BOROUGH OF POOLE
SERVICE PROVISION SCRUTINY AND AUDIT COMMITTEE
13 DECEMBER 2005
The meeting commenced at 7.00pm and concluded at 9.36pm.
Present:
CouncillorAllen (Chairman)
CouncillorsAdams, Brooke, Mrs Deas, Gregory (substituting for Councillor Belcham), Mrs Hives, Mrs Lavender (substituting for Councillor Burden), Newell (substituting for Councillor Montrose) and Pethen.
Members attending in accordance with Scrutiny Rule 16F.
CouncillorsClements, Eades and Miss Wilson
Note Councillor Clements and Eades were Members of this Committee but as signatories to the “call-in” were not voting Members.
Also in attendance
Councillor Sorton, Portfolio Holder for Resources
Officers in attendance
Arthur Green, Interim Head of Property Services
Sarah Varley, Property Services
Tim Martin, Head of Legal and Democratic Services
Keith Guy, Legal and Democratic Services
Matti Raudsepp, Leisure Services
Pauline Gill, Legal and Democratic Services
Members of the public present:5
1.APOLOGIES FOR ABSENCE
Apologies for absence were received from Councillors Burden (Vice-Chairman), Belcham, Montrose and Meachin.
Note – Councillor Meachin was a signatory to the “call-in” but not a Member of the Committee.
2.DECLARATIONS OF INTEREST
Councillors Allen and Gregory declared personal interests as Members of Dorset Fire Authority in Agenda Item 4 – Sale of Land at Marshes End.
Councillors Clements and Eades declared personal interests in Item 3 – “New Lease of Swan Lake Café and New Lease of the Old Boatyard” for the purposes of a New Restaurant, Poole Park as objectors to the disposal of open space at Poole Park.
Councillors Clements and Eades also declared that there was no Liberal Democrat Party Whip imposed on any of the proceedings before the Committee this evening.
3.NEW LEASE OF SWAN LAKE CAFÉ AND NEW LEASE OF THE OLD BOATYARD FOR THE PURPOSES OF A NEW RESTAURANT: POOLE PARK
Both Councillors Clements and Eades wished to formally record their objection to Scrutiny Rule 16F in the Council’s Constitution which meant that as signatories of a “call-in” regarding the above decision taken by Cabinet at its meeting on the 1st November 2005 although Members of this Committee they were not able to vote. Both Members regarded this procedure to be undemocratic.
The Committee noted the decision of Cabinet on the 1st November 2005 detailed below which had been “called-in” by Councillors Eades, Meachin, Plummer, Mrs Moore, Miss Wilson and Clements.
“That the completion of an Agreement for Surrender and Re-grant of Lease for the Swan Lake Café and proposed new lease of the Old Boatyard for the purposes of a new restaurant, Poole Park, be approved on terms agreed by the Interim Head of Property Services.”
Members noted the reasons given for the “calling-in” of this Cabinet decision to this Scrutiny Committee as follows:-
- No provision has been made for Competitive Tendering – how do the Council Taxpayers of Poole know Best Value has been achieved for the site?
- Why has the District Valuer not been asked to give an opinion on the terms of the lease?
- Why is the Lease granted for such a long period of time (40 years)?
4. If the Leaseholder is supposed to be sole concessionaire for providing catering services in The Park, why does the Lease contain a provision for assignment?
5. If the building is supposed to be solely a restaurant, why is there provision in the lease to allow patrons to consumer alcohol without buying a meal?
6. Why is there a one year rent free period?
7. I would like to request that the Scrutiny Committee seek means of strengthening the Council’s ability to ensure that the promised provision of an ice-skating facility is honoured. I would draw the Committee’s attention to the situation at Tower Park, where Members supported the change of use of the site to include ice skating and that has now become a bingo facility. I would like the Committee to be advised on alternatives such as a single lease for both sites or more specific restrictions on acceptable alternative uses for the Swan Lake venue.
The Chairman invited Councillor Clements to address his concerns to the Scrutiny Committee.
Reason 1
“No provision had been made for competitive tendering – how do the Council taxpayers of Poole know best value has been achieved for the site?”
Councillor Clements queried why there had been no competitive tendering and why the exclusivity agreement currently operated by the current leaseholder of the Swan Lake Café was being perpetuated. He felt that the variation by the introduction of the proposed new restaurant was so large that this could have been undertaken as part of a competitive tendering exercise.
With regard to some Members comments on the use of this proposed restaurant as a venue for after Theatre suppers, Councillor Clements had attended a presentation on proposals for the regeneration of the North Poole Town Centre where he felt there were numerous opportunities to site this type of facility without using Poole Park.
