating model right means thinking about it from the start.
There is no single right answer
The range of options is broader than many assume. A council might retain direct control, establish an arm's-length company, transfer the asset to a community organisation, sell it outright, or create a hybrid arrangement that blends several approaches. Each model carries different implications for risk, revenue, accountability, and long-term flexibility.
The choice depends on what the building is for, what the council wants to achieve, and what capacity exists - within the authority and beyond it - to make it work.
Retained council management
The simplest option, on the face of it, is for the council to continue owning and operating the asset directly. This keeps control firmly in-house. It avoids the complexity of establishing new entities or transferring responsibilities. And for assets that serve a core public function, it may be the most appropriate route.
But direct management comes with constraints. Council staffing structures are not always suited to running commercial or quasi-commercial operations. Procurement rules, pay scales, and decision-making processes can make it harder to respond quickly to changing circumstances. And where a building needs to generate income to cover its costs, the public sector environment does not always lend itself to the commercial mindset required.
For some assets, direct management works well. For others, it becomes a drag on performance - or an ongoing liability that the council never quite escapes.
Local authority trading companies
A LATCo - a local authority trading company - allows a council to establish a separate legal entity, wholly owned by the authority, with the freedom to operate more commercially. LATCos can trade with external customers, set their own staffing arrangements, and respond to market conditions with greater agility than an in-house team.
This model has become increasingly common since the 2011 Localism Act extended councils' trading powers. It offers a middle path: the council retains ownership and ultimate control, but the day-to-day operation sits at arm's length.
The high-profile LATCo failures that have made headlines - energy companies, large-scale property development - were ambitious commercial ventures operating in volatile or competitive markets. A LATCo established to operate a single civic building is a different proposition entirely. But the lessons still apply: governance matters, commercial discipline matters, and realistic expectations matter - just at a scale proportionate to the risk.
Community Interest Companies
A CIC - a Community Interest Company - is a corporate structure designed specifically for social enterprises. It operates much like a normal limited company, but with two important features: a statutory asset lock, which ensures that the company's assets are used for the benefit of the community, and a requirement to demonstrate ongoing community benefit.
CICs have become a popular vehicle for community-led regeneration. They offer flexibility, limited liability for directors, and a clear signal to funders and the public that the organisation exists to serve a social purpose rather than generate private profit.
For stranded assets, a CIC can provide a useful ownership and operating structure - particularly where the building will be run by a community group, a social enterprise, or a partnership of local organisations. The asset lock provides reassurance that public investment will not be extracted for private gain. The company structure provides a familiar legal framework for contracts, employment, and governance.
CICs can be limited by shares or by guarantee. They can pay modest dividends to investors, subject to a cap. And they can receive assets from councils through community asset transfer, often at less than market value, where the community benefit justifies the discount.
Charitable structures
Where a building will be used primarily for charitable purposes - education, heritage, community wellbeing - a charitable structure may be more appropriate than a CIC. Charities benefit from tax reliefs, can access a wider range of grant funding, and carry a level of public trust that commercial structures do not.
The most common incorporated form is the Charitable Incorporated Organisation, or CIO. Like a CIC, a CIO has its own legal personality and offers limited liability to its trustees. Unlike a charitable company, it is regulated solely by the Charity Commission and does not need to file separately with Companies House.
CIOs come in two forms: a foundation model, where the trustees are the only members, and an association model, where a wider membership has voting rights. The choice depends on how the organisation wants to be governed and who it wants to involve in decision-making.
The constraints of charitable status are significant. Charities cannot distribute profits, must operate within their stated charitable purposes, and face restrictions on trading activity. But for the right kind of asset - a heritage building with an educational mission, a community centre serving a defined population - these constraints may be entirely compatible with the intended use.
Community asset transfer
Community asset transfer is not an operating model in itself, but a mechanism for moving ownership or management from a council to a community organisation. The receiving body might be a CIC, a CIO, a community benefit society, or another form of not-for-profit entity.
