Agenda item

[At this juncture, Councillor Angela Goodwin withdrew from the meeting in accordance with Overview and Scrutiny Procedure Rule 2.]

The Chairman invited the Lead Councillor for Resources to comment on the report submitted to the Committee.  The Lead Councillor for Resources introduced the item. 

The Lead Councillor for Resources suggested that the report submitted to the Committee was produced in response to two complaints that were politically driven.  He referred to the Council’s decision to purchase Liongate House for £13 million in 2013 and the process leading to the decision to dispose of the property for £10.1 million in 2020.  The Lead Councillor for Resources suggested delaying the sale in 2020 would have been inadvisable and reminded the Committee that the disposal of Liongate House had been audited as part of the audit of the 2019-20 statement of accounts for the Council and no issues or concerns had been raised with the valuation or the disposal. 

With reference to a Royal Institution of Chartered Surveyors (RICS) investigation as to the merit of the complaints about the advice given to the Council for both the acquisition and disposal of Liongate House [the outcome of which was circulated as supplementary information shortly before the meeting], the Lead Councillor for Resources informed the meeting that RICS had concluded there was insufficient evidence to show a failure to comply with RICS rules or professional standards and that there was no case to answer.  He stated that there was no evidence to suggest Liongate House was not marketed effectively or was worth more than £10 million at its time of disposal in 2020.

The Director of Resources summarised the acquisition, sale, and rental income of Liongate House as detailed within the report submitted to the Committee.  She indicated that since the disposal of the property the Council had received complaints relating to its sale and one complaint relating to its acquisition.  The Director of Resources advised the meeting that the terms of reference for the overview and scrutiny review were drafted by her and approved by the Chairman of the Overview and Scrutiny Committee.  She confirmed that the report submitted to the Committee contained the evidence the Council held relating to the acquisition and disposal of Liongate House and the decision-making processes followed by the Council.  The Director of Resources invited the Committee to consider each of the questions posed in the terms of reference for the review and the evidence presented in the report.

In accordance with the Council’s Public Speaking Procedure Rules, Mr Geoff Davis addressed the meeting. 

Mr Davis advised the Committee that he was a former Guildford Borough Councillor and had no current or prospective personal or financial interest in the subject.  He stated he was a Fellow of the RICS, with extensive experience in the property profession, including 47 years in Guildford, and had a degree in planning and development.  He suggested that, if handled differently, the disposal of Liongate House could had resulted in an additional £5 million or so for the Council.

Mr Davis commented on the time taken to address his queries and the importance of exploring the issues raised.  He suggested that Liongate House was a trophy building and that it had been sold at an undervalue.  Mr Davis questioned why the building had not been offered to the Council’s housing department for affordable or social housing.  He indicated that he would not be commenting on the purchase of the building in 2013. 

Mr Davis suggested the merit in the Council holding the property after the break clause was exercised by the tenant and questioned whether dilapidations had been collected.  He suggested that at the time of the Council’s disposal of Liongate House there was a strong market for large office buildings with permitted development rights.  He queried whether the proceeds from the disposal of Liongate House had been reinvested as indicated.

Mr Davis noted that the 2019-20 valuation of Liongate House was £12.15 million.  He indicated that if the building had been offered to the market correctly, as the circumstances in relation to permitted development rights changed, then a higher price could have been achieved from the disposal.  He suggested there were inaccuracies in the pre-application enquiry.  In addition, Mr Davis highlighted the period taken to complete the sale with the cash buyer of Liongate House.  He suggested the permitted development rights should have been put into place by the Council before the marketing of the site, not after.  Mr Davis criticised the omission of an overage clause in the sales contract. 

Mr Davis suggested that Liongate House should have been valued at approximately £15 million.  With reference to the report submitted to the Committee, he suggested that the Council’s Property Review Group identified the value in obtaining permitted development rights in September 2019 and that the options appraisal commissioned by the Council noted the need to ensure an overage agreement to cover off any additional consented space, such as accommodation in the roof space. 

