Content

Salford City Council - Record of Decision

 
Title:
Sale Of
Market Sale and Shared Ownership Properties and Transfer of Social,
Affordable and PRS Homes Developed by The Council at Longshaw
Drive, Little Hulton.
 
I, Councillor Jack Youd, Deputy
City Mayor, in exercise of the powers contained within the City
Council’s constitution do hereby;
 
 
1.   
Approve the disposal of 12 properties in the first
phase of development at the Longshaw Drive site for market sale to
individual purchasers at the estimated values set out in the report
by way of freehold transfer, with further approval to be delegated
to the Executive Director of Place to agree sales incentive
packages in line with market evidence.
2.   
Approve the disposal of 2 properties for social rent
and 4 properties for affordable rent in the first phase of
development to Dérive RP at the
values set out in the report by way of freehold
transfer.
3.   
Approve the lending of £1,336,730 (plus
legal fees and associated costs) to Dérive RP to fund the acquisition of the
initial 6 social/affordable units, subject to drawdown of Homes
England grant funding.
4.   
Note the tenure mix, phasing and sales programme for
the remainder of the development as set out in the report,
comprising a further 159 units, which will be the subject of a
further report prior to the release of the next phase of
development to seek approval to the disposal terms of subsequent
phases.
5.   
Delegate authority to the Executive Director of Place in
consultation with the S151 officer to: negotiate, agree, and
finalise the detailed terms of the transaction, including such
arrangements on estate management, repair and service charge and
title matters.
 
The Reasons:
                             
 
To facilitate the sale and
transfer of completed residential units and use of Homes England
AHP grant funding as released on a phased basis.
 
Assessment of Risk:
Medium 
 
The
source of funding: Housing Capital Programme, with loan to be
repaid by Derive group companies over 40 year term.
 
Legal
Advice obtained:  Kate Bouchier and
Kathryn Saldana, Shared Legal Service.

 
The Council has the power to
provide funding to Derive RP and Derive Group under Section 24 of
the Local Government Act 1988 (LGA 1988), which allows the Council
to provide financial assistance for privately let housing
accommodation. Section 25 LGA 1988 requires Secretary of State
consent to the exercise by the Council of its Section 24 LGA 1988
power.  Consent C of the 2010 General
Consents under Section 25 LGA 1988 provides the Council with a
broad consent to “provide any person with any financial
assistance for the purposes of, or in connection with, the
acquisition, construction, conversion, rehabilitation, improvement,
maintenance or management…of any property which is or is
intended to be privately let as housing
accommodation”. 
 
The Council will rely on its
power under Section 24 LGA as the legal basis for the proposed
Council loan of £323,050 (plus
legal costs and associated fees) to Derive Group to enable
Derive Group to acquire 2 of the Phase 1 Longshaw Drive Housing
Units for onward sale by Derive Group as Shared Ownership Homes.
The Council will rely on its power under Section 24 LGA as the
legal basis for the proposed Council loan of £1,336,730 (plus legal costs and associated
fees) to Derive RP to enable Derive RP to acquire 6 of the Phase 1
Longshaw Drive Housing Units for use as social and affordable
rented housing.
 
The Council has been awarded
Homes England AHP 2021-26 grant funding to fund the construction of
the 6 Phase 1 units at the Longshaw Drive Estate. The Council will
seek approval from Homes England to transfer the 6 units which have
been funded through Homes England AHP grant to Dérive RP.  Homes
England will require Dérive RP
to enter into a legal undertaking, whereby Dérive RP will undertake to ensure that the
6 units are used for the purpose of the provision of affordable and
social rented housing. 
 
The Council will need to ensure that the
disposal of all of the units (including those to the Derive
Companies) are at best consideration, under the terms of section
233(1) Town and Country Planning Act 1990. In addition, the Council
should also ensure that the disposals are not at an undervalue
(from market value) for the purposes of section 24 Local Government
Act 1988. Existing conditions as to use (such as grant conditions
under agreement entered into by the Council) can be taken into
account in calculating market value. If best consideration is not
achieved or there is any element of undervalue, then specific
statutory consent to the relevant disposal will be
required. 
 
The Council has the power
(under section 233(1) Town and Country Planning Act 1990) to effect
the sale of the open market units directly, without a requirement
to transfer to a subsidiary, provided the Council's primary purpose is not to generate a
profit. Where, as in the case of the sale of the open market houses
on Longshaw Drive, the Council’s primary purpose is to
deliver better quality housing (including meeting affordable
housing requirements); promote regeneration and economic
development within Salford; and create jobs, growth and prosperity
for residents, the sales do not have to be concluded through a
corporate vehicle, notwithstanding that the sales may produce an
element of profit as a consequence of fulfilling this primary
purpose.
 
Care should be
exercised on the use of incentives in terms of meeting the duty to
obtain best consideration under section 233(1) TCPA. The section
refers to the Council being able to dispose on terms that are
“expedient in order to secure the best use of that or
other land and any buildings …”  Expediency
might be informed by what is necessary to compete with others in
the market, or to meet expectations of what buyers would expect to
have included in the purchase of a new home.
 
