Consultation suggests the leasehold should be protected
The available evidence shows that a majority of the public want the Sub Rooms to remain in public hands, although the council and Dale Vince have stated retaining public access is the most important thing.
If public ownership is not on the table, and the building and forecourt are instead sold to a private company, the council should be considering very carefully how they can protect the public’s access and use, as recognised by the council themselves (my emphasis):
Only 2 [out of 126] people suggested private ownership should be considered, but still as a community arts venue … as long as the venue remained open and offered accessible entertainment/community facilities, it was not important WHO ran it, but SDC should protect the leasehold to prevent future sale/loss from the community.
Even with the best intentions, things change
As long as Ecotricity is doing well, there’s no reason to think it would stop running the Sub Rooms as a venue. In any case, “making commercial sense” is not always Dale Vince’s priority - this is a company that loses well over two million pounds per year on Forest Green Rovers. And he has made it very clear it’s personally important to him that it continues as a venue.
However, the fortunes of business rise and fall, and once the Sub Rooms is in private hands, it is an asset that can be bought or sold like any other.
What happens if Ecotricity goes into administration? Or when Dale Vince leaves the picture? Will the new owners feel the same way as him, or just see the Sub Rooms as an asset to be sold to the highest bidder?
There are also risks under the ownership of a benevolent owner. It’s not clear exactly how Ecotricity proposes to grant public access, and this will be subject to change. Dale has stated on Facebook:
…we’re proposing to take all costs of running the building and to maintain at least as much public use of it as it has now.
But without seeing the bid detail, it’s hard to check how realistic this promise is. Running the venue and using it as a staff meeting place could be a complex proposition. For example:
- The main upstairs room will be used by up to 700 staff during the week. This presumably means some kinds of daytime events (like the Fabulous Sound Scapes exhibition) will no longer be possible. What about sound checks and setup for bands?
- Will the traditional uses of the square (morris dancing, demos, Goodwill Evening) all be protected? How? What about if one of these clashes with a commercial event? Could the square become a car park? Will the flower van still be allowed to use the forecourt?
What can be done?
What are the options? We can think of three, but are not lawyers (if you are, please let us know if we’re on the right tracks!)
The Task and Finish Group recommendation recommending the Ecotricity bid proposes “the imposition of restrictions .. and management covenants … [and] overage provisions to cover the possibility of any alternative uses”
On the other hand, the Ecotricity bid itself explicitly states that their offer is subject to “no unreasonable or restrictive covenants or obligations”.
The one public statement we can find from Dale Vince (on his personal Facebook page) about legal protections gives a hint of the kind of convenant he would consider reasonable:
We recognise the concern that one day we may choose or need to sell the Sub Rooms (though it’s totally not on our agenda) and I expect that if our bid is chosen … we would sit down with SDC and cover issues like this with covenants. In this case it would be simple enough to require that SDC had first right to buy the building.
There are a few problems with this suggestion, and with covenants in general.
A covenant offering the Council “first right to buy the building” is practically useless, given the Council says it’s disposing of the building because it can’t afford to keep it.
The council is in a poor position to negotiate restrictive terms after accepting a bid, and it’s not clear they’re leaving enough time before the decision. No restrictions were mentioned during the sale process, so any company could quite reasonably refuse to accept any new terms. Despite indicating a willingness to be a part of such discussions, Dale Vince has no incentive to concede any control, and the Council would hold very few cards by this stage.
This suggestion is about ownership of the building, not access. A covenant to protect specific parts of the building, at specific times of day, would be unusual, complex, and hard to agree (see point 1 above). Even if such a convenant could be agreed, it would also be difficult to pass on such obligations to any new owners.
A covenant is of limited use in the current political and economic context. Its enforcement would rely on the Council having the time, money, and political will to prosecute the other party. It seems unlikely that a future council would value public access rights over the cost of legal action against a large company.
When a covenant can be enforced, it’s easiest when the buyer still owns the property, and the seller still exists as a legal entity. Neither of these is guaranteed. Ecotricity certainly won’t own the building forever, and there is also a realistic possibility that the District Council may no longer exist in a few years.
It may be possible for a covenant-based approach to work, but the devil is in the details, and the details need to be thought through properly in advance. The idea of negotiating restrictive covenants with a potential buyer after accepting their bid is absurd.
The Task and Finish Group report also recommends “overage provisions” to prevent future change of use. Overage is a legal provision allowing the seller to claw back payments if the buyer subsequently makes a profit on their land. It’s unclear how such a provision could protect the public use of the building. Again, the council needs to make the detail (and legal basis) of any such provisions clear before accepting a bid.
2. Renting the building
One possibility is for the Town Council to become landlords, and rent the space to Ecotricity. The discussion on this Facebook post indicates Dale Vince doesn’t think this is a good idea.
3. Selling a short lease
Another possibility, which would give Ecotricity much more control, is to sell a short-term lease to the company. There is plenty of precedent for this. For example, the leaseholds of schools and hospitals are commonly sold on 25 year terms under PFI contracts. There would still be the short-term problem of ensuring public access during the lease, but medium-term the public interest could be revisited when the lease expires.
Leases (long or short-term) confer other legal advantages to the freeholder. Whereas covenants are typically about land and access, leases commonly constrain the behaviour of leaseholderes. Additionally, it is easy to ensure such constraints apply to future leaseholders, even if the lease is sold on.
A party associated with the bid has suggested (on Facebook) that Ecotricity could not buy the leasehold because it “makes no commercial sense” to invest in a building you don’t own.
However, the Ecotricity bid was made because they need a meeting space for staff: any investment advantages would be a tiny bonus (it would only add about 0.7 per cent to their balance sheet). As staff accommodation, a short lease could present an excellent deal. To illustrate:
- There will be one-off costs to restore the building fabric; the Stroud Trust bid indicates the basic work might be around £150,000.
- Suppose Ecotricity paid £100,000 for a 10 year lease
- This would be equivalent to £2,000 per month over the period, for a massive office space in a prestigious building in the heart of the town.
What you can do
Write to your councillor here. Some questions you might want to include:
- How will the building, square, and public services be protected for public use in the event of a private sale?
- Do they consider convenants would be enough to protect the building and serviecs?
- If so, will any covenants be stipulated before committing to a preferred bidder?
- What do they think of the option of a short lease?
- Will there be a full council vote on the decision?
Come to the “information event” on Saturday 18 November, from 9.30am at the Sub Rooms.
Attend the S&R Committee’s vote on the Sub Rooms on 5th December, from 7.30pm at Stroud Council, Ebley Mill.
If you know about property law, get in touch and help us write something more authoritative!