BROMSGROVE District Council could be forced to stump up £265,000 of taxpayers’ money to cover the cost of a lease on a building after the company it assigned it to failed to pay up.
On Wednesday the authority’s cabinet recommended to full council that it puts aside the cash from its working balances to cover the maximum financial liability that could result from the unit at 31 Sherwood Road, Aston Fields.
It all began in 1985 when the council, as freehold owner of small industrial units on the site, entered into a sale and leaseback agreement in order to keep control over the buildings.
It sold the 99-year leasehold and at the same time took out a 35-year sublease which expires in 2020.
In 2011 the freehold and sublease were sold to a company which has recently defaulted on its payment of rent under the sublease.
And that has meant the council is now liable to pay the rent under that sublease. But at the same time the council is entitled to take back the rest of the 35-year-lease and take control of the units again.
On Wednesday (September 2), Bromsgrove District Council’s cabinet gave approval for council to apply to take over the lease.
The cabinet also recommended to put aside the £265,000 from working balances in case it is needed (£200,000 to cover the cost of the lease until 2020, a further £60,000 for delapidation costs and £5,000 for any legal costs relating to getting an overriding lease).
A Bromsgrove District Council spokesperson said most of the units were occupied by local businesses and the rent received from those should be sufficient to cover the rent payable until 2020 so the total bill should be a lot less than the money the authority was set to put aside.
“Any empty units can be used as the council sees fit, which may include providing space for new small businesses.
“The council will not be able to establish the current levels of occupation/rent paid until the lease is overridden.
“Recovery of any sums paid to date on behalf of the company concerned will have to be considered separately and will depend on the financial viability of the company.”
But Coun Luke Mallett, the leader of Bromsgrove Labour Group, called the situation a ‘financial fiasco’.
“The real question is how we have ended up in this mess in the first place and why the taxpayers could now be paying for the incompetence of the Conservative administration.
“This is a quarter of a million pounds which could have been used to pay for local services but instead it may have to be spent on sorting out a legal mess.”