Old Street Police Station and Court

Report: 14
Date: 27 October 2005
By: Chief Executive and Clerk, Treasurer and Commissioner

Summary

In February 2005, the Authority decided that this property should be marketed for sale. Negotiations with the Community Advice Project (CAP) had taken place over several years to find a basis for a sale of the property to that organisation but had not reached any agreement. The Finance Committee recommended that the property should be marketed. After a lengthy debate, the Authority concurred with the Finance Committee.

The marketing was managed by external agents appointed by the Director of Property Services. It was conducted as a two-stage exercise. Bids were invited by advertisement and from those bids, a shortlist of purchasers was drawn up. The short listed bidders were then invited to submit their best and final offers.

The accompanying exempt report later in this agenda sets out details of the bidding process and of the best and final offers received.

In the marketing material, it was stated that the Authority was prepared to consider offers based on community use. One of the short listed bids is from the Community Advice Project (CAP) in partnership with a commercial developer. Their offer is more than £2m below the highest bid.

The Authority cannot agree to a sale at an undervalue greater than £2m. without the consent of the Secretary of State. If the Authority were minded to sell the property to CAP, it would be necessary to make application for consent.

As well as a statement of the various bids, the accompanying exempt report contains a detailed commentary on the CAP proposals to assist the Authority to decide if there is justification for a sale at an undervalue.

CAP have requested the opportunity to make a presentation to the Authority in support of their proposal.

A. Recommendation

That the Authority decides on the sale of the property.

B. Supporting information

Marketing the property and offers received

1. Details of the marketing process, and of the offers received in the first and second stage tendering, are contained in the exempt report accompanying this paper.

2. If there were no question of a sale at an undervalue, the Director of Property Services would recommend that the highest offer, from Company A, be accepted.

The proposal from Community Advice Project

3. The MPA and CAP were in discussion from early 2001 about terms for CAP to buy the Old Street Police Station and Magistrates Court. Originally, the GLMCA (as then owner of the courthouse) was also party to the negotiations, but in September 2004, the MPA acquired the GLMCA’s interest. The objective throughout was to find a means – and agree a price – that would enable the MPA to comply with its legal obligation to dispose of property for the “best consideration reasonably obtainable” (in short, market value).

4. In 2001, the District Valuer prepared a valuation of £4.5m for an unconditional sale. CAP made an offer in that amount, but conditional on obtaining planning permission. The then Director of Property Services MPS was not satisfied that the offer matched the basis of valuation. The District Valuer was unable to provide a valuation certificate on the basis of a conditional offer, but indicated that if planning permission was granted for the development that he had assumed (i.e. for CAP’s proposed scheme) then the valuation certificate would be valid. Informal discussions with the External Auditor at this time led to the suggestion that the MPA would give CAP time to pursue a planning application, in order to resolve the planning uncertainty and, in effect, crystallise the valuation.

5. In September 2003, CAP were encouraged to submit a planning application as soon as possible and no later than 3 months from the end of August 2003. It was envisaged that once planning permission had been granted, the MPA would then approach the District Valuer to update his valuation and confirm whether the CAP offer represented best consideration at that time. If that was confirmed, the negotiations on terms of sale would then be concluded and contracts exchanged as promptly as possible. CAP were advised that the MPA would want to achieve exchange of contracts no later than September 2004. The MPA undertook not to market the property whilst the planning process was proceeding.

6. The timetable slipped, largely because of the extent of the requirements of the local planning authority and English Heritage. Following consultation with the Chair of Finance Committee, CAP were informed in January 2004 that the MPA still supported their endeavours and would extend the timescale for exchange of contracts, provided they continued to drive forward towards the planning consent.

7. CAP’s development partner (a commercial developer) then sought from the Authority a legally binding commitment to proceed with the disposal when planning permission was granted. The developer was concerned that the costs associated with the planning application and surveys were rising, and that the company would be adversely exposed to risk without a concrete assurance of the MPA’s intent to complete the sale. Officers advised that an agreement as proposed would not be a prudent step for the Authority to take before planning permission was granted.

8. In view of the MPA’s previous support of the CAP project, the Finance Committee agreed that officers should explore all avenues to try to provide a satisfactory assurance for the developer. In the event, discussions with that company failed to produce a mutually satisfactory conclusion.