In concluding his statement, Mr Davis summarised his concerns threefold: not offering the building to the Council’s housing department for affordable or social housing; not seeking permitted development rights prior to marketing the property; and not ensuing an overage clause was in place. 

In accordance with the Council’s Public Speaking Procedure Rules, Councillors then questioned Mr Davis and a number of points were made:

• A member of the Committee suggested that the Council explored obtaining permitted development rights for Liongate House prior to disposal and that an overage clause was not available.  In addition, he queried the accuracy of the £15 million valuation of the site.  In response, Mr Davis suggested the permitted development rights should have been in place by the Council before the site was marketed, rather than being put in place by the purchaser. 

• In response to a question from a member of the Committee about the acquisition of Liongate House by the Council in 2013, Mr Davis advised that he did not became a Guildford Borough Councillor until 2015. 

• Members of the Committee suggested that Liongate House was not a trophy building due to its proximity to the A3, the A320, and Ladymead retail park.  With reference to air quality, a Committee member questioned the desirability of the Council using the site for affordable housing.  In addition, Mr Davis’s assessment of the value of obtaining permitted development rights for the site was questioned.  In response, Mr Davis referred to the apparent sales of apartments at the site and the advantages to the Council of securing permitted development rights ahead of marketing the site.

• In reply to questioning, Mr Davis defended his valuation of the site at approximately £15 million.  He suggested the Council had not achieved the immediate, unconditional sale it had agreed with the purchaser.  He confirmed that his £15 million valuation was at current prices. 

• The Lead Councillor for Regeneration asked if Mr Davis agreed with him that the original purchase of Liongate House in 2013 was a poor investment by the Council.  In reply, Mr Davis indicated that he would not have recommended its purchase in 2013.

• In reply to a question, Mr Davis stated that the site was not marketed with the information that the flooding risk had been removed.

The Chairman thanked the public speaker for his attendance and for answering questions from Councillors.

During the ensuing discussion a number of issues were raised:

·         In response to a question, the Director for Resources confirmed that all information relating to the acquisition of Liongate House in 2013 was included in the report and appendices submitted to the Committee.

·         In reply to questions about his statement introducing the item, the Lead Councillor for Resources reiterated that he believed the acquisition of Liongate House in 2013 was a poor decision. 

·         The Lead Councillor for Resources suggested the review of the Council’s ownership of Liongate House was a poor use of both his time and that of the Director of Resources. 

·         In reply to a query about the declining rental income from Liongate House, the Director of Resources confirmed that the Council was bound by the terms of the lease agreed before its acquisition of the property. 

·         In response to a question about the actions the Council took after identifying the likelihood that the tenant would exercise the break clause, the Director of Resources indicated that the process that resulted in the decision not to pursue permitted development rights occurred between the autumn of 2018 and April 2019, with the property marketed from May/June 2019 onwards.

·         In reply to questions, the Head of Asset Management advised that the valuations of Liongate House during the Council’s period of ownership were provided externally. 

·         The Director of Resources confirmed that the RICS investigation had considered concerns raised over the advice provided to the Council for both the acquisition and the disposal of Liongate House.

·         A member of the Committee questioned whether during its disposal of Liongate House the Council as an organisation had the ability to react once the implications of the Environment Agency’s decision relating to the flood zone became clear. 

·         The Director of Resources indicated that the Council received interest payments because the purchaser delayed completion.  In addition, she confirmed that the Council received the dilapidations payment.

·         A member of the Committee indicated that due to rental income the Council’s ownership of Liongate House had resulted in a net profit of £3 million.  He suggested that the Council’s decision-making processes had been clear and rational.  Another member of the Committee suggested that the Council took and followed professional advice for both the acquisition and disposal of Liongate House.

RESOLVED:  That the report submitted to the Committee and the comments of Committee members be noted.