Decision

Salford City Council - Record of Decision

I, Councillor Mike McCusker, Deputy City Mayor and Lead Member for Planning, Transport, Sustainable Development and Regeneration , in exercise of the powers contained within the City Council Constitution do hereby approve the write off of debt relating to Kiki Concepts Limited (Menagerie) following them entering administration.

The Reasons are:

The Council has exhausted all legal avenues to recover the debt. From an accounting perspective, the adjustment ensures accurate financial reporting, while from an estate management standpoint, it enables the release of funds to reimburse outstanding service charges. The current debt position has created cashflow constraints for the building’s managing agents, delaying payments to suppliers, many of whom are local businesses, thereby impacting the wider supply chain. Resolving this matter promptly will restore financial stability and support ongoing estate operations.

Options considered and rejected were:

As noted above, there are no viable recovery options available. The former tenant entered into administration, a statutory moratorium came into effect which has prevented the Council from taking steps to recover the outstanding debt. As such, the only appropriate course of action is to write off the outstanding amount in accordance with the Council's financial procedures.

Assessment of Risk: Low

The source of funding is: N/A

Legal Advice obtained: External Legal Advisors 

As the Debt fell due before the Administrators were appointed, this sum, like the Payment, will rank as an unsecured claim in the Administration.

Moreover, and considering the moratorium on enforcement action, the options open to SCC to recover this sum are very limited and there is no guarantor of the Lease that SCC could enforce against in this regard.

On that basis, and assuming KCL did not want to assign the Lease in due course, we consider the likelihood of SCC being able to recover the Debt from KCL to be unlikely.

Financial Advice obtained: Rafeeah Khan, Senior Accountant

This report seeks approval for the write-off of debt relating to Kiki Concepts Limited (Menagerie) following Administration. Ground Floor Unit 2 was let to Kiki Concepts Ltd on a lease from 4th August 2016 to 28th April 2041, with no break until April 2031.

The total arrears proposed for write-off amount to £637,455.98 (gross) comprising:

Rent:                          £289,798.64

Utilities:                      £318,528.86

Service charge:        £27,595.20

Insurance:                 £1,533.28

These debts were incurred prior to the appointment of administrators on 7th November 2024 and rank as unsecured claims in the administration process. Given the statutory moratorium on enforcement action and the absence of a guarantor, recovery options are extremely limited. The latest administrator’s report (May 2025) confirmed that no dividend is expected for unsecured creditors, and the company will likely move to dissolution.

Financial Implications of the proposed debt write-off for the Council as the principal landlord are:

VAT applies to all taxable supplies (rent, service charges, utilities, and insurance)  under the lease. Following the tenant’s administration and approval of the report recommendation, the invoices will be credited, and the VAT originally charged becomes irrecoverable because the supply is effectively cancelled, as the HMRC requires credit notes to reverse VAT in these circumstances. After crediting, costs such as service charges, utilities, and insurance will fall to the Council as void costs, as they relate to maintaining the property for future lettings. These costs will be recharged internally on a net basis without VAT, as there is no onward taxable supply to the insolvent tenant.

The financial impact is therefore two-fold: the Council will absorb £289,714.45 of void costs (net service charges, utilities, and insurance) while also losing rental income of £241,498.87, which affects commercial income targets but does not create a direct cash outflow. This treatment ensures compliance with VAT regulations and accurately reflects the cost of insolvency to the Council.

The proposed write-off will be funded from the New Bailey Reserve. The New Bailey Reserve was established to provide financial resilience for the estate, covering unforeseen costs and mitigating risks associated with tenant defaults to ensure operational stability. It also acts as a buffer against market volatility and safeguards cashflow. The anticipated drawdown from the reserve has already been reflected within the revenue budget monitoring position.

It should also be noted, that the Council remains liable for its headlease with its superior landlord.

Procurement Advice obtained: N/A

HR Advice obtained: N/A

Climate Change Advice obtained: N/A

This is a CAT A building and is fully compliant with all current Building Regulation requirements.

The following documents have been used to assist the decision process: report submitted to Property/Regen Briefing on 14th September 2026

Contact Officer:  James Robertson, Senior Property Surveyor                      

Email: james.robertson@salford.gov.uk

-       This decision is not subject to consideration by another Lead Member.

-       The appropriate scrutiny to call-in the decision is the Growth and Prosperity Scrutiny Panel                        

Signed: Councillor Mike McCusker          

Deputy City Mayor and Lead Member for Planning, Transport, Sustainable Development and Regeneration

Dated: 14th September 2026

This decision was published on  Monday 14th September 2026                                           

This decision will come in force at 4.00 p.m. on Monday 21st September 2026

unless it is called-in in accordance with the Decision Making Process Rules.