Agenda item

Cabinet Member Presentation from Cllr Duckworth on Commercial Property


Councillor Duckworth gave her presentation on Commercial Property and made the following points:


·  Property vacancies were caused by tenancy surrender, identification of new potential properties, properties that were no longer needed and heightened interest;

·  The Council’s marketing strategy was tailored for each individual property, with smaller properties being handled in-house. Larger, more complex properties needed external agents, such as Zoopla or Rightmove;

·  Rent levels were set through various valuation methods, with three main approaches: Coast approach, income approach and market approach;

·  The Comparable Method under the Market Approach considered factors such as location, size, amenities, recent transactions, market conditions, tenant demographics, property age and condition; and zoning;

·  Rent Reviews did occasionally deviate from the Comparative Valuation Model due to lease conditions, such as: Fixed Increase Rent Review, Open Market Rent Review, RPI (Rent Price Index) Rent Review, Turnover Rent Review, Staggered Rent Review, Stepped Rent and Cap and Collar Rent Reviews.


Councillors commented and asked the following questions:


·  Councillors asked if the figures shown in the presentation were consistent throughout the entire Thanet District Council portfolio. Officers informed them that the figures deviated, due to the timing of the rent reviews;

·  It was asked if there was a way of calculating the rent of a property, based on the community benefit it provided. Councillors were told that community benefit was too broad to quantify, so there was a standard rent that every property was calculated too, however the Council did support community organisations who moved in transparently, through grant funding;

·  Councillors wanted to know at what stage near the end of an organisation's lease on a property, did Thanet District Council start looking at renewal of the lease. Officers replied that termination would be subject to a three month or six month notice, depending on which property it was. Also that not all properties were subject to the Landlord and Tenant Act 1954, which allowed tenants to automatically renew a tenancy if they chose to;

·  Councillors referenced the example in the presentation and wanted to know to what conclusion TDC calculated the rent. Officers replied to say that data was compared with three or four other properties, none of which were exactly the same, even if they were all units in the same industrial park, due to the different uses each unit would provide. Parking spaces were calculated separately as well as other factors (such as tennis courts), subtracted from the base rent to help calculate the rent per square metre and the additional costs applied thereafter;

·  Councillors asked if there was a default process for any property that falls out of the Landlord and Tenant Act 1954. Officers replied that all leases were now in the act unless it was contracted out of the lease, as the tenant would be aware of this and aware that they would not have the same protections that someone inside the act would have. Councillors were also informed that the Council does not have a preference to whether or not a lease was in the act as it depended on factors such as the ease to let a unit, but in some cases if the use was unique, the Council would prefer if the tenants had that protection of the act;

·  Officers were asked what level of resource did the Council have to cope with the current portfolio of units. Officers replied that for some time, the Council had surveyors on a contract by contract basis, however the Council has recently been successful in employing two permanent surveyors. The team allocates new pieces of work on  Mondays and portioned the work out between surveyors and other members of the team;

·  In a scenario where a leaseholder’s rent was changed and went up, Councillors were curious who would be best for them to go to for a grant. Officers replied that the leaseholder just needs to put that proposal in an email to the team and then the team would then engage with the leaseholder;

·  Councillors asked about the decision process on who would be provided grants and who would not. Officers replied that it would be an individual officers’ decision based on schemes approved by the allocated budget and Cabinet. Some grants were specific to the organisation, such as the Citizens’ Advice Bureau. Officers also said they would be happy to share with Councillors the list of grants available;

·  Councillors wanted to know more about Full Repair Leases and how TDC enforced them. Officers replied that the tools available to enforce these leases were full termination of the lease because of breach of contract and dilapidations which would be capped based on the level of investment. Properties were inspected on a cycle, but the Council also depended on a declaration made by the leaseholder that they were currently following the details of the lease. Officers also informed Councillors that charities had access to discretionary supports which were not available to properties under commercial use;

·  Councillors discussed outdated leases in the TDC portfolio and wanted to know where the Council stood when it came to bringing them back in line. Officers replied that this was why the Council preferred short term leases, so that at the renewal stage, contracts were modernised which were then drafted by in-house solicitors;

·  A request was made for a list of properties in the Council portfolio and whether or not there was a leaseholder currently there. Officers replied that there was already a report published on the Council’s website, for the sake of transparency which listed every single asset in the commercial fund;

·  Officers added that when it came down to considering offers, all bids were considered, whether they’re above the asking price or below the asking price;

·  It was asked whether or not the Council provided a grace period for rent when it came to natural occurrences that may damage the property in question, e.g. flooding. Officers informed Councillors that when a property gets leased out, the leaseholder would be urged to take out insurance, including business continuity insurance on the property;

·  Councillors asked if in the future TDC could look at adding a social element to the benefits of a property, including employing local residents and toilet facility availability. Officers replied that the social element cannot be quantified as there were too many variables, but when a unit was up for bid, the use for the unit would be taken into consideration;

·  Councillors asked if there was an updated asset disposal list in regards to areas in the district that included toilet facilities. Officers replied that the asset disposal list was not necessarily there for sale, just that Cabinet has approved for the Council to make choices regarding the individual locations;

·  Councillors wanted to know where TDC was with outstanding rent reviews. Officers replied that there were 12 outstanding, but the Council were working on those;

·  Councillors suggested the possibility to include in future leases, toilet operating hours as a standard;

·  Officers responded to Councillors questions regarding underletting that the Council uses accounting Capital valuations which were not public record, in order to police unauthorised subletting of the units;

·  Returning to the point of calculating social benefits to properties, officers replied that there have been talks to establish a performance measure aspect to the portfolio, which included indicators for social value. Councillors were interested in this idea as it opened up transparency with grants for the public;

·  Councillors suggested the idea of having some form of resident satisfaction for commercial units, similar to what Housing Department’s Resident Involvement Team. Officers said they would take this into consideration;

·  Councillors asked about shelters in the area and whether it was possible to have people book them for uses such as a coffee stand or busking. Officers replied that there were plans to upgrade some of the shelters across Thanet and have received responses about leasing the use of these shelters;


Councillors noted the presentation.