Purpose

To consider the report of the Cabinet Member for Finance and Resources seeking approval for options in respect of future occupation of the former NCP Car Park at Portland Terrace.

Decision

(i)  To delegate authority to the Executive Director of Growth and Prosperity, following consultation with the Cabinet Member for Finance and Resources, and the Executive Director Enabling Services, to negotiate the optimum terms to take a surrender of the lease held by the NCP with vacant possession or subject to the third party rights; and to regulate any third party rights by granting a tenancy or licence to those parties as is deemed appropriate.

(ii)  To delegate authority to the Executive Director of Growth and Prosperity, following consultation with the Cabinet Member for Finance and Resources and the Executive Director Enabling Services, to market the site within a defined timeframe, with a criteria that assesses proposals against relevance to the City Plan, Growth and Prosperity Plan and the requirements of the Medium-Term Financial Strategy but excludes the use as a short stay shoppers and commuters car park.

(iii)  To delegate authority to the Executive Director of Growth and Prosperity, following consultation with the Leader and Cabinet Member for Growth, Prosperity and Culture, Cabinet Member for Finance and Resources, Director of Legal and Governance, to agree and finalise terms that constitutes best consideration for the Council for a lease of the property should a suitable proposal be secured within that defined timeframe that represents value for money to the council and the resident.

(iv)  That if no suitable proposals that represent value for money for the council are secured within that defined timeframe, to delegate authority to the Executive Director of Growth and Prosperity, following consultation with the Leader and Cabinet Member for Growth, Prosperity and Culture; Cabinet Member for Finance and Resources; and the Executive Director Enabling Services to pursue a process in line with ‘Alternative Options Considered and Rejected - Option 3’ at paragraph 6 below.

Reasons for the decision

The Portland Terrace Car Park operated by NCP is closed. The lease, that was granted to NCP continues and NCP through their administrators, continues to be responsible for the repairs and maintenance, security, and other management responsibilities for the property including business rates.

Since NCP closed the car park, the company has not complied with the obligations and responsibilities under the lease. As the company is in administration, to enforce those obligations, the Council would require permission from the Court or the administrator, and so the usual remedies are limited. It has been necessary for the Council to step in to secure the property. The current situation results in loss of income for the Council as well as additional cost including an increase in the property insurance premium together with the cost of measures to secure the car park to reduce incidents of antisocial behaviour. The current insurance reinstatement value (sum insured) for this property is circa £20M. It is important that the Council takes steps to bring the property back into beneficial use and in order to do so it would need to take a surrender of the lease, which will allow it to deal with the property free from the tenants continuing theoretical right to use it.

The first step is to agree a surrender of the lease with NCP which will end the lease to NCP and bring the car park back under the control of the Council, subject to any valid third-party rights that may exist. The existing third-party rights may need to be regulated and documented at the time the surrender takes place. Following this, it is proposed to market the car park to seek another short term private sector tenant or licensee. However, if beneficial terms cannot be secured through the marketing exercise this position could be reassessed and other options, as set out below, could be explored further.

Alternative options considered

Option 1 – Do nothing

The lease would remain with NCP and its administrators, and the car park may continue to remain empty.

· There is a significant risk the rental income and business rates will not be received.

 · The Council will continue to incur costs of securing the car park and the ongoing cost of regular inspections. The ability of the Council to recover these costs from the Tenant/Administrator maybe limited. Whilst it cannot be assumed that they are totally irrecoverable it is a substantial risk that liabilities arising since the date the car park closed will not be recovered in full. Any liabilities accruing after the date of vacation will rank as an unsecured debt, and so higher ranking debts of the tenant will be considered first as part of the administration process.

· There is a risk of antisocial behaviour despite additional security arrangements being in place noting that the council’s property insurers have moved the property to a high risk categorisation.

· Having an empty building in the city centre does not contribute to the vitality of the area, economic development of the city, or the Southampton Renaissance Vision.

· The building is at risk of deterioration if not actively managed.

· The cost of repairs and maintenance will continue to fall to the tenant, however if the building is or becomes a health and safety risk, the council will need to step in to make the building safe.

For these reasons, option 1 is not recommended.

Option 2 – Accept a surrender of the lease and operate the car park in-house · Taking a surrender of the lease would provide more certainty concerning day to day responsibility for the property and will result in the legal position aligning with the situation on the ground, should the Council directly manage the car park.

· This would be on a basis of a similar tariff to the other council operated city centre car parks.

· The Council has published a Traffic Regulation Order in case there was a need to consider the operation.

· The car parking studies that have been completed would suggest there is no requirement for these spaces as shopping, commuter car park spaces in the city centre.

· The recommendation is not to pursue this option.

Option 3 – Accept a surrender of the lease and demolish the site or disposal with a view to demolition

· The site is identified as a strategic asset, within the Southampton Renaissance Vision, for regeneration. In that regard, there is the option for the Council to accelerate plans to bring this site forward for redevelopment. This could include sale of the freehold or demolition of the car park.

· By accepting the surrender of the lease, the council will regain full control of the site and its future.

· Whilst this is the preferred option in the longer term it is important that the council explores the market opportunities in the short term that may reduce its building and financial liabilities and increase income.

· Any short term options received will need to represent value for money for the council and allow for further development in line with the Growth and Prosperity Plan and the requirements of the Medium-Term Financial Strategy. · Until the property is demolished the council would be responsible for ensuring that the site is secure and remains in a safe condition. The council would be responsible for meeting the cost of any repairs required to make the building safe together with ongoing cost of regular inspections and the property insurance premium costs.

· If the Council does not receive proposals in the context set out above, within the defined timeframe of market testing, this option (as per recommendation iv) should be progressed immediately subject to necessary governance and therefore preparatory work should also commence in the background.