Agenda item

To scrutinise the decision to approve the final terms and the grant of a lease of the Durley Road Car Park site to Durley Road Development LLP. The published officer decision is attached to this agenda.  This decision was taken by the Council’s Corporate Property Officer on 13 November 2020 under delegated powers to comply with the decision made by Cabinet on 24 June 2020.

Note:  this decision is not subject to call-in and is listed for post decision scrutiny following a request from a member of the Overview and Scrutiny Board. 

The Chairman introduced the item and explained the reasons why the report had come to the meeting. A copy of the report had been cirucalted to each member of the Board and can be found at Appendix ‘A’ to these minutes in the minutes book. It was an opportunity for the Board to consider the decision taken and the reasoning and requirements behind the decision but it was explained that there was no opportunity to ‘call-in’ the decision. The Chairman advised that he had invited Mr Carr, Chief Executive of Fortitudo and a local property developer to attend the meeting to provide some insight on his view of the Council’s decision regarding the lease for the site and explain further as regarding his offer for the site at a higher amount than the Value for Bournemouth Development Company (BDC).

The Chief Executive, as the Corporate Property Officer responsible for the Officer decision being scrutinised explained the background and the reasoning for the decision.

Mr Carr outlined his involvement in the site and the offer which he had made. Fortitudo had offered £1.5m, which was slightly less than the companies own options appraisal for the site. He raised further issues concerning the Council’s arrangements with BDC and suggested an audit of the sites developed should be undertaken. There was concern raised that the Council was not complying with section 123 of the Local Government Act 1972 regarding disposing of land at Best Value and also concerns with

Councils controls on planning and whether there was a break clause within the agreement. The Board was advised that the options agreement as referred to in the decision record had not been seen by many, the red book valuation was based on unknown assumptions and the disposal value was less than a quarter of the offer made by fortitude.

The Board was reminded that it was only the decision on the Durley Road Car Park site that was to be considered for Scrutiny and not the wider issues concerning BDC or previous developments.

The Chief Executive advised that deliverability for any site needed to be a foremost consideration, which was a contributing factor behind the initial BDC options arrangement. The Council was commissioning a review of the BDC partnership arrangements with partners and this would be an opportunity for the O&S Board to look at the arrangements overall. The Chairman requested whether the options agreement could be made available to Board members. The Monitoring Officer advised that it would be commercially confidential but should be available on the Council’s contract register, although it may need to be redacted.

Members raised a number of points in the discussion which followed including:

·     The difference between the red book value and the price which was being offered. It was noted that the difference in these values would be due to potential claims for losses from commercial partners and would be related to a commercial negotiation with partners at Morgan Sindall.

·     What the penalties would be if the Council didn’t go ahead with the project and whether the same penalties applied to Morgan Sindall if they withdrew from the agreement. It was noted the BDC was a company owned jointly by Morgan Sindall and the Council at 50 percent each. Morgan Sindall would fund developments up front therefore if they did not go ahead they would be financially penalised. Both parties would be contractually bound in the same way and there would be contractual penalties.

·     A Board member asked how the decision taken met best value requirements. The Chief Financial Officer referred the Baord to the decision record as to how the value was arrived at and how it met section 123 of the Local Government Act and what the Council was looking at to ensure that the decision was legally compliant.

·     The Chairman asked why the independent valuation report didn’t take into account into account any other market offers made. It was noted that it was valued at its existing use as a car park and the wider market level rather than any offers which were made on the site. It was noted that the land was not for sale on the open market and open offers would not have been considered. Offers were made for sites frequently and would not be considered. 

·     The Chairman asked the Chief Financial Officer felt constrained by the contract arrangements made. The Chief Financial Officer advised that this appeared to be straying into Value for Money requirements of the original agreement. The independent valuation was double checked by Homes England. The Conclusion that this was the right thing to do was set out in the Officer Decision Record. In 2010 the arrangements for this were set out in a full OJEU notice which was supported by the Regional Development Agency at the time.

·     A further query was raised regarding the constraints of the contract in ensuring meeting the requirements of section 123 of the Local Government Act 1972. The development agreement, which was contractually binding was set out 10 years ago which needs to be taken into account.

·     A Board member commented that any offer can only be accepted with proper proof of funds. Red book value done by a qualified chartered surveyor – backed up by the Homes England.

·     The Chairman commented on issues concerning land being disposed of at below market value and Stamp Duty Land Tax and the implications of a beneficiary in this situation. The Board was advised that this was a complicated issue and further advise would need to be sought on this before providing a response.

·     Financing for the development company and the source of the loan coming from the Council. The loan to BDC was part of Council’s treasury management strategy rand the management of the Council’s cash which was regularly reported to the Audit and Government Committee on a regular basis. There was a very clear OJEU framework governing this issue.

The Chairman thanked Mr Carr for attending the meeting and summarised that clearly officers have followed the processes and procedures that they needed to abide by in this decision and the issues regarding Value for Money would be taken into account by the Audit and Governance Committee.