Councillor Clements then referred to Reason 2:
“Why is the District Valuer not been asked to give an opinion on the terms of the lease?”
He explained that with regard to the Dolphin Quays development where the Council was receiving a large income in rental when he was Leader of the Council he had been advised that it was good practice to consult the District Valuer on such a transaction. He queried why this has changed.
Councillor Clements then referred to Reason 7:
“I would like to request that the Scrutiny Committee seek means of strengthening the Council’s ability to ensure that the promise provision of an ice-skating facility is honoured. I would draw the Committee’s attention to the situation at Tower Park where Members supported the change of use of the site to include ice-skating and that has now become a bingo facility. I would like the Committee to be advised on alternatives such as a single lease for both sites or more specific restrictions on acceptable alternative uses for the Swan Lake venue.”
Councillor Clements expressed his concern with regard to the ice-skating facility and felt that the Council should learn from experience where at Dolphin Quays the expected outlet shopping had not materialised. He wished the proposed ice-skating facility to be made a reality by a strictly drawn up lease.
Councillor Clements then explained that, in his previous experience, before undertaking such agreements Cabinet had always had the financial information regarding the financial status of prospective leaseholders before a lease was signed and he queried whether was the case in this instance?
The Chairman then invited Councillor Eades to outline his reasons for “calling-in” the Cabinet decision and indicated that the Committee would then consider the points raised by each Councillor.
Councillor Eades referred to Reason 5:
“If the building is supposed to be solely a restaurant, why is there a provision in the lease to allow patrons to consume alcohol without buying a meal?”
Councillor Eades felt that the provision allowing the purchase of alcohol without the purchase of a meal meant that the proposal was for a café bar not a restaurant. He did not feel there should be any such provision contained in the Lease for the purchase of alcohol without purchasing a meal. He stated that the existing Lease included the ice-cream kiosk within the Lease for the Swan Lake Café. In surrendering the original Lease and re-granting the Lease including the ice-cream kiosk in the new Lease for the new restaurant Councillor Eades queried whether the rental included the kiosk? He felt that the ice-cream kiosk was worth a substantial sum on its own and that the new Lease incorporating the rental for the ice-cream kiosk was wholly inadequate and would like this scrutinised.
The Committee addressed these issues in turn:-
Reason 1
No provision has been made for competitive tendering – how do Council taxpayers know best value has been achieved for the site?”
The Committee noted the background that on the 1st April 1999 the Council had entered into a lease with South Coast Caterers Limited which was protected under the security of tenure provisions of the Landlord and Tenant Act 1954 meaning that the tenant had a right to renew this lease on much the same terms as the existing lease (with the exception of rent) which he currently occupied. The current lease was for a term of 20 years expiring on the 31st March 2019 and contained an exclusivity clause regarding catering within Poole Park. Members queried:-
- Whether the length of a lease ever exceeded 20 years; and
- whether the original facility had been built by the Council?
The officers responded explaining that the new building had been constructed in approximately 1961 with leases being granted in 1961, 1986 and 1999. A Member queried that under the Landlord and Tenant Act 1954 if the lessor had a right to another 20 years but that if the 1999 lease terminated in 2019 whether the Court would grant an extension of 15 years if the Council did not agree to grant this lease?
Councillor Sorton explained that providing the tenant paid the rent and complied with the terms of the Lease he had security of tenure.
A Member queried why the new Lease had doubled in length from 20 to 40 years?
Councillor Sorton explained that this was due to the substantial input of capital by the Leaseholder.
A Member queried that if the Lease was due to expire in 2019 and the current leaseholder had asked to renew the Lease early because of a wish to pursue the proposed development of a new restaurant and, it was normal procedure to renew a lease for 20 years why, on this occasion had the Council deviated from its normal procedure?
Councillor Sorton explained it was a matter of valuation with regard to the restaurant lease.
The Chairman queried if the Swan Lake Café lease period was being doubled to 40 years? He could not understand why giving a lease double the length represented best value to the Council. The officers explained that the value was accounted for in the terms of the lease already agreed and that expert advice had been taken from Christie and Co who had verified that the proposals were commercially acceptable.
The Chairman pointed out that the Council was the Client and that it was important for the Client to be satisfied that value for money was being achieved.
A Member queried what financial checks had been carried out on the Company in terms of financial viability. The officers advised that checks had yet to be carried out and that any agreement was subject to satisfactory financial checks.
The Chairman queried whether the Portfolio Holder would see the results of the financial checks and was assured this was the case.
