Agenda item

            (Councillor McCarthy left the meeting while this item was under discussion.)

            The Committee considered the undernoted report:

“1        Relevant Background Information

1.1       By two separate leases the Council provided two adjoining plots of land at River Terrace to the Trustees of St. John Vianney YC and the Trustees of St. Malachy’s Parish for the respective provision of a Youth Club and a Pre-School Playgroup. 

1.2       The St. John Vianney YC site comprises approximately 0.3 acres and is held by the Trustees on a 99 year lease from 1 November 1985.  The lease requires use of the site in furtherance of the purposes of St John Vianney Youth Club.  The initial (1985) rent contained in the lease was £600 per annum.

1.3       The St. Malachy’s Parish site comprises approximately 0.25 acres and is held by the Trustees on a 91 year lease from 1 November 1993.  The lease requires use of the site for St Malachy’s Parish Pre-School Playgroup or for such other parochial purposes as the Trustees shall consider fit and appropriate.  The initial (1993) rent contained in the lease was £645 per annum.

1.4       Both leases contain provision for the review of the annual rents every five years.  On each occasion the reviewed rents are to be based on the then current market rental value of the site (i.e. site without buildings) but taking into account the terms of the respective leases.  The terms of the leases restrict use to very specific purposes, however it is considered the levels of rent should be broadly similar to other community based rents payable in respect of other sites leased by the Council for community type purposes.  Council officers have endeavoured to adhere to these levels in discussion of the outstanding rent reviews with the representatives of St John Vianney YC and St Malachy’s Parish.  Neither of the two leases contain a time-limit within which the rent reviews are to be triggered or agreed.  Both leases contain provision for arbitration in the event that the parties are unable to agree the reviewed rent(s).

1.5       It is recognised that community based organisations play a vital role in improving the quality of life and social outcomes for an area.  Settlement of rent reviews for such leases can often involve a significant time resource weighted against the relatively small increases in rent.  

1.6       Members, however, may wish to note that Councils in N.Ireland are currently constrained in their ability to dispose or lease premises to community type organisations at nominal amounts.  Section 96(5) of the Local Government Act (NI) 1972 requires District Councils [except with the prior approval of the Department of the Environmant (DOE)] to dispose of property for the best price or best rent that can reasonably be obtained.  By contrast, Councils in England have a wider ability as the ‘LGA 1972 General Disposal Consent (England) 2003: Disposal of Land for Less than Best Consideration’ removes the requirements for authorities to seek the consent of the Secretary of State for disposal at less than best price where the authority considers the disposal will help it to secure the promotion or improvement of the economic, social or environmental well being of its area (subject to certain conditions).  As part of previous discussions in relation to the Review of Public Administration (RPA) there had been suggestions that something similar to the English model should be introduced in Northern Ireland, but at the present time the Council remains bound by the existing terms of the 1972 LGA.

1.7       The Estates Unit have responsibility for the management of a significant leased property portfolio of circa 280 leases (including the Council’s commercial estate at Balmoral, Duncrue & Gasworks) and these are proactively managed to ensure rent reviews and lease terms are adhered to and optimised for the benefit of the Council.  The total rental income to the Council (in 2011/12) was approximately £6.7M, which represents a marked increase over the past few years. However, many of the community type leases were previously managed by the Client departments but more recently responsibility for these passed to Property and Projects (Estates) who have endeavoured to resolve any outstanding rent review issues. 

1.8       In relation to the St John Vianney YC site and St Malachy’s Parish site, the Trustees, in November 2010, appointed solicitors and a commercial estate agent/valuer to act on their behalf in relation to the proposed implementation of back-dated rent reviews and the levels of rents payable. 

1.9       The following seven rent reviews remained outstanding:

i)           St John Vianney YC site – Rent reviews as at 1.11.1995; 1.11.2000; 1.11.2005; and 1.11.2010 have not been agreed.

ii)         St Malachy’s Parish site – Rent reviews as at 1.11.1998; 1.11.2003; and 1.11.2008 have not been agreed.

1.10     The Limitation Act 1980 (commonly known as the Statute of Limitations) constrains the length of time over which any debt arising from the rent reviews can be pursued.  Following consultation between Legal Services and Property and Projects it is agreed that of the rent reviews which have not yet been agreed, one of them would not have yielded any increase in rent and three of them are now time-barred on account of the operation of the Limitation Act 1980. 

