November 19, 2019
Crown Estate intransigence
The Scottish Crown Estate Act 2019 is beginning to be implemented and so it may just be teething problems as Crown Estate Scotland starts to orientate itself to its new focus of serving the best interests of Scotland’s communities. CES is now able to set leases and rents at less than market value, or even nil consideration, if the effect would be to support local economic development. A group in the Western Isles, Harris Development have requested that CES grant them ‘Community Organisation Support Exemption’ (COSE) to enable them to operate their marina. CES seem less than keen.
Extract from the formal submission from Harris Development Ltd to Crown Estate Scotland and Scottish Government
Harris Development own and operate the Isle of Harris Marina with pontoons at Tarbert and Scalpay North Harbour. The facility was 100% publicly funded to promote visiting and local marine tourism which has been shown to be a major economic driver.
The Crown Estate Scotland and Harris Development Limited have not agreed a lease or lease terms for the foreshore and seabed use that they have. This second formal submission to Crown Estate Scotland and to Scottish Government sets out the Harris Development proposal that will help it and other community groups continue to deliver real benefits for the local community in the years ahead.
HARRIS DEVELOPMENT BACKGROUND
Harris Development Limited (HDL) is a company incorporated in 1994 ‘to foster, plan, encourage and assist all types of development within the geographical area of the Isle of Harris, with a view to promoting an economic, natural and social environment that will result in a more balanced and stable level of population’
HDL puts forward a community led vision for sustainable socio-economic development on the Isle of Harris. It is ultimately a social enterprise organisation that applies commercial strategies to maximise improvements in financial, social and environmental well-being.
It is governed by a board of Directors who give up their time and expertise voluntarily. There are no shareholders or dividends and the company is essentially not for profit. If any cash surplus is generated from activities it is re invested in current or new projects.
Proposal from Harris Development
HDL is proposing that CES adopts ‘COSE’ or Community Organisation Support Exemption which would mean that HDL would enter into a lease but that the rent charged would be ‘Nil’ or ‘peppercorn’ in recognition that HDL’s marina project exists as a community not for profit enterprise.
HDL further seeks that COSE be fully adopted by CES and applied to other community groups and that this would be a positive public relations coup, at very little cost, for the newly formed (2017) Crown Estate Scotland management.
What is ‘COSE’
Harris Development Limited’s proposal is for CES to adopt ‘COSE’ or Community Organisation Support Exemption with respect to their lease and rent negotiations with community groups seeking to develop marine assets. COSE is a concept developed by HDL.
Community organisations are clearly defined. (They also defined under the CES act 2019-part 1 section 6) They are all focused on delivering local or community benefit and are social enterprises as well as charitable or voluntary organisations. Some will be community development trusts or companies limited by guarantee or charitable community trusts. All will in some general or focused capacity be seeking to promote economic development in their area as well as regeneration of their economic, social and physical environment. They will all be looking to improve social wellbeing and social inclusion, especially in rural areas. And they will all have environmental wellbeing and sustainable development at the heart of their organisations.
Harris Development Limited (HDL) is a community focused company limited by guarantee and has, for 25 years, delivered local initiatives that have satisfied all of these community ‘articles’
The latest project, The Isle of Harris Marina, which was 100% funded by Scottish Government and other agencies, has already begun to deliver substantial local community socio-economic benefits which are exactly why it was funded publicly in the first place.
The Crown Estate in Scotland, now Crown Estate Scotland since 1st April 2017, has asserted its ‘right in the crown’ over the foreshore and seabed and subsequently sought to bind HDL to a lease for the installations at Tarbert and Scalpay North harbour.
Its initial rental terms of £2,160 plus VAT, largely based on assumptions of number of berths, was rejected by HDL in April 2018 and a counter proposal based on the number of anchors and shore pins placed on the foreshore and seabed was submitted 6th April 2018. It also included a proposal for a rent-free period (to allow the project to ‘bed down’) as well as a stepped rent thereafter. This was rejected by Bidwells, agents for CES, in June 2018 and a revised offer of rent to £1,700 per annum was proposed with one rent free year and a stepped rent from £250 to £1,700 over 4 years.
This was rejected by HDL as it was clear that rents at this quantum would be detrimental to the success of the project and would detract from delivering value locally. It sought clarity and guidance as well as intervention by MSP Alasdair Allan. He wrote to Chief Executive Simon Hodge on 11th September 2018 as well as to Roseanna Cunningham. Roseanna Cunningham replied 2nd October 2018. No reply was received from Simon Hodge to Alasdair Allan’s letter (?)