The Interim Head of Property Services pointed out that should this have been an unsolicited approach from a developer/leaseholder not already known to the Council then the first thing the officers would have done was to undertake appropriate financial checks but this was an established tenant, who had a good financial record and no problems were anticipated.
The Committee addressed question 5:
“If the building is supposed to be solely for a restaurant, why is there provision in the lease to allow patrons to consume alcohol without buying a meal?”
Some Members understood the concerns expressed that if alcohol could be purchased without consuming food and asked for clarity whether this was meant to be prior to a meal which was felt to be standard practice in restaurants.
The officers advised that at the existing Swan Lake Café patrons were permitted to consume alcohol without purchasing food. Leisure Services advised that there had been no reported complaints regarding the operation of the café in respect of customers making use of this part of the facility. Members were informed that in other Council owned restaurants which were subject to lease such as, Branksome Beach Café, patrons were allowed to purchase alcohol without purchasing food with the alcohol consumed within a small, designated area set aside for this purpose.
It was the intention that the new restaurant should be allowed to follow the precedent already set by other Council owned restaurants on the beach front and as currently operated in the Swan Lake Café. The terms of the Lease were also to state that the building was primarily for use as a restaurant. Members were concerned that there was the opportunity to purchase alcohol without consuming food up to 11.00p.m.
Members wished the terms of the lease to be changed to include the following provision “no alcohol to be purchased except with meals after 11.00p.m.
Members then addressed Question 6:
“Why is there a one year rent free period?”
The officers advised that in respect of the Swan Lake Café there was no rent free period.
In respect of the new restaurant there was a rent free period which was granted to allow the restaurant to be constructed and the business established which was usual market practice. The Chairman queried why the first year was rent free when the ice-cream kiosk had been taken out of the existing lease with the Swan Lake Café and put into the lease with the new restaurant? He felt there was no value attached to the kiosk in the Lease and he felt that, should this ice-cream facility be subject to competitive tender, it would be very attractive commercially.
The Interim Head of Property Services explained that the Lease had been put together as part of a package on which the officers had sought independent specialist advice from Christie and Co. The rent free period was standard business practice to allow the business to become established. There was, in fact, no rent free period, the rent was geared so that there was a grace period in the difficult, first year for new businesses and the rent in following years took account of this.
The Chairman was concerned that there was no separate value for the kiosk operation. It was explained that it was part of a package that could not be analysed separately.
The Interim Head of Property Services explained that it was like a retail outlet, the rental was based on percentage turnover taking a proportion of the profit. It was not rent.
Councillor Sorton explained the percentage turnover was gross turnover not net and that the Council’s Financial Services would receive quarterly accounts.
Members queried why the two leases for the new restaurant and the Swan Lake were different. The officers explained that the Swan Lake Café was an occupational lease. The building was Council owned. The restaurant was being built by the developers so they were taking the risk and there was a smaller percentage of rental to the Council.
A Member explained that if the lease was set and reviewed every few years it would not go down. If it was based on gross turnover there was no guarantee of an increase. He queried the value of this to the Council?
Councillor Sorton explained that it was a balance of risk and reward not based on turnover rates.
The Interim Head of Property Services explained that there was a fluctuation in profit and a fluctuation in rent. The average, was taken over several years to take account of fluctuations in the economic cycle.
Members then addressed Question 4:
“If the Leaseholder is supposed to the sole concessionaire for providing catering services in the Park, why does the lease contain a provision for assignment?”
The officers advised that the existing lease provided for the assignment of the lease of Swan Lake Café. When assigned exclusivity would therefore transfer to the new tenant.
If the tenant of the Swan Lake Café or the tenant of the new restaurant wished to assign their lease in the future the exclusivity clause as part of the other terms of the Lease would also be assigned to the new restaurant.
The Chairman queried why if there was a sole concessionaire why did the Council need two leases.
Councillor Sorton explained that the officers had tried to negotiate a single lease but this was not acceptable to the Tenant and that if the Council insisted on one Lease, it may lose the deal.
The Officers advised that they would prefer one Lease but this was unacceptable to the Tenant. The exclusivity was not a personal concession but a term within the lease guaranteeing the right to be the exclusive provider of catering within the Park.
A Member queried why if two leases were granted and one could be assigned what would happen to the exclusivity?
It was explained that it would remain with the new restaurant subject to the Swan Lake Café being able to serve hot drinks and snacks. The officers advised that the majority of the exclusivity had transferred with the lease to the new restaurant. Members were concerned that the exclusivity was being assigned to the wrong building and felt it should remain with the Swan Lake Café. The Interim Head of Property Services advised that the lease on the Swan Lake Café could be drawn up to ensure that the use of the building should remain only as a café.