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Land Adjacent to 182 York Avenue, East Cowes, Isle of Wight Po32 6Be – Proposed Freehold Sale

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Land Adjacent to 182 York Avenue, East Cowes, Isle of Wight Po32 6Be – Proposed Freehold Sale 30/08 DECISION UNDER DELEGATED POWERS DECISION CANNOT BE TAKEN BEFORE FRIDAY, 13 JUNE 2008 Title LAND ADJACENT TO 182 YORK AVENUE, EAST COWES, ISLE OF WIGHT PO32 6BE – PROPOSED FREEHOLD SALE Report to the Cabinet Member for the Economy, Planning and Property Purpose 1. This report is to consider the sale of Isle of Wight Council’s (IWC) freehold interest of land adjacent to 182 York Avenue, East Cowes, to a special purchaser, the British Red Cross (BRC). BRC currently occupy the premises, benefiting from a long leasehold interest. 2. A special purchaser is classed as a person (or body) with an existing interest in the land in question or adjacent land where that interest is such that the person (or body) may be prepared to pay above market value or where, because of the interest, the Council may be better able to achieve its corporate objectives (such as economic and social regeneration) by working with the special purchaser. Outcomes 3. The IWC’s interest is transferred to the BRC for the sum of £5,000 (Five Thousand Pounds), incorporating an overage clause (please see paragraph 10 below) and IWC’s professional fees up to £750 plus VAT. Confidential / Exempt 4. Not applicable. Items Background 5. The approximate location of the subject property is shown outlined red on the attached plan for illustrative purposes only (Appendix A). 6. The IWC has been approached by the BRC’s Agent to establish whether the IWC would sell their freehold interest in the subject premises. The BRC’s Agent informs us that the BRC wish to undertake extensive works to improve the property, including re- roofing, works to the kitchen and improving disabled access. Therefore the BRC wish to hold the longevity associated with a freehold interest. 1 7. The property is currently used not only by the BRC but also hired to a variety of Island organisations, who should therefore benefit from any works. 8. The BRC currently occupies the premises by way of a Lease dated 3rd August 1978 originally between the County of the Isle of Wight as Landlord and Messrs Guttridge, Giles, Godsland and Roberton as Trustees of East Cowes Dispensary, as Tenant, for a term of 99 years from 1st April 1978. The passing rent for the remainder of the term is £1 per annum. 9. The BRC originally approached the IWC via their Agent making an offer of £2,000 plus professional fees for the IWC’s interest. Following further negotiations and obtaining an external valuation from two independent local Chartered Surveyors, a proposed consideration of £5,000 plus professional fees up to a maximum of £750 plus VAT has been reached, subject to contract and formal approval. 10. An overage clause has been negotiated to the benefit of the IWC. The covenant will enable the IWC to receive one half of any increase in value associated with an alternative planning permission for the property being obtained at a future date, when assessed against the market value as may be demonstrated at that time for the existing use. Strategic Context 11. The proposed sale supports the Eco Island Theme and Priorities: (i) “A Thriving Island” - This proposal may assist in reducing energy consumption from these premises, with the proposed works including re-roofing the property, thus potentially helping to reduce the Island’s carbon footprint. (ii) “A safe and well kept Island” – The proposed works should enhance the appearance of this building and how the immediate area looks and feels. (iii) “A Healthy and Supportive Island” - It is understood that the BRC hire the hall to the general public in addition to their own use. Therefore, the improvements to the property will be of benefit to residents of the Isle of Wight and facilitate the continued use of the premises by the BRC. 12. There are no known adverse human rights issues relating to this decision. Crime and disorder issues are generally improved when buildings are refurbished and better used as they become less of a target for vandals. Diversity issues are likely to be improved by better DDA accessibility and wider community use. Consultation 13. Consultation has been undertaken with Risk and Insurance, Finance and Legal Services, the Cabinet Member for the Economy, Planning and Property, Scrutiny and the Ward Member Cllr Margaret Webster. 