9. In September 2004, CAP started exploratory discussions with another possible development partner, a company experienced in regeneration projects and with a record of accomplishment of dealing with listed buildings. Proposals were subsequently submitted by that developer and by another commercial company invited by CAP to bid. Both bids were expressed as partnerships with CAP. Both fell very substantially short of the 2002 valuation from the District Valuer. The Finance Committee considered the matter in January 2005 and recommended to the Authority that the property now be marketed. The Authority debated the matter at length in February 2005 and decided to concur with the Finance Committee.

10. During the first phase of marketing, CAP submitted 6 different bids, with several different partners and in sums across a wide range of values. At the shortlist stage of the marketing process, it was evident that the gap between the highest offer submitted by CAP and the highest offer overall was substantial. Officers recommended that the highest offer from CAP should go forward to stage 2 so that the arguments for considering a sale at an undervalue could be considered by the Authority. The Chair and Vice Chairs of the Authority approved the short listing recommendations under the Urgency Procedure (the papers were also circulated to members of the Finance Committee and EODB). CAP and their development partner then submitted a best and final offer as detailed in the exempt report.

11. The bid document from CAP, containing a full statement of the Community Courthouse Project and of the benefits it is expected to produce, has been circulated separately to all members. A brief summary drawn from CAP’s submission is at Appendix 1.

12. In order to give members an objective appraisal of the financial aspects of CAP’s bid, and to support any application for the Secretary of State’s consent to sell at an undervalue (if that is what the Authority decides to do) an independent appraisal was commissioned from Peter Martin, former Treasurer of the MPA. His appraisal is in the accompanying exempt report.

C. Legal implications

13. The MPA, like all local authorities, has power under the Local Government Act 1972 Act to dispose of land in any manner it wishes, including sale of their freehold interest, granting a lease or assigning any unexpired term on a lease, and the granting of easements. The only constraint is that a disposal must be for the best consideration reasonably obtainable unless the Secretary of State consents to the disposal.

14. Section 128(1) of the 1972 Act confers on the Secretary of State power to give a general consent for the purposes of land disposals by local authorities. The Secretary of State's sole statutory function in respect of the exercise by local authorities of these disposal powers is to give or withhold consent to a proposed disposal in cases where his consent is required.

15. The Secretary of State granted a “general consent” in July 2003. The terms of the consent mean that specific consent is not required for the disposal of any interest in land which the authority considers will help it to secure the promotion or improvement of the economic, social or environmental well-being of its area and where the undervalue does not exceed £2m. Although the criteria derive from the Local Government Act 2000, their use in the consent is not confined to authorities with duties and powers under that Act. Therefore, police authorities not covered by the 2000 Act can also rely upon the well-being criteria when considering disposals at less than best consideration. The authority must also be satisfied that a sale at an undervalue would comply with any other relevant governing legislation.

16. The 2003 general consent says: “It is Government policy that local authorities and other public bodies should dispose of surplus land wherever possible. Generally it is expected that land should be sold for the best consideration reasonably obtainable. However, it is recognised that there may be circumstances where an authority considers it appropriate to dispose of land at an undervalue. Authorities should clearly not divest themselves of valuable public assets unless they are satisfied that the circumstances warrant such action. The consent has been issued to give local authorities autonomy to carry out their statutory duties and functions, and to fulfil such other objectives as they consider to be necessary or desirable. However, when disposing of land at an undervalue, authorities must remain aware of the need to fulfil their fiduciary duty to local people.”

17. The core governing legislation for the MPA is the Police Act 1996, and the core statutory function of the MPA is to “secure the maintenance of an effective and efficient police service for the area”.

18. The Authority has no duty, or even a power, to secure the promotion or improvement of the economic, social or environmental well-being of its area. It does have power under Section 111 of the Local Government Act 1972 “to do anything (whether or not involving the expenditure, borrowing or lending of money or the acquisition or disposal of any property or rights) which is calculated to facilitate, or is conducive or incidental to, the discharge of any of their functions.”

19. So far as the CAP project can be seen to facilitate or be conducive or incidental to the functions of the MPA – to secure effective and efficient policing – then it is within the Authority’s power to provide support (by sale at an undervalue or otherwise).

20. It is clear that some of the outputs offered by the CAP scheme can be seen to have some relevance to the policing task – in particular, the diversion of young offenders away from crime and the education of young people in youth justice issues. At a more general level, the work of the project in building community trust and confidence in policing and criminal justice is also likely to be conducive to improved policing.

