Purpose

To consider a motion from Full Council
regarding the future of KLV

Content

RESOLVED
 
KEY DECISION
 

That the Executive:
 

i)       
Noted the position set out in this report regarding
the legal ownership of the KLV site arising from the nature of the
Council’s and PLMS’s leasehold interest;

 

ii)      
Noted the Options Review produced by Max Associates,
and that these options are predicated on the Council having full
control of the site which it currently does not have;

 

iii)    
Noted the
Council is not able to take control of the site and take on the day
to day running of KLV under any of the options laid out in the
Options Review due to the nature of its legal interest;

 

iv)    
Noted the recommendation in the Options Review
that, should the site come back
into the full control of the Council, in the short term, an
external contractor would be the most sustainable solution, but
also notes the subsequent budgetary pressure this would create,
whilst the wider management model for the Council’s
entire leisure portfolio is considered.

 

v)     
Endorsed the current proactive approach of the
Leisure and Asset Management teams in working with PLMS to support
the ongoing business growth and development of future
plans.  

 

 

Reasons for Recommendations:

 

·      
The Council is not in
control of the KLV site and legally has limited step-in rights to
manage the facility and the obligations within the sub-underlease
that require the sports facilities to remain open. Courts do not
support keep open clauses and the only recourse they would consider
if a breach occurred, is compensation to the landlord of any loss
of income etc. This would not resolve the issue and it is not
likely that any compensation awarded would fully compensate any
loss, nor does it guarantee PLMS could pay such costs. PLMS has
confirmed its commitment to the site and has made recent capital
investment into it.

 

·      
The Council is engaging
with PLMS in its capacity as Landlord to explore ways it can
continue to support the sustainability of the centre, without
financial detriment to the Council.

 

·      
The Council is in the
process of developing a Leisure Facilities Strategy and a review of
Future Management Options for the whole of its leisure estate which
will report in early 2025. Any future decision regarding KLV needs
to be considered in this wider strategic context.
 

·      
There are no management
options as a result of the legal interests in the site. It is
therefore not an option for the Council to take on the running of
KLV.

 

Alternative Options
Considered:

 

·      
The Council could
approach PLMS and ask that they voluntarily relinquish their lease
and all rights to the site, at no cost to the Council.
Alternatively, the Council could open negotiations with PLMS to
surrender their lease at a premium to the Council. Either of these
two options could give the Council control of the site. These
options are not recommended as the options appraisal confirms that
the Council operating the site is not financially
viable.

 
·      
PLMS have not shown any
indication that they would wish to relinquish the lease without
payment. The cost of a negotiated surrender is currently unknown as
it would be dependent on PMLS bringing this option forward, a
condition survey of the building and on business growth and
profitability at the point of sale. For KLV, this is continuously
changing and currently improving, from almost a restart position,
following the threat of closure in the summer of 2023. Market value
does not reflect worth to the Council, nor necessarily does the
price Phoenix would accept to surrender the
lease. 
 
·      
Notwithstanding that the
option to negotiate a surrender of the lease is a matter for PMLS
to bring forward, to do so at any cost to the Council, is not
recommended at this stage. However, dialogue will continue to be
held with PLMS on their future plans for the site, in particular
how the tenant will ensure investment in the asset is secured to
safeguard any financial risk to the Council of dilapidations and
ensure the preservation of the asset. 
 
·      
Whilst both of the above
represent the conditions under which the Council could have control
of the site, neither are viable options for the
Council.