Briefing Paper to the Value for Money Overview and Scrutiny Commission 23 July 2010 Concessionary lettings update Briefing by the Head of Economic Development and Regeneration 1. Purpose of the briefing paper and summary 1.1 The Overview and Scrutiny Commission have previously considered a report providing an update on concessionary lettings of Council owned properties, including those leases that are due for renewal. The Commission raised questions when considering that update report. The purpose of this paper is to provide a response to those questions. 2. Introduction 2.1 The Scrutiny Commission considered an update on the review of concessionary lettings of Council owned properties granted to third sector organisations in a report presented to the Commission on the 22 April 2010. This briefing paper intends to set out the queries raised by the Scrutiny Commission, outline detailed replies to those queries and provide the information needed for the Commission to raise any other issues it feels the Council needs to address. It also outlines the reasons behind a recommendation that a further briefing is submitted to Scrutiny in January 2011. 3. Recommendation 3.1 That a briefing note be submitted to the Scrutiny Commission in January 2011 providing full details of those new concessionary leases granted, those approved for renewal and those concessionary leases terminated, during the period 1 April to 31 December 2010. 4. Questions raised by the Scrutiny Commission and replies. Why have concessionary leases not been reviewed despite the expiry date having passed? 4.1 The schedule attached to the report considered by Scrutiny showed a number of concessionary lettings where an agreed lease termination date had expired. A number of other concessionary leases were granted on a basis where no formal expiry date was agreed and as such are being regarded as periodic tenancies. At 1 the time these lettings were first collated into a schedule, the Council could have served notice terminating those lettings on 1 April 2008. That termination date has been used in the schedule previously considered by Scrutiny. This has now elapsed and the occupiers are regarded as holding over under the current terms of occupation. Notice can still be served by the Council to consider renewal of those concessionary lettings where no fixed expiry date applies. 4.2 It is proposed to review those concessionary lettings, both fixed term leases and those that should be regarded as tenancies that are holding over, in accordance with the Community Asset Transfer (CAT) Strategy and revised Concessionary Lettings Policy (CLP) approved by the Asset Management Committee earlier this year (refer background documents for minute reference). Having received that approval 19 concessionary lettings are due for renewal and are highlighted grey in Appendix 1 attached to this report. 4.3 Those concessionary lettings due for renewal will be the subject of individual reports to Area Committees providing details of the leases and any benefits provided to the local community. The report would be seeking comments from the Area Committees on a recommendation to terminate or renew based on the evaluation carried out by the CAT project team. What are the additional costs other than estimated rental value, met by the Council in relation to maintaining and running each property on an annual basis? 4.4 Assessment of the concessionary lettings granted by Council and that are due for renewal has identified that in some instances the Council presently pays for occupancy costs other than rent. This has included contributions towards rates, utilities, repairs and maintenance, insurance etc. The authority for providing such additional support is in many instances unclear. Clarification is being sought with occupiers of those leases that are due for renewal. 4.5 The revised CLP applies the principle that the occupier is normally expected to fund all occupation costs other than rent. If approved for renewal who is responsible for what and who pays for what including amounts, will be clearly set out in any renewal terms. As those lettings in Appendix 1 and all future renewals are appraised, the additional occupancy costs will be established in detail from Council records and discussion with the lessee. Appendix 1 includes additional columns setting out how it is proposed to capture that information which is to be confirmed (TBC) Do occupiers under concessionary leases receive any other public funds to offset revenue costs? 