2 14. Independent external advice has been sought from two local Chartered Surveyors, who have provided a joint report with respect to this proposal - a copy of the report is attached as Appendix B. Financial / Budget 15. The annual ground rent of £1 per annum will cease should the Implications transfer happen. Nevertheless, the proposed transfer will provide a gross capital receipt of £5,000 for the IWC. 16. The BRC have agreed to pay up to £750 plus VAT for the IWC’s professional fees associated with this proposed transaction, even in the event of non-completion. Legal Implications 17. The BRC are a special purchaser due to their leasehold interest and approached the IWC with an initial proposal. 18. Section 123 of the Local Government Act 1972 enables the IWC to dispose of the property for best consideration. Options 19. The three options are: i. Sell the IWC’s freehold interest to the BRC as a special purchaser for £5,000, including an overage clause in favour of the IWC, should a beneficial change of planning permission be obtained in the future, as detailed in paragraph 10 above. ii. Market the IWC’s freehold interest, subject to the BRC Lease, and £1 per annum rental, in the open market. iii. Retain the IWC’s freehold interest and the current equilibrium. Risk Management 20. Option (i) will enable £5,000 to be obtained for the IWC and at the same time help to facilitate a wider community benefit. External professional advice has been obtained to ensure best consideration is received by the IWC. The proposed terms include provisions for up to £750 plus VAT to be paid by BRC associated with the proposed transaction, even in the event of non-completion and an overage clause will be included as discussed at point 10 above. 21. Option (ii) would require the IWC to instruct an agent to take the interest to market. This approach will result in agent’s fees being incurred by the IWC and possible legal costs associated with the transaction. It is understood that the British Red Cross would not wish to undertake their proposed works if they were not successful in purchasing the IWC’s interest. 22. Option (iii) to retain the current equilibrium. The IWC would continue to receive the annual rent of £1 per annum for the remainder of the term but would not receive a capital receipt of £5,000. The IWC would retain limited management responsibilities associated with their retained interest and as 3 option (ii) it is not believed that the BRC would undertake the proposed works to the unit. Evaluation 23. The BRC currently enjoys occupation of the land and the residue of a 99 year term (circa 69 years) at a rent of £1 per annum until expiry. 24. The premises consist of a single storey building with brick elevations beneath a pitched roof, understood to be clad with asbestos cement sheeting. We understand the BRC currently use the premises as a meeting hall which is hired by the public, stores and ancillary office space. 25. We understand the BRC wish to undertake substantial improvement works to the property at a cost in the order of £70,000, including renewing the roof, kitchen fittings and providing disabled access to the property. These improvements would benefit the users of the hall, and the community at large. 26. The IWC has the opportunity to secure a gross capital receipt of £5,000 for their interest and the inclusion of a covenant for any future beneficial change in planning use as detailed above. 27. We do not believe the subject premises currently have any beneficial operational benefits to the IWC due to the current Lease. 28. We have received independent valuation advice that supports the proposed consideration of £5,000 (subject to contract and agreement). The negotiated figure is an enhanced value of £3,000 when compared with BRC’s initial offer. 29. If the IWC looked to take their interest to market, as discussed above, additional expenses may be incurred by the IWC, which are not associated with BRC’s proposal. We have obtained independent valuation advice which concurs that best consideration has been obtained and thus the IWC would not necessarily receive a value greater than £5,000 if the interest were marketed. We have also negotiated an overage clause as detailed at point 10, which we do not believe would necessarily be forthcoming should this matter be brought to the market. Recommendation 30. It is recommended that option i is adopted and the IWC transfers its freehold interest to the BRC for the sum of £5,000 plus professional fees (to a maximum of £750 plus VAT), along with the inclusion of the overage covenant relating to any increase in value associated with change of planning use. 31. Option (i) has been recommended because we believe this will provide benefits to the wider community who use the hall in the form of an improved facility, in addition to providing a capital receipt for the IWC of £5,000, for an asset which we believe currently has no operational benefit to remain in IWC’s asset register. 4 Appendices Attached 32. Appendix A – Joint independent Chartered Surveyors valuation advice and Site Plan for illustrative purposes only.
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