Examination of Witnesses (Questions 6560
- 6579)
6560. However, the works which Crossrail intend
to carry out in this area, it now turns out, are no longer compatible
with the approved redevelopment proposals. As I understand it,
the powers they seek have not changed, but the way in which they
actually intend to do it means that they are now no longer compatible.
I think, to put it in a nutshell, what they take, although a relatively
small part of the building, takes, as I understand it, a main
access out. That this was the situation became clear to the Petitioner
towards the end of last year and, as you have heard, as a result
of that position, the Promoters have now agreed that they will,
if they take, take the whole and they will do that, they say,
if the Crossrail Bill is granted Royal Assent and funding for
Crossrail is made available, and I will come back to that in a
moment.
6561. The lease to Lazard's expires on the June
quarter day this year. Very, very briefly, the lease requires
Lazard's to return the property to the condition it was in at
the start of a lease of about 30 years. They will be doing some
works, but those works will not make it lettable in the current
market, so we have a position where, in order to achieve even
short-term lettings in the current market, significant further
works would be required and, when you see that in conjunction
with the fact that after Royal Assent the property could be taken
with a few months' notice, it is most unlikely that any viable
letting of the office element will be possible. That is effectively
accepted by the Promoters in the reference that you have already
seen. The Promoters, as you know, my Lords, have up to five years
from Royal Assent to decide whether to proceed and acquire the
property. From June this year, the Petitioner's outgoings in relation
to the site in terms of covering bank loan payments, empty rates,
maintenance and ground rent will be something in the order of
£6.45 million per annum. However, their income will be reduced
from the order of £6 million to something less than £1
million once there is no longer the Lazard's lease, so, in very
broad terms, Souzel will, therefore, face an annual deficit of
over £5 million potentially for over five years and there
is no certainty as to whether the property will be taken and,
if it is taken, when it will be taken, and no application can
be made to the Tribunal to assess compensation until notice to
treat is served. If the property is not in the end taken at all,
then there will be no compensation, so, if they wait for five
years and then do not take it, no compensation. We believe that
is an unacceptable and unfair position for Souzel to be left in
because until such time as the Promoters decide either to start
the process of acquisition or to announce they do not intend to
proceed, we will suffer significant loss. We face great uncertainty
as to the duration and extent of that loss without any recourse
to the Lands Tribunal. This is not a case where the Petitioner
will get any benefit from Crossrail because if Crossrail does
go ahead, the property will be taken. This is not simply a case
of an opportunity for re-development being delayed. The particular
facts of this lease falling in now and the juxtaposition of Crossrail
mean that the Petitioners are effectively being deprived of the
benefit of the main element of the property from June this year.
Their heavy ongoing liabilities remain and they have no recourse
to compensation unless and until a decision is made to take the
property and, for example, that makes it very difficult to plan
sensibly how to deal with the loans. We believe that would be
an extreme result and clearly outside the range of acceptable
results. We believe that provision should be made to provide a
fairer result.
6562. My Lords, the simplest way for the result
to be made fairer would be for the Promoters to undertake, or
be required, to take the property earlier, ie soon after Royal
Assent, I am not suggesting they take it before but soon after.
I think it is still up on the screen, my Lords, the Promoter's
document setting out the commitments. If you look at 4 and 5,
first, funding has to be in place—I will come back to that—and,
secondly, they will purchase the premises when satisfactory terms
are agreed. There is nothing there that actually requires them
to take it. It may be that we are not so far apart as we thought.
If there was certainty that it would be taken relatively soon,
that would significantly reduce the uncertainty, it would limit
the extent of losses that were potentially uncompensatable and
give certainty that if the property is taken, the process of determining
compensation would start relatively soon. If, as we were told
at the Budget speech, government funding for Crossrail is secure,
it is difficult to understand why the Promoters are reluctant
to give such an undertaking. If there is a risk of delay or cancellation,
then in these circumstances that risk should be the Promoter's
not Souzel's. They say that they intend to take it in June 2009.
In that case, why can they not be held to that if they were to
say, "Right, we will take it or decide not to take it in
June 2009", that would be a very significant improvement
on the position of this Petition.
6563. My Lord, alternatively, the Promoter should
pay a substantial sum towards the loss of rent from June 2008
on some sort of regular basis, we would suggest quarterly, until
they take the property or make a final decision not to take it.
We believe that the historic rent paid pursuant of the Lazards'
lease would be an appropriate figure to set it out. If they then
went on to take it, what had been paid could be taken into account
in the final determination of compensation. If they did not take
the property, then those payments would provide some mitigation
of the losses incurred while the Promoters made up their mind.