21. In considering the level or amount of support, the Authority must adopt a responsible approach to the use of its resources, with the interests of taxpayers in mind. The Authority should consider whether the project is likely to come to fruition and deliver the promised benefits. It should consider whether any support given is effectively tied to the delivery of the benefits for policing.

22. The Authority must also be satisfied that any support provided is at a level that is reasonably proportionate to the benefits to the Authority in the discharge of its core functions. (In advice relating to an issue related to the sale of Bow Street Magistrates’ Court at an undervalue, leading Counsel advised that if the benefits were tenuous or very remote from the MPA’s statutory objects, it could be ultra vires for the Authority to enter into the transaction). In other words, the more direct the relevance to MPA core functions, the stronger is the justification for significant support, whereas more remote relevance would only justify a more modest level of support.

23. The Authority must also, in the exercise of its fiduciary obligations, have regard to the benefits to be derived from the additional resources accruing if the highest offer is accepted, in terms of delivery of the MPA’s own programme. The Director of Property Services comments on this below.

24. Under the Race Relations Act 1976, the Authority must, in carrying out its functions, have due regard to the need (a) to eliminate unlawful racial discrimination and (b) to promote equality of opportunity and good relations between persons of different racial groups. The weight given to race equality considerations should be proportionate to its relevance in the case of any function. “Relevance” for this purpose is defined by the Authority’s Race Equality Scheme. In the current MPA RES, property disposal or management of the property estate are not defined as functions of high relevance. The general duty under the 1976 Act does not override other legal or statutory obligations. So in the present context, the general duty under the 1976 Act must be considered in the context of the MPA’s fundamental fiduciary obligation to use its resources reasonably in pursuit of its core functions, and its specific duty to obtain best consideration on disposal of property (unless the Secretary of State consents otherwise).

25. Under the Crime and Disorder Act 1998, the Authority must exercise its functions “with due regard to the likely effect of the exercise of those functions on, and the need to do all that it reasonably can to prevent crime and disorder in its area”.

26. At the time of writing this report, the MPA does not have any information about the terms of the partnership between CAP and its commercial developer partner. It is not possible therefore to be satisfied that the benefit of any undervalue could be “ring fenced” so as to secure only the benefits supported by the Authority and not available to benefit the developer in its commercial venture. Further, there is a question how the MPA subvention would be protected in the event that the CAP project failed for any reason after the sale has been concluded. If the Authority were minded to sell at an undervalue, both of these points would need to be covered by agreements with CAP and their partner, before any credible application could be made for government consent.

D. Race and equality impact

27. As stated above, under the Race Relations Act 1976, the Authority must, in carrying out its functions, have due regard to the need (a) to eliminate unlawful racial discrimination and (b) to promote equality of opportunity and good relations between persons of different racial groups.

28. In looking at those parts of the general duty, as extended, in relation to building redevelopment, it might be helpful to consider the fruits of any redevelopment (by way of process or outcomes) that might be relevant to each of the areas of the general duty.

1. eliminate unlawful discrimination
   1. Building and other works to be undertaken by firms that operate under a strictly adhered-to equal opportunity/anti-discrimination policy and fair pay system;
   2. Development to produce an advice unit/operating facility for organisations working to combat discrimination.
2. promote equality of opportunity
   1. Provision of affordable housing for low income groups;
   2. Provide employment/supply opportunities to BME/minority/SME businesses and to individual minority group people;
   3. Building and other works to be undertaken by firms that operate under a strictly adhered to equal opportunity/anti-discrimination policy and fair pay system;
   4. Development to produce an advice unit/operating facility for organisations working to promote equality of opportunity.
3. promote good relations between persons of different groups
   1. Housing to be marketed across, and suitable for all communities/income bands;
   2. Provision of exhibition/meeting/activity space to promote knowledge of different cultures/lifestyles/needs and to encourage across community activities.
   3. Development to produce an advice unit/operating facility for organisations working to promote good relations between persons of different groups;

29. The summary description of the CAP objectives and benefits at Appendix 1 and the full narrative in their bid documentation demonstrates the significant and beneficial impacts that the project would have if it comes to fruition. Declining public trust and confidence in the justice system is one of the most significant issues facing the justice system today. The Community Courthouse Initiative represents a significant diversity initiative that, through its projects and services, will act as an interface between socially excluded communities and the wider criminal justice and legal systems, and offers the potential of a reduction in crime levels in the communities it would serve.