The use of
incentives is a matter for a valuer to determine and external
valuation advice should be taken on their use to ensure that they
do meet best consideration requirements.  The Council will also need to be clear that it is
not offering incentives in order to make profit, but to enable a
sale for the best use of the land and buildings and to fulfil its
obligations under section 233(1) – in essence to further the
planning purposes for which the land is held, and to promote and/or
improve economic, social and/or environmental
well-being.
 
All disposals will need to
comply with the terms of the GMCA Brownfield land funding secured
against the site. The Council will need to liaise with GMCA early
on in the sales process to secure a release of these first 18
properties from the terms of the GMCA grant funding agreement and
also ensure that it meets the applicable grant conditions on any
disposal.
 
In the event that funding is not available to
Derive Group to acquire the 2 units intended as shared ownership
housing, then alternative proposals will need to be progressed
quickly, allowing sufficient time for any necessary consents and
legal documentation to be prepared with a view to achieving
occupation quickly following handover from the building contractor
in August.

Financial Advice obtained: Alison Woods, Commercial
Finance Manager
 
The Council is
currently delivering new mixed tenure homes at Longshaw Drive, as
part of the approved Housing Strategy Capital programme and the
transfer of housing units as outlined in this report, to
Dérive RP Limited and
Dérive (Salford) Group Limited,
will be subject to the approval of the boards of Dérive RP Limited and Dérive (Salford) Group Limited
respectively. 
 
Such approvals are
supported by fully viable business plans, which incorporate the
full repayment of all loans to Salford City Council over a 40 year
period at an interest rate of 4% on an annuity basis. 
 
Both Dérive RP Limited and Dérive (Salford) Group Limited have a number
of golden rules which ensure that all schemes they take on are
fully viable without the need for working capital; this gives the
council assurance that it will be able to meet its debts in
fulfilment of the required loans.
 
Council Loan to Dérive (Salford) Group Limited to fund
acquisition of Shared Ownership Units
 
The proposed
secured term loan facility to Dérive (Salford) Group Limited of
£323,050 (plus legal fees), is required to fund the cost of
acquisition for the 2 shared ownership units and is subject to
Dérive (Salford) Group Limited
being successful with an application for Investment Partner Status
from Homes England to enable direct drawdown of grant funding to
help deliver the shared ownership element of the
scheme.  Should this application by
Dérive (Salford) Group Limited
be unsuccessful or the funding award is lower than bid for,
alternative funding sources or an increased loan facility from the
Council will be required to make up the shortfall, which will be
the subject of a further report where necessary, or otherwise
authorised under the scheme of delegation by the Executive Director
Place. 
 
Council loan to Dérive RP Limited to fund the acquisition of
Affordable Units
 
The proposed secured term loan facility of
£1,336,730 (plus legal fees) to Dérive RP Limited, is required to fund the
cost of acquisition of the 6 affordable housing units in the
development.
 
The Council has also been awarded and utilised
Homes England Affordable Homes Programme 2021- 26
(“AHP”) grant funding to help deliver this part of the
first phase of the development, to be sold to Dérive RP Limited and is seeking approval
from Homes England to discharge grant conditions and transfer the
Homes England AHP grant to Dérive RP Limited. 
 
It is intended that the Homes England AHP
grant funding will remain with the 6 properties which are to be
held by Dérive RP Limited and
the AHP grant be transferred to Dérive RP Limited will therefore acquire the
6 properties subject to the obligations and grant conditions, which
have been accepted by the Council in return for the Homes England
AHP grant funding. 
 
Open market sales
 
The report outlines
that there are 10 housing units proposed for onward sale by the
Council on the open market at best consideration, market
value.   It should be noted that
under this proposal and in line the Council’s Treasury
policy, the capital receipts from disposal of the 10 units will be
utilised to pay down the Council’s overall debt (which covers
the net construction cost for the 10 units).
 
Procurement Advice obtained: n/a - No implications. The award of
the contract to Seddon Construction to build the affordable homes
was subject to a separate Procurement Board Approval. 
 
 
HR
Advice obtained: n/a there No implications
 
 
Climate
Change Advice Obtained: In Consultation with: Mike Hemingway -
Principal Officer - Climate Change
 
All homes are being
built to Passivhaus standard ensuring they are cheaper for
residents to heat and result in significantly lower than average
emissions.
 
 
The
following documents have been used to assist the decision
process:
Public
briefing report submitted to Property/Re3generation Briefing on
8th July 2024
 

Contact Officer: John Nugent
(Property Services)
Assistant Principal Development Surveyor        
Tel
No 0161 779 6072

 

 

 

 

*          
This decision is not subject to consideration by another
Lead
          
Member/Executive Director

*          
The appropriate Scrutiny Panel to call-in the decision is
the
           
Growth and Prosperity Scrutiny
Panel.

 
 

Signed:
Councillor Jack
Youd
Deputy City Mayor and Lead Member for Finance,
Support Services and Regeneration
Date: 9th July 2024

 

 

*          
This decision was published on Monday 9th July 2024.

*          
This decision will come in force at 4.00 pm on Monday
15th July 2024

         
 unless it is called-in in accordance with the
Decision Making Process

          
Rules.