Transfers can take several forms. A freehold transfer passes ownership outright. A long lease - often at a peppercorn rent - gives the community organisation security of tenure while the council retains the underlying asset. A licence or management agreement provides operational control without any transfer of property interest.
The right approach depends on the capacity of the receiving organisation, the nature of the asset, and the council's appetite for letting go. Community asset transfer can unlock energy, investment, and commitment that a council-run operation would struggle to generate. But it can also fail if the receiving organisation lacks the skills, resources, or governance to sustain the building over time.
Councils that rush into transfers without properly assessing capacity - or that use transfer as a way to offload problem assets - often find themselves picking up the pieces a few years later.
Sale to the private sector
Sometimes the right answer is simply to sell. A building that has no viable public or community use, or that would require ongoing subsidy the council cannot afford, may be better placed in private hands.
Sale can take different forms. An unconditional sale transfers the asset outright, with no restrictions on future use. A conditional sale, or a sale with covenants, can require the buyer to deliver certain outcomes - retaining heritage features, providing public access, delivering affordable workspace - as a condition of the transaction.
The trade-off is straightforward. Sale releases capital and removes an ongoing liability. But it also means losing control. Once an asset is in private ownership, the council's ability to influence its future use is limited to whatever protections were built into the sale agreement - and to the planning system.
For assets with strong market value and no compelling public purpose, sale may be the most sensible route. For assets where the council has strategic objectives - regeneration, community benefit, heritage conservation - it requires careful thought about what is being given up.
Leases and operator agreements
Between full ownership and outright sale sits a range of arrangements where the council retains the asset but hands operational responsibility to a third party.
A commercial lease to a private operator can generate income while transferring day-to-day management risk. A management agreement can bring in specialist expertise - a heritage trust, a hospitality operator, a workspace provider - while keeping the council in the driving seat on strategic decisions.
These arrangements work well where the council wants to retain long-term control but lacks the capacity or appetite to run the building itself. The key is getting the terms right: rent levels, repair obligations, break clauses, performance requirements. A poorly structured lease can tie a council into arrangements that become unworkable as circumstances change.
Hybrid models
In practice, many successful projects combine elements of several models. A council might retain ownership of a building, establish a CIC to manage it, and bring in a commercial operator for specific income-generating elements. Or it might transfer the freehold to a community trust while retaining nomination rights for certain uses.
Hybrid models can offer the best of several worlds - public accountability, community involvement, commercial discipline - but they also add complexity. The governance arrangements need to be clear. The respective roles and responsibilities need to be properly documented. And everyone involved needs to understand who is accountable for what.
Complexity is not a reason to avoid hybrid models. But it is a reason to get proper advice and to invest time in getting the structure right.
Matching the model to the purpose
The operating model should follow from the concept, not the other way around. A building intended as a community hub will need a different structure from one intended as a commercial workspace. A heritage asset with significant conservation obligations will need a different approach from a 1970s civic building being repurposed for modern use.
The questions to ask are practical. Who has the skills to run this? Where will the revenue come from? What level of subsidy is realistic, and for how long? What happens if the operator fails? What does the council want to retain control over, and what is it willing to let go?
These are not questions with abstract answers. They require honest assessment of capacity, risk appetite, and long-term commitment - from the council and from any organisation being asked to take on responsibility.
Getting the structure right before the design
Operating models are not an afterthought. They shape everything from the mix of uses to the physical layout of the building. A community café needs different kitchen specifications depending on whether it will be run by volunteers or a commercial caterer. A workspace needs different configurations depending on whether it will be let to a single anchor tenant or multiple small businesses.
Architects cannot design effectively without knowing how a building will be operated. Funders cannot assess applications without understanding who will run the asset and how. And councils cannot make sound decisions without clarity on where responsibility will sit and how performance will be monitored.
This is why we work on operating models early - before detailed design, often before funding applications, and always before commitments are made that become difficult to reverse.
If you are developing plans for a stranded asset and want to think through the ownership and operating options, we would welcome a conversation. We can help you assess what structures might work, model the financial implications, and ensure the concept you are pursuing has a delivery model that will actually sustain it.
