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May 22, 2013

No more peppercorn rent

Many Scottish local authorities have established arm’s-length organisations (ALEOs) to run public services and manage council assets. ALEOs are seen as a way of bringing in new investment which councils cannot access. But they have also been heavily criticised for lacking transparency and democratic accountability. These concerns have come to the fore again in Glasgow with the behaviour of the ALEO responsible for managing the City’s property. Out of the blue, community groups on peppercorn rents have received notices of massive (300,000%) rent increases.



David Leask, Evening Times, 8 May 2013

GLASGOW charities and voluntary groups could be forced to close after landlords increased rents by almost 300,000%.

City Property, The Evening Times can reveal, has just ordered one of the city’s most vibrant independent community centres to quit its base because it can’t pay the rent. It has told the Kinning Park Complex that payments, including insurance, will leap from £1 to almost £3000 a year – a 299,900% increase.

The community centre – the only one left in the South Side neighbourhood – fears its future is now in doubt. Lindsay Keenan, the not-for-profit facility’s manager, said: “We have been told to quit the building by May 27. City Property says the notice of removal is a formality. But it wants to raise our payments from a £1 a year to nearly £3000 a year.  That may not sound like much but we run on a shoestring.”

The threat to evict the Kinning Park Complex, which operates out of a Edwardian schoolhouse, comes after small businesses in Glasgow’s High Street formed an association to campaign against rent rises imposed by City Property. Many firms, especially small shops, have already shut as the cost of leasing from City Property rises. 

The Aleo – and arm’s length council organisation – was set up to raise income, mostly to cover the interest on a £120million mortgage it took out in 2010 to finance Glasgow City Council’s controversial early retirement pay-offs.

In 2011, City Property came under fire from charities – including Glasgow the Caring City – after it moved to hike rents for those enjoying symbolic peppercorn rents on council-owned premises. Charity and voluntary sector sources believe the landlord held off further efforts to commercialise rents ahead of last year’s council elections. Now – as leases are renewed – it is looking to raise more money.

The Kinning Park Complex was taken over by community volunteers in 1996 after the then newly created Glasgow City Council tried to shut it down.  The council stopped funding the facility but did agree a peppercorn rent, one of many non-commercial leases agreed on an ad-hoc basis over the last few decades. 

Effectively the complex – until now – has enjoyed a hidden subsidy from the council.  City Property is now trying to switch such leases to a commercial basis – leaving third-sector tenants to apply to the council and other sources for alternative funding.  The Kinning Park Complex has been trying to source such funding. But late last month it was issued – out of the blue, it says – with a notice of removal, something City Property describes as “standard documentation”.

Its board didn’t think this was standard. “Your notice of removal,” its members said in a furious joint letter to City Property boss Richard Rae, “came across as a heavy-handed threat to all of the people who use the Kinning Park Complex”.  They added: “We find that shocking, outrageous, irresponsible and completely unacceptable.”

The board said City Property had delayed talks on a long-term lease for six months.  They also claimed that the Aleo had refused to discuss community ownership, a move that could have unlocked the £400,000 the complex needs to fund essential repairs. Today it was claimed the council put the increase in rents on hold before the last local government elections.

SNP councillor Graeme Hendry said: “The issue of City Property squeezing tenants in the voluntary sector to the point of bankruptcy was well documented in 2011, and the Council was rightly criticised.  At a hustings meeting for the 2012 elections, Councillor Matheson [the city’s Labour leader] was heard to promise a review of the issue, but it would seem that now the election is out of the way this has been conveniently forgotten.”

The Kinning Park Complex said its future bookings had been put at risk by the threat to evict the voluntary group from the building.  It said it would hold City Building legally responsible for the loss of business or livelihoods that resulted from this. Mr Keenan reckons the complex needs £400,000 in repairs. “This building has served the community for a century and with a bit of investment it would last another 100 years.”

He added: “From our first look into City Property we have had serious concerns about the entire manner in which this Aleo was set up, the basic rationale for it and the effect of it throughout the city and on organisations such as ours. Our concerns have grown with experience.”

A source close to City Property insisted Kinning Park Complex was the only one of 70 tenants facing new leases to complain.  He insisted a long-term 25-year lease was still on the table for the centre. But he suggested this could be in doubt because the Kinning Park Complex’s funding problems were affecting its prospects of securing a lengthy tenancy. 

He said: “The onus is on the organisation to review the Business Plan thus providing City Property with sufficient comfort to allow the longer term lease to be concluded.” An official spokesman added: “The notice of removal letter sent to Kinning Park Complex CIC was purely an automatic, procedural document – there is no prospect of eviction.  The organisation, like all those on the Concessionary Lease Renewal Programme, was advised that this was standard practice when looking at the renewal of leases. No other organisations have raised this as a matter of concern.”