actually taking stuff from a skip isn't against the law.
I'm afraid it is, or rather I'm afraid it could
be. It is not a strict liability offence. That is to say there is no offence of "stealing from a skip". People make the mistake of confusing English common law with a system of administrative certainty and assume that if there is no specific offence covering an action then that action is legal. It doesn't work like that.
If you want a parallel consider what would happen if you found something in the street. Find something in the street and take it home and you could
be committing the offence of stealing by finding. What you should do is take anything you find to a police station, if nobody claims the item within a certain period ownership defaults to you. You might think this is OTT for a rusty old bike, but there are a couple of lads on our street who often leave their bikes leaning against the front fence. You might argue that they deserve to get their bikes stolen, but the point is that if you took one of them it could
be theft. Or what if the bike you find is already stolen? The penalty for handling stolen goods is stricter than the penalty for stealing by finding - which would you prefer?
The same would apply to something you found in a skip. Or you could simply ask the person who chucked the item if you could take it (BTDT) or you could contact the skip operator and ask them if they minded. Usually the skip operators DO mind sometimes because they want the income from the scrap value of the item, but more often because there are liability issues. Imagine Acme Skips allowed you to take a bike from one of their skips and riding it home the front wheel collapsed injuring you, would a court consider them liable for your injuries.
Common law is a minefield, which is why the word "could" is so important in this post. You could be committing an offence, but only if somebody complains, the case makes it to court and the court finds you guilty. Then and only then did you actually commit the offence. However I am a big fan of arse covering and would recommend that you always ask permission. Like my granny always said, "it doesn't hurt to ask". Don't think she was talking about bikes in skips but you never know.
Right. Sorry for hijacking the thread and all that.
So to get back on topic: before I considered a rebuilt I'd check the extent of that rust. If it's coming through the paintwork like that it could be pretty badly rusted.