Report Of: Paul Slocombe, Director of Resources

Report of: Paul Slocombe, Director of Resources

Subject: Land at Simpson Street/Stonehouse Street/Linthorpe Road, Linthorpe, Middlesbrough (former Bee-line bus depot & Kwik-Fit depot)

Date: 6 September 2006

PURPOSE OF REPORT

1. To seek approval to the terms upon which Middlesbrough Council and Kwik-Fit Properties Limited are to jointly market and dispose of their respective land-holding interests at the above location, as directed by the Corporate Management Team on 17 August 2006.

2. To seek approval to the transfer of a small strip of land from the Council to Mike Rider of Simpson Street, Linthorpe, Middlesbrough on the terms reported.

BACKGROUND & EXTERNAL CONSULTATION

3. The property shown on plan VAL 4059E marked 1 and 2 is owned by Kwik-Fit Properties Limited. The property marked 3,4,5,6 and 7 is owned by Middlesbrough Council. The property marked 8 is owned by Mike Rider.

4. The property marked 3 is subject to a Lease from the Council to Kwik-Fit for a term of 50 years from 1 July 1958 at a peppercorn rent.

5. On 20 June 2002, Delegated Authority was exercised in respect of an exchange of the Council’s land (site 3) for Kwik-Fit’s land (site 2) to complete the assembly of a Council development site (2,4,5,6 & 7), but Kwik-Fit failed to complete the transaction.

6. Following the closure of its depot (on sites 1 & 3) further discussions led to Kwik-Fit submitting an offer to pay the Council the initial sum of £187,500 (25% of the anticipated net receipt, based on their assessment of the value of the respective land holdings), and a further 25% of any proceeds above a net receipt of £750,000 in return for the Council’s freehold interest in the premises marked 3,4,5,6 and 7.

7. The matter was reported to the Council’s Technical Officer Group (Property) on 9 February 2006 where it was recommended that the Council jointly disposes of the site (marked 1 – 7 on plan VAL 4059E, but excluding the hatched area) with Kwik-Fit, subject to terms being agreed, to enable the Council to retain a greater influence over the development of the site.

8. It has been provisionally agreed that that Kwik-Fit will seek outline planning consent for retail development of the site and that its agent will subsequently market the freehold interest in the site provided that the Council enters into a legal agreement with Kwik-Fit Properties Limited on the following main terms:- a. The Parties agree to jointly market all their interests in the site for sale through the ‘Appointed Surveying Firm’ (Davison Blackett Ltd, The Estate Office, Netherton Moor, Bedlington, Northumberland, NE22 6AW) and on securing a mutually acceptable purchaser will each simultaneously convey their interests to the agreed purchaser. b. Each party will give in principle approval to the recommendation for sale proposed by the appointed surveying firm within 28 days of the proposals’ presentation to them and if deemed acceptable by both parties will secure all internal Board or Executive approvals required within 60 days of the proposal being presented. Such periods to be subject to any reasonable extension as may be agreed between the parties. c. Each party is to be reimbursed from the gross sale price for all qualifying expenditure, i.e. costs incurred by the parties in the enhancement of the value, marketing and sale of the property. The net proceeds will then be apportioned with Kwik-Fit to receive 62.5% of the remaining sum and The Council 37.5%, to reflect the value of the respective interests and the fact that Kwik-Fit will incur speculative costs. d. The agreement is to remain in place for a period of 1 year and thereafter by agreement between the parties to allow for any sale conditional on planning consent and potentially challenge by judicial review to be concluded where both parties feel this is to their mutual benefit or earlier if a sale is agreed.

9. On 9 February 2006, the Council’s Technical Officer Group (Property) also recommended that the area of Council-owned land within the area shown by hatching on plan VAL 4059E be transferred to Mike Rider at nil consideration with each party to bear their own costs in order to resolve Mr Rider’s claim to have obtained a right of access to the rear of his property (marked 8 on the plan) over parts of the proposed development site and avoid a potentially costly and time consuming Court case. Kwik-Fit is also willing to transfer its ownership within the hatched area to Mr Rider on similar terms provided that it does not conflict with the proposed development of the adjacent site.

OPTION APPRAISAL/RISK ASSESSMENT

10. The following alternative options were reported to the Council’s Technical Officer Group (Property) on 9 February 2006:- i. To agree, in principle, to sell the Council’s freehold interest in sites 3,4,5,6 and 7 (excluding the hatched area) to Kwik-Fit for a sum to be negotiated, plus legal and surveyors fees. ii. To try to progress the previously approved exchange of interests with Kwik-Fit (site 2 for site 3) and market site 2, 4, 5, 6 and 7 for development independantly of Kwik- Fit’s site 1 and 3. iii. Not to transfer the hatched land to Mr Rider at nil consideration and either seek a capital payment, payment of the Council’s fees, or retain the land and refute his claim.

FINANCIAL, LEGAL & WARD IMPLICATIONS

11. Kwik-Fit’s initial appraisals indicate a site vale in the region of £800,000. It is anticipated that qualifying expenditure, e.g. costs of securing planning consent, insuring against the title defect which prevents building on some parts of the site and disposing of the site will be at least £50,000. 12. Although the other options reported would also result in the Council receiving a capital payment, it is felt that a joint disposal with Kwik-Fit would generate a greater sum whilst also resulting in a better development of the site from an economic regeneration perspective and for the benefit of the community.

13. In March 2001, the Tees and Hartlepool Port Authority Limited transferred ownership of sites 6 and 7 to the Council for £1.00 on condition that the Council would pay the Port Authority 50% of the increased value of such areas of land if they were disposed of for development. This commitment is still “live” and will reduce the Council’s share of the net sale proceeds.

14. The property is situated in the Park Ward and Ward Councillors have been advised of the current position.

RECOMMENDATION

15. That the Council grants approval to the terms upon which Middlesbrough Council and Kwik-Fit Properties Limited are to enter into a contract to jointly market and dispose of their respective land-holding interests at the above location.

16. That the Council approves the transfer of its land within the area shown by hatching on plan VAL 4059E to Mike Rider at nil consideration with each party to bear their own costs.

REASONS

17. The recommendations should result in the Council securing the optimum financial consideration in return for its property interests, plus its legal and surveyors fees, whilst also ensuring that the regeneration of this vacant property is carried out in the best interests of all parties concerned. 18. The costs involved in disputing Mr Rider’s claimed right of way would be likely to exceed the value of the hatched area of land.

BACKGROUND PAPERS

19. Report considered by the Council’s Corporate Management Team on 17 August 2006.

AUTHOR: IAN ROBERTS HBS VALUTION ESTATES & ENTERPRISE CENTRES TEL NO: 727066