1.11     The Trustees’ representative has made proposals regarding two of the remaining three reviews, namely the 2008 review at the St Malachy’s Parish site and the 2010 review at the St John Vianney YC site.  In both cases the levels of rent proposed by the Trustees’ valuer are based on Retail Prices Index (RPI) increases.   The one remaining rent review which is not time?barred by the Limitation Act is the 2005 review at the St John Vianney YC site.  The Trustees’ representatives have declined to enter into discussions regarding this review.

2          Key Issues

2.1       The RPI increases proposed for the 2008 and 2010 reviews translate into proposed rents of £1000 per annum and £1400 per annum respectively.  These are considered to fall within an acceptable limit of the general community based rentals and are recommended for approval. 

2.2       Of the outstanding rent reviews it is considered that one of them (namely the 1995 review at St John Vianney YC site) would not have yielded any increase in rent.  Three further rent reviews are ruled out by the operation of the Limitation Act 1980.  Of the three rent reviews which remain within the statutory time-limit the Trustees’ valuer has declined to make a proposal for a revised rent for the 2005 review at the St John Vianney YC site.

2.3       Applying a RPI increase would produce a rent of £1200 per annum in relation to the 2005 review on the St John Vianney YC site.  The overall amounts of additional income which might result from this review would be relatively small, although the rent review (with reference to the Limitation Act 1980) is legally valid.  However the Council’s Investment Programme 2012–2015 recognises the role for the Council supporting the community and voluntary sector as well as local groups and organisations which play a vital role in supporting our local communities and improving quality of life. In this context there could be reputational risks to the Council by drawing a community based organisation into an arbitration process.  The financial outcome to the Council from any arbitration process would be uncertain and there are relatively small amounts of money involved.  The potential costs to the Council in proceeding with arbitration would outweigh the relatively small amounts of money involved.

2.4       The valuer acting for the Trustees has proposed that the Retail Prices Index be used as the formal mechanism for calculation of future rent reviews at both sites.  Such a change would require the alteration of the terms of the two leases through Deeds of Variation.  Given the relatively low level of rents on these sites there is much merit in this proposal.  It would certainly simplify the process and eliminate much of the delay, resource cost and risk associated with the rent review process. 

2.5       As referred to above, Members will note that note that Property and Projects Department now manage the leases for these properties and more robust arrangements are now in place which are in keeping with the Department’s central position in relation to management of the Council’s property assets.

3          Resource Implications

3.1       Financial

            In the absence of final agreement on rents associated with all the outstanding rent reviews, it is difficult to be precise about the potential financial impact which results from the operation of the Limitation Act 1980 and not proceeding to arbitration in respect of the 2005 review.  However even if RPI increase would have been the minimum which would have applied then the increase in the Council’s income which would result from the 2000 and 2005 reviews at the St John Vianney YC site and the 1998 and 2003 reviews at the St Malachy’s Parish site would be in the region of £4800.

3.2       Human Resources

            Resource in Estates Management Unit and Legal Services would be required in connection with any reference to arbitration and with any Deed of Variation which could be required to give effect to the proposed revised rent review methodology.

3.3       Asset and Other Implications

            The management of the rent review process would be simplified and speeded up by the proposed move from market rental valuations to indexation via the Retail Prices Index.

4          Equality and Good Relations Considerations

4.1       There are no equality or good relations issues associated with the current proposals.

5          Recommendations

5.1       Committee is recommended to:

i)              To approve the proposed rent of £1000 per annum in respect of the 2008 rent review at the St Malachy’s Parish site and £1400 per annum in respect of the 2010 rent review at the St John Vianney YC site

ii)            To approve the preparation of two Deeds of Variation, by the Town Solicitor, to give effect to the proposed revised rent review methodology for future reviews, based on the Retail Price Index.

iii)          Note the effect of the operation of the Limitation Act 1980 in relation to the 1998, 2000 and 2003 rent reviews and to also note that 1995 review would not have yielded any increase in rent. 

iv)          To agree not to pursue the 2005 rent review at the St John Vianney YC through the arbitration process set out in the lease.”

            The Committee adopted the recommendations.