Alasdair Allan MSP wrote again to Simon Hodge on 16th May 2019 which was replied to by Andy Wells, Head of Property (in the absence of but at the request of Simon Hodge on 3rd June 2019)
Andy Wells writes:
Moving forward, our policies and procedures will clearly be defined by The Scottish Crown Estate Act 2019 once it is fully enacted, and policies are currently being developed to accommodate this new legislation. The Act prohibits CES from making transactions ‘for consideration of less than market value. ‘However, the act will allow us to consider transactions below market value if we are satisfied the transaction is likely to contribute to the promotion or improvement in Scotland of economic development, regeneration, social wellbeing, environmental wellbeing or sustainable development
In fact the CES Act 2019 does allow CES to consider transactions below market value as well as for NO consideration (part 3 section 1):
(1)The manager of a Scottish Crown Estate asset must not make any of the following transactions (“a relevant transaction”) for consideration of less than market value-
(a)a transfer of ownership of the asset,
(b)a grant of a lease of the asset,
(c)a grant of any other right in or over the asset.
(2)Despite subsection (1), the manager may make a relevant transaction for consideration of less than market value (including for no consideration) if the manager is satisfied that the relevant transaction is likely to contribute to the promotion or the improvement in Scotland of-
(d)environmental wellbeing, or
In this case the ‘manager’ is assumed to be Andy Wells for CES. The CES website suggests that the chartered surveyors Bidwells act as ‘agents’ but this does not make them the manager as defined in section 2 of the Act.
Whilst this correspondence was going on Bidwells were still seeking agreement of rents. (Bidwells email to HDL marina 2nd May 2019) to which HDL marina replied (29th May 2019 saying it could not agree a rent other than ‘Nil’ and made the first proposal for ‘COSE’
Paul Bancks (for CES) replied to HDL by email on 7th June 2019 saying that ‘seabed rents are based on end use rather than the nature of the tenant’ and with reference to the new CES Act 2019 he goes on to say however that ‘ policies are currently being developed to accommodate this new legislation’ (which is also what Andy Wells said) . At the end of the email he threatens to involve an independent arbiter (the valuation office agency) but says that this would be a lengthy process ‘with additional costs’ This threat appears to have been carried out already as HDL has recently been contacted by the valuation office.
The Crown Estate Scotland assertions (as stated in the letter from Andy Wells (CES manager) to Alasdair Allan MSP dated 3rd June 2019 are:
To comply with current legislation (now the Crown Estate Scotland Act 2019)
If CES intends to comply with current legislation, then it does have the power to agree a lease at Nil Consideration if the manager is satisfied that the relevant transaction is likely to contribute to the promotion or the improvement in Scotland of-
(a)economic development, (b)regeneration, (c)social wellbeing, (d)environmental wellbeing, or (e)sustainable development.
Senior managers at CES are clearly eager to ensure that they develop positive policies and procedures under the new legislation and the CES annual report and accounts to March 2019 resonates with how much CES has given back to communities and what more it can do in the future
With 2020 being Scotland’s year of coasts and waters it would seem to be extremely negative for CES to be embroiled in controversy with a community group that is delivering real benefits in a local community; helping to drive marine tourism that is delivering financial benefits to the local and wider Scottish economy.
Ensure a fair and consistent approach across their assets
CES can adopt ‘COSE’ and ensure that all community groups are treated equally, consistently and fairly. Having contacted several other community groups both in the islands and on the mainland, it is clear that CES is not ensuring a fair and consistent approach across these assets with reports of varied and different approaches to lease terms and rents.
Going forward HDL’s support base within other community groups and development trusts will enable it to help CES in ensuring that a consistent approach is extended to all of these groups if COSE is implemented.
HDL believes the Crown Estate act 2019 allows the manager of a Crown estate asset to enter into a transaction at less than market value or indeed Nil consideration (it’s just that they don’t want to and believe that there is no support for a challenge to this)
The Crown estate management could be in breach of the Crown Estate Scotland Act 2019.
By adopting COSE the Crown estate will, for very little cost, gain considerable positive publicity and win a public relations coup in 2020 Scotland’s year of coasts and waters which will inevitably highlight the Crown Estate role in the growth of marine
Considerable support exists within other community groups for change and the Crown Estate Scotland have a duty to Scottish government under devolved powers and a duty and obligation to comply with the new Crown Estate act 2019.
Harris Development Limited is a community organisation and complies with the definition of such under the CES Act 2019. HDL clearly delivers on key objectives that can satisfy the criteria for the manager of a Crown asset to enter into a transaction at less than market value or Nil consideration. HDL is ready to enter into a lease with CES under these terms.