Agenda item

To consider a report by Councillor Julian Thompson-Hill, Lead Member for Finance, Performance and Strategic Assets (copy enclosed) seeking Cabinet approval to grant 16 leases, each for a term of 10 years at a peppercorn rent, to Denbighshire Leisure Limited on terms as set out within the report.

RESOLVED that Cabinet –

(a)       approve the grant of 10 year leases to Denbighshire Leisure Limited for each of the sites at a peppercorn.  The leases will be on the basis of the standard lease (Appendix 3 to the report).  Site specific adjustments will be included within each of the leases to incorporate: annual shared user agreements, grant funder obligations, Charity Commission requirements, advice from DCC tax advisors, third party occupation as well as any other localised site arrangements; delegated authority to be given to the Head of Finance and Property Services to agree, in consultation with the Lead Member for Finance and Efficiency and the Head of Legal, HR and Democratic Services, and

(b)       confirms that it has read, understood and taken account of the Well-being Impact Assessment (Appendix 4 to the report) as part of its consideration.

Councillor Julian Thompson-Hill presented the report seeking Cabinet approval to grant sixteen leases, each for a term of ten years at a peppercorn rent, to Denbighshire Leisure Limited (DLL) on terms as set out within the report.

In May 2019 Cabinet agreed the establishment of DLL, a wholly Council owned Local Authority Trading Company Limited by Guarantee.  The report represented another stage within that process relating to the lease of sixteen properties to DLL as identified within the report together with the notable terms.  Given the various site specific issues and matters of further clarification and detail that DLL may want to raise it was recommended that the leases be granted on the basis of the draft standard lease with powers delegated to the Head of Finance and Property in conjunction with the Lead Member for Finance and the Head of Legal, HR and Democratic Services to agree minor variations in respect of those issues.  Any material departure from the standard lease would be brought back to Cabinet.  Reference was also made to the Land Transaction Tax element and Denbighshire’s position in that regard which had been set out within the report.

Councillor Bobby Feeley advised that she had a number of points to raise regarding the leases and was pleased a mechanism was in place to agree any subsequent variations.  She also questioned the level of consultation and highlighted that the Head of Leisure had not been included as part of that process.  In terms of the risks identified within the report she felt that, given the unique situation in this case, there would be merit in including the risks around the Council’s involvement and their obligations.  To supplement that point for clarity the Managing Director Denbighshire Leisure Limited advised that there were obligations on both parties in the lease arrangements but the report had only referenced the risks around DLL and not around the Council fulfilling its own obligations in that regard.  In responding to the issues raised the Lead Member and officers advised that –

·         the decision was being made by the Council and therefore the report included the potential risks to the Council that needed to be considered when making the decision whether or not to grant the leases on the basis as set out in the report.  The Council needed to consider its own interests and ensure it fulfilled its obligations in respect of the lease arrangements.  There may be risk to DLL depending on the behaviour of the Council but that risk would not be included within the report given that the Council was not a risk to itself.  The appropriate place to record the risks to DLL would be in their own Risk Register

·         consultations had been carried out regarding the ADM with those as listed within the report and in terms of specific sites included consultation with Rhyl Town Council in respect of their interest within SC2, Arts Council for Wales in respect of grant funding together with Llangollen International Music Eisteddfod in respect of Llangollen Pavilion which had not been listed.

Cabinet raised further questions regarding the risks to the Council together with the split of responsibilities between the Council and DLL, particularly in terms of maintenance and repair, together with the financial implications of fulfilling the lease obligations in that regard and subsequent impact on the financial success of DLL.

The Lead Member and officers responded to questions as follows –

·         the risk relating to the ADM not being as financially successful as hoped had been included in all reports relating to the ADM highlighting that in such an event any resultant additional costs would fall back to the Council to fund

·         elaborated upon the Council’s position regarding the Land Transaction Tax payable explaining that recent advice had determined the Council would be liable for that tax based on the value of the lease.  Given that the Council provided significant financial support to DLL with the rents on a peppercorn basis there was essentially no value to the lease and a robust case would be made in that regard.  Consequently it was not considered a significant risk but in the event that the position was successfully challenged by the Welsh Revenue Authority the matter would be reported back to Cabinet

·         explained that DLL and the Council were separate legal entities but DLL was controlled and owned by the Council so the leases would have responsibilities for both parties.  The Council was in control and responsible for fulfilling its obligations within the lease and retained responsibility for the structure and external parts of the buildings and DLL would be responsible for the internal maintenance of the sites; condition surveys would be carried out and there would be an agreed baseline beforehand in terms of the condition of assets

·         the condition reports set the benchmark of how both parties would maintain the assets which remained within the Council’s ownership and it was in the Council’s interest to ensure they were maintained and continued operating

·         the governance arrangements outside of the leases involved both an operational board and strategic board to monitor all those risks.  In the event of unforeseen circumstances impacting on the successful operation of facilities the issue would likely come before both boards and the Council could ultimately decide to pay for the rectifications with resources in year.  The benefit of the lease and governance arrangements would mitigate against such risks.

RESOLVED that Cabinet –

(a)       approve the grant of 10 year leases to Denbighshire Leisure Limited for each of the sites at a peppercorn.  The leases will be on the basis of the standard lease (Appendix 3 to the report).  Site specific adjustments will be included within each of the leases to incorporate: annual shared user agreements, grant funder obligations, Charity Commission requirements, advice from DCC tax advisors, third party occupation as well as any other localised site arrangements; delegated authority to be given to the Head of Finance and Property Services to agree, in consultation with the Lead Member for Finance and Efficiency and the Head of Legal, HR and Democratic Services, and

(b)       confirms that it has read, understood and taken account of the Well-being Impact Assessment (Appendix 4 to the report) as part of its consideration.

At this juncture (11.35 a.m.) the meeting adjourned for a refreshment break.