Meeting documents

1 THE ISSUE

1.1 In March 2005, a decision was made to grant a 3 year lease of Mount Beacon Lodge, Lansdown, Bath to Bath Housing Co-operative on terms to be negotiated. This report seeks to gain approval to that lease being granted on terms which provide for a rent at less than market value.

2 RECOMMENDATION

2.1 Agree that a three year lease is granted to Bath Housing Co-operative of Mount Beacon Lodge, Lansdown, Bath at a rent at less than market value of £90 per calendar month subject to the tenants undertaking an approved scheme of works, and
Either:
subject to the presumption that the lease will revert to the Council at the end of that term and the property will be sold on the open market.
Or:
the lease will revert to the Council at the end of that term, unless agreement is reached between the Housing Co-op and the local authority that the Housing Co-op has a role to play in contributing to affordable housing initiatives, and that a continuation of the lease represents good value.

2.2 To note the estimated income foregone of £7,320 p.a. for three years, as a result of letting the property at less than a market rent and the effect on the Council's cashflow and overall borrowing costs

3 FINANCIAL IMPLICATIONS

3.1 The market rent for this property is estimated to be £1,200 per calendar month. The Co-op will enter in to a schedule of works that they will undertake to the property, estimated to be the equivalent of approximately £500 per calendar month. They will pay a rent of £90 per calendar month. There is a shortfall of rental income equivalent to £610 per calendar month (£7,320 per annum)

3.2 If the property were to be sold with vacant possession a capital receipt of around £350,000 at current market value would be expected. By entering in to the proposed lease the potential for gaining the benefit of this receipt will be lost for at least three years. All or part of that capital receipt could be made available for the provision of other schemes that fall within the Council's adopted Social Housing policies and frameworks.

3.3 Effectively delaying the receipt will impact on the Council's cashflow & overall borrowing costs as follows:

Year 1 £350,000 * 5.5% = £19,250
Year 2 £350,000 * 9.5% = £33,250
Year 3 £350,000 * 9.5% = £33,250

3.4 Towards the end of the three year lease it will be possible to re-examine the occupation of the property by the Co-op, but, in agreeing to this proposition, a presumption is made, and understood by the Co-op, that unless there are substantial changes to their situation, the lease will revert to the Council at the end of the term, and the property will be sold on the open market at that time.

4 THE REPORT

4.1 This report seeks approval to grant Bath Housing Co-operative a 3 year lease of Mount Beacon Lodge, Lansdown, Bath at less than market value rent.
In a Joint Single Member Decision Co-operative made by Executive Members for Economic Development and Community Safety, Housing & Consumer Services on 7 March 2005 it was resolved to grant the co-op a lease of three years subject to the terms of the lease being negotiated by the Head of Property Services. This report seeks to gain approval to that lease being granted on terms which provide for a rent at less than market value.

4.2 Further background is set out in the Appendix to this report.

5 RISK MANAGEMENT

6 RATIONALE

6.1 The Executive Members for Economic Development and Community Safety, Housing & Consumer Services have resolved to grant a lease of the Lodge to the Co-op on terms to be agreed by the Head of Property Services. In order for this lease to be granted at a level which the Co-op can afford it has to be at a rent which is at less than full market value. Works will be undertaken to offset some of the lost rent but a subsidy of £610 per calendar month will still be required under this proposal.

6.2 Where a new concessionary rent is offered to an organisation, it is Council policy that the concession should be supported by a sponsoring service. In this case it would normally be Housing services that should support the concession.

6.3 As the co-op do not fall within the housing criteria currently accepted by the Council, the Housing Service will not support this proposal. The Executive Member for Economic Development, in whose portfolio the Property Department sits, believes that the time period of the lease should be used to investigate more fully with the Housing Co-op and Housing Service, whether the Co-op can offer a means to ease homelessness or contribute towards affordable housing. In the meanwhile, this proposal will, in essence, represent grant aid support by Property Services to the Bath Co-op.

7 OTHER OPTIONS CONSIDERED

7.1 Do not grant a lease of the property to The Bath Housing Co-operative. This will immediately gain vacant possession of the property by implementing notices terminating the current tenants' occupation. The property could then be sold providing an estimated capital receipt in the order of £350,000. All or part of this receipt could then be made available to support other Social Housing schemes in the Authority, if the Executive so chose.

A lease could be offered at full market value. The Co-op has indicated that they cannot afford a lease on this basis and the property would then have to be vacated and sold as above.

8 CONSULTATION

8.1 Ward councillor, Executive councillor, Other B&NES Services, Section 151 Finance Officer, Chief Executive, Monitoring Officer

8.2 Comments received have been incorporated into the report

9 REASONS FOR URGENCY

9.1 Not urgent.