4.6 Again discussions with those occupiers of concessionary leases that are due for renewal indicates that in certain instances they have successfully applied for grants and other forms of financial assistance from public sector organisations. Those details are being established with those concessionary leases that are due for renewal and which will be considered by the CAT project team. The source and amount of grant funding will be established. Appendix 1 again includes additional columns setting out how it is proposed to capture that information. 2 Why was such a long lease issued with regard to the Harpings Road Football and Play Centre? 4.7 The 999 year lease granted to Birtlecrest Limited for premises at Harpings Road was negotiated and agreed by the former Assistant Director for the Department of Industrial Development. That officer has subsequently left the authority and only limited case file records are available. From those details the Council received a premium upon completion of the lease. This was equivalent to the freehold value at the time. The grant of a 999 year lease enabled the Council to retain the freehold whilst receiving a capital receipt. Whether retention of the freehold was a driver behind the grant of such a long lease is conjecture as it cannot be confirmed from the case file or discussion with the officer who negotiated the transaction. In other cases the same outcome of retaining the freehold has been achieved by granting a much shorter term say 125 years. 4.8 The Harpings Road lease was a commercial not concessionary letting and as such should not have been included in the concessionary lettings schedule. 5. Conclusions 5.1 When the Scrutiny Commission tasked the Head of Business Support Services to review the concessionary lettings granted by the Council to third sector organisations, progress has been made in forming a CAT project team, adoption of a CAT Strategy, Concessionary Lettings Policy and establishing processes for appraising applications and renewals for concessionary leases. 5.2 It is clear the CAT project team still has considerable work to carry out in validating the concessionary lease details as it considers new requests for concessionary leases and works its way through a backlog of concessionary lettings that are due for renewal. It is proposed to still set out the notional rental income foregone from those Council property assets occupied under concessionary lease terms. Those details need to be supplemented with other occupancy costs paid by the Council and other funding provided to lessees from other public sector bodies. 5.3 It is suggested that a briefing paper is submitted to the Scrutiny Commission in January 2011 providing details of those concessionary lettings granted, terminated and renewed during the period 1 April to 31 December 2010. That paper will include full details of rental income, capital values and costs of any other support provided by the Council and other public sector organisations. This will enable a full assessment to be made of any savings achieved for those lettings not renewed and the ongoing financial support provided by the Council to the third sector through concessionary lettings that are approved for renewal. Mark Jones Head of Economic Development & Regeneration Contact Officer David Bennett Telephone number 612183. Background Documents ♦ Minute 105 of the Value for Money Overview and Scrutiny Commission ♦ Minute 81 of the Asset Management Committee meeting held on 21 March 2010 approving the Community Asset Transfer Strategy and Concessionary Lettings Policy. 3 Other occ. Other costs public Full Council sector Tenant Unit Description Unit type Tenant Status Annual Rent Rental Value funded grants Current / rent Hull Playgoers' Society Ainthorpe Primary School Educ / CS review due £900.00 £2,500.00 TBC TBC Mrs L Downing Ainthorpe Primary School Roundabout Nursery Educ / CS Current £1,300.00 £6,900.00 TBC TBC Super Stadium Management Company Ltd Anlaby Road K C Stadium Sport facil Current £0.00 £78,000.00 TBC TBC English Churches Housing Group Ltd Appin Close 42 Dwellings Current £0.00 £0.00 TBC TBC S A F E Project Appin Close 2 Offices Current £0.00 £1,475.00 TBC TBC Ms A Harrison Appin Close 9 Offices Current £0.00 £2,325.00 TBC TBC Hull and Humberside Housing Ass Ltd Arthur Street 2 Agriculture Current £0.00 £1,550.00 TBC TBC Bayswater Court Residents Association Bayswater Court 40 Dwellings Current £0.00 £1,775.00 TBC TBC Preston Rd Neighbourhood Development Co Ltd Bessingby Grove 45 Offices Current £0.00 £1,075.00 TBC TBC Heart of Boothferry Bethune Avenue 67 Shops Future £0.00 £2,425.00 TBC TBC Heart of Boothferry Bethune Avenue 73 Shops Future £0.00 £2,450.00 TBC TBC CityBuild Blackfriargate 20 Car parks Current £0.00 £0.00 TBC TBC English Churches Housing Group Ltd Blackhope Close 21 Dwellings Current £0.00 £0.00 TBC TBC HCBE (ARC) Blanket Row former Castle Street Car Park Car parks Holding Over £0.00 £0.00 TBC TBC Case Training Services Charles Street 70 - 76 Offices Current