30. There is no reason why the sale of this property to the highest bidder would necessarily fatally damage CAP’s project. CAP have invested time and energy in developing the project around this building, and one can see that the use of a former courthouse has symbolic and practical benefit. Nevertheless, it would seem that all of the elements of CAP’s project could be provided from other premises, in the same catchment area, possibly more economically than within the shell of a Grade 2 listed building with a substantial market value.

31. There is no information to suggest that acceptance of the highest bid would have adverse impact in the terms of the race equality legislation. Clearly there may be debate about relative levels of positive impact. Local organisations in Hackney have made their views known by way of support for the CAP scheme.

32. The Head of Race and Diversity in the MPA comments that in arriving at a determination as to the merits of the various bids, an initial screening was made based on the data in the possession of the MPA. In terms of meeting the general duty, (of eliminating unlawful racial discrimination, promoting equal opportunities and promoting good race relations) from the evidence available while there is much to commend within the CAP bid, there is little evidence to indicate that tenders supplied by other bidders would not also meet the general duty.

E. Financial implications

33. The Director of Property Services comments as follows:

• Members will be aware from previous reports, and in approving the Estate Strategy (Building Towards the Safest City), that the MPA estate is in poor condition and needs urgent repositioning. Such action is necessary to modernise the buildings, their community locations and fitness for purpose. In addition the current estate cannot be supported, going forward, within present capital or revenue budgets. The objective has been to “recycle” capital receipts in to new facilities that are fit for purpose and to close the funding gap.
• Correcting this situation is a major risk / issue / priority for both the Service and the Authority as the estate is recognised as playing a major part in support of front line policing. Indeed the estate strategy is aligned to the policing plan to substantiate this statement.
• Present estimates put the maintenance backlog (revenue and capital) at some £ 150m and benchmarking has identified an additional annual capital reinvestment gap of some £ 50m. Current MPA approved plans are narrowing the funding gap but only at the margin. In addition revenue constraints have led to the need to remove £ 11m from the 2005/06 property budget and for base non discretionary revenue costs of some £ 7m per annum to be absorbed within current property budget allocations.
• Disposal of surplus property, and proceeds from the sale of relocated property, play a major part in funding the strategic changes in the estate. Proceeds from property sales also support, to a lesser extent, capital investment in other priority Service areas such as Transport and DoI.
• Reduction of disposal proceeds from Old Street will clearly reduce action under way to close the funding gap on the wider front line estate. For instance if disposal at an under value took place the Service would lose the opportunity to create a replacement Patrol Base in a London Borough. There are other alternative expenditure options including correcting resilience shortcomings on some 4 major sites. The scale of the funding gap is such that every pound received from property disposals can be prudently and sensibly spent to stabilise Service delivery.
• If the Authority were minded to borrow to fill the capital income gap created by a sale at an undervalue this would generate a debt financing charge to the revenue account and possibly an additional Minimum Revenue Provision of c£ 110k and c£ 88k per annum respectively (total c£ 190k) which is unbudgeted.

34. The Treasurer comments that this paper and the accompanying exempt report have covered the main financial arrangements. The financial difference between the highest bid price and the offer from CAP is substantial. Proceeding with a sale at an undervalue of that magnitude has clear ramifications for the Authority’s own programmes, as explained by the Director of Property Services above. However as explained in detail above, the General Consent has been issued to give local authorities discretion to carry out their statutory duties and functions, and to fulfil such other objectives as they consider to be necessary or desirable. However, when considering disposing of land at an undervalue, authorities must remain aware of the need to fulfil their fiduciary duty to local people.

F. Background papers

None

G. Contact details

Report author: David Riddle (MPA), Ken Hunt (MPA) and Alan Croney (MPS).

For more information contact:

MPA general: 020 7202 0202
Media enquiries: 020 7202 0217/18

Appendix 1

Community Courthouse Project

“It is an imaginative and constructive use of a historical building, which has processed its fair share of notorious cases in the past. It will provide a positive point of learning between disadvantaged communities and the criminal justice agencies”
~ His Honour Judge Roger Sanders, former Stipendiary Magistrate at Old Street Magistrates’ Court.

