During discussion, reference was made to:
a) Paragraph 7 of the officers’ commentary, stating that:
“The Council will have the right to terminate the site leases for breach of the Development Agreement which SFP fails to remedy …”.
b) Paragraph 7 of the summary report, dated 19 October 2006, by Eversheds, setting out provisions relating to the termination of the Development Agreement.
The Corporate and Regulatory Services Manager, stated that in his view the opinion contained in the summary report from Eversheds concerning the ability of the Council to terminate the site leases was unaffected by the 2009 variations to the Development Agreement as these did not directly affect the site leases. He then summarised the 2009 variations to the 2006 Development Agreement as:-
§ the Developer being able to provide a £1 million cash deposit instead of the £5m Performance Bond;
§ the Developer no longer being required to build the hotel first; and
§ the Council extending the time for completion of the development to 28 February 2014 (with the discretion to extend time for completion for a further three years).
c) Paragraph 1.10 of the report to Cabinet on 7 May 2009 which inferred that the site leases did not have the same protection as the freehold.
The Corporate & Regulatory Services Manager stated that if the Development Agreement was terminated the developer would lose the right to further develop the site thus rendering the site leases unmarketable. In addition the Council was no longer proposing to transfer the freehold to the developer in advance of completion of the development. However, it was always the case under the 2006 Development Agreement and remained the case following the 2009 variations that so long as the developer completed the development and paid the Council all outstanding overage, the freehold of the site would be transferred to the developer.
d) Paragraph 19.1 of the Deed of Variation dated 3 September 2009, in particular sub-paragraph number 2 thereof, which stated that:
“The Developer shall procure that … Practical Completion of the whole of the Development Works takes place by not later than 28 February 2014, provided that where the Council in its absolute discretion determines that due to a severe market downturn it would be reasonable for the Developer to be permitted an extension of time …”.
It was proposed by Councillor Driver, seconded by Councillor Marson:
“1. THAT the Corporate and Regulatory Services Manager requests the Leader of the Council as quickly as possible for an executive decision authorising him to seek external legal advice;
2. THAT the Group recommends to Cabinet that no further negotiations take place with the Developer until that external legal advice has been obtained.”
Amendment to motion
An amendment to that motion was proposed by Councillor Campbell and seconded by Councillor Marson, as follows:
“THAT part (2) be replaced with the following:
“THAT the Group recommends to Cabinet that no executive decision be taken in relation to further varying the Development Agreement, but that any recommendation in that regard be made to Council for final decision.”
On being put to the meeting, the amendment was agreed.
Adoption of substantive motion
The substantive motion:
“1. THAT the Corporate and Regulatory Services Manager requests the Leader of the Council as quickly as possible for an executive decision, authorising him to seek external legal advice;
2. THAT the Group recommends to Cabinet that no executive decision be taken in relation to further varying the Development Agreement, but that any recommendation in that regard be made to Council for final decision”;
was, upon being put to the meeting, declared CARRIED.