There are approximately 430,000 members of ethnic minority communities within the Project’s Prime Target Area of Hackney, Newham, the City of London, Tower Hamlets, Waltham Forest, Haringey and Islington. Research clearly shows extremely negative statistics concerning the gulf between agencies of the law and the justice system, and ethnic minority communities, and that these communities are excluded, disadvantaged and discriminated against with regard to education, training, and employment. Rates of school exclusion are much higher than in the population as a whole, and although 19% of businesses within the capital are run by members of the Black and minority ethnic (BME) community, a high proportion have found that discrimination and prohibitively high legal fees are limiting opportunities to succeed.

The principal objectives of the CCP are to:

• Empower socially excluded and disadvantaged ethnic minority communities enabling them to deal with the root causes of their exclusion and disadvantage;
• Educate and inform ethnic minorities of their legal rights and responsibilities whilst improving relationships between these communities and the law and criminal justice agencies;
• Develop the capacity of ethnic minority community organisations, businesses and individuals to make tangible contributions to the social and economic regeneration of their communities;
• The adoption of a multi-disciplinary approach to altering the culture and negative perceptions held by many ethnic minority communities in relation to the agencies that make up the criminal justice system, the legal system and the police in particular by Increasing public knowledge and understanding about the courts and the legal system, and providing opportunities for positive interaction between criminal justice agencies and ethnic minority communities.
• Increase the employability and skills base of the ethnic minority communities within law related fields through training, mentoring and other programmes;
• Foster and promote good citizenship, community development, leadership and accountability as effective tools for creating and maintaining inclusive communities;
• Make a significant impact into the reduction of ethnic minority pupils excluded from schools, and provide foundations for the enhancement of their academic performance;
• Contribute to economic development and regeneration of the surrounding area in terms of property and social fabric.

Of particular relevance to the MPA, the Community Courthouse Project will aim to:

1. Reduce youth crime through youth justice education programmes and restorative justice initiatives;
2. Provide opportunities for positive interaction between criminal justice agencies and socially excluded/ disadvantaged communities;
3. Establish programmes to facilitate the recruitment and retention of more people from ethnic minority communities into the Metropolitan and City of London Police Services as well as other areas of the law and the justice system;
4. Change the culture and negative perception among minority communities of the law and the justice system

The Community Courthouse initiative aims to produce the following key outcomes over the next 3 years:

• 540 Young people successfully graduating from the Youth4Justice education programme;
• 1500 Black and minority ethnic business members of the Business Law Clinic;
• 70 New jobs created directly within the Community Courthouse programmes and services;
• 60 New businesses created;
• 100 Public service and city law firms signed up to mentoring and work experience programme;
• 300 Long-term training places established;
• 60 Permanent jobs created;
• 750 Businesses supported with detailed legal and financial advice and assistance;
• 80 New jobs created through the Courthouse Business Incubator;
• Major regeneration work undertaken in restoration of a building of historical interest.

The project will work in full co-operation and co-ordination with all relevant initiatives, policies and reports including the National Strategy for Neighbourhood Renewal, the Policy Action Team Reports, Youth Offending Teams, and the Hackney Strategic Partnership. It will work towards ensuring implementation and achievement of the recommendations set out in The McPherson Report.

The Project will see the establishment of a range of law related programmes and services that will strive to enhance the capacity of ethnic minority communities, increasing their employability within the field of legal/law services and providing opportunities for positive interaction with the law and criminal justices agencies. The CCP’s Programmes and Services will include:

• Volunteer Internship Programme: providing hands on legal training and experience for young people and unemployed adults;
• Youth4Justice Programme: working with young people to develop an understanding of rights and responsibilities and combat social exclusion;
• ICT learning centre: an Information and Communication Technology training centre targeting black and ethnic minority people of all ages;
• Public Service Recruitment and Training Programme: an initiative designed to improve recruitment and retention of ethnic minorities within the legal system and other related services;
• Prisoners Advisory Service: legal advice and workshops inside prisons to support the programme of rehabilitating young and other offenders;
• Service to Seniors: Welfare benefits advice and legal support for those involved in social/care services;
• Business Law Clinic: offering affordable legal services for ethnic minority enterprises, and providing a database of legal information for both professional and public use;
• Business Units and Office Space: affordable units, primarily for black and ethnic minority businesses with a bespoke range of support services.

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