My Lords, if that alternative approach was adopted --- We are
not looking to make a profit on this basis, we are looking to
hold the position while they make up their minds.
6564. My Lords, if I can just add one further
point. The Promoters have indicated that they may refer to various
company information relating to our clients. They have provided
us with information relating to various companies. The Petitioner
Souzel is not a subsidiary of the companies they have provided
detailed searches of. It is, however, ultimately owned by one
of several family trusts which have various beneficiaries and
I can make it clear that we are not saying we are poor, but that
does not make this fair.
6565. My Lord, I have been brief, as promised,
unless there is anything else you wish me to deal with. Barristers
sometimes are brief, not always.
6566. BARONESS FOOKES: Not often!
6567. MR HICKS: I am glad to be the exception.
Is there anything else you wish me to deal with?
6568. CHAIRMAN: No, I do not think so.
6569. MR HICKS: I do not anticipate,
unless my learned friend indicates there are relevant dispute
of facts, that it is necessary for me to call a witness.
6570. CHAIRMAN: I should not think so,
thank you. Mr Mould, you will have to have powers before you can
do anything about this?
6571. MR MOULD: My Lord, yes.
6572. CHAIRMAN: I suppose that depends
on Royal Assent?
6573. MR MOULD: It does indeed, yes.
6574. CHAIRMAN: Thereupon you will do
something and you will now tell us. I suppose the question of
blight arises?
6575. MR MOULD: Yes. What we will do
is what we have said in the list of commitments that you have
in front of you, which is still on the screen. What Mr Hicks invites
you to do is to say we should do more. Let me be clear, we do
not consider that there is any justification in relation to these
Petitioners for doing any more and I shall explain to you, I hope
equally briefly, how it is that we say that. It may be helpful
just to summarise my learned friend's points. He draws attention,
I think, to two uncertainties which he says cause difficulties
for his clients. One is the uncertainty as to whether the project
will proceed at all. The second is, assuming it does proceed,
the uncertainty as to when his client's property will be taken
for the purposes of the project. The reason why that is significant
is because, as your Lordship will very well understand, ordinarily
it is the date on which property is taken, that is to say, using
the legal language, when possession is taken of the property,
subject to compulsory acquisition, that the process of negotiating
land compensation, including land compensation to embrace disturbance
costs such as lost rent, pending acquisition, it is at that date
that process takes effect. That will be the position in relation
to these Petitioners, subject to our commitment 5, just as it
would be in the case of any investment property owner within central
London whose property is required wholly or in part for the purposes
of Crossrail's scheme. There is no relevant distinction to be
drawn between these Petitioners and any other person, any other
company with similar property holdings, affected by the Crossrail
proposals and therein lies the real difficulty here. If we were
to go further, as Mr Hicks says we should, in relation to their
property there would be no basis upon which we could refuse to
take a similar course in relation to, I suspect, literally hundreds
of properties owned by investment proprietors in the West End,
the City of London and so forth. This is genuinely a case where
a precedent could be set.
6576. That brings me back, if I may, to the
legal context which underlies this Petition. I said this case
was all about blight and so it is, Mr Hicks has made that very
clear. Blight affects property, that is to say the uncertainties
associated with major schemes of this kind affect property until
powers are obtained, funding is committed and compulsory acquisition
has taken place, your Lordships will readily understand that.
There is a very clear statutory scheme to remedy the effect of
blight in certain limited cases. We explained that to the Committee
at the beginning of these proceedings when Mr Smith gave his presentation
and, as you will recall, in relation to commercial property a
remedy is provided to the occupiers of small business premises,
the limitation is expressed by reference to a rentable value on
it, but it has never been the case that there is a remedy for
the uncertainties and the blighting effects of schemes of this
kind afforded to the owners of investment property affected by
such proposals. The reasons for that are perfectly straightforward.
Owners of that kind are generally able to make appropriate financial
arrangement to cover the costs associated with the blighting effect
of major schemes in a way that small business occupiers are far
less likely to be able to do, so there is a clear policy distinction
to be drawn there.
6577. The next point is also fundamental. If
proprietors of the kind that Mr Hicks' clients are were able to
secure advanced purchase or advanced payments of compensation
to cover blight in relation to their property, the costs would
soon become so prohibitive to the scheme that these schemes would
never take place. One only has to think of the consequences of
a commitment which would have to extend, we say, across the whole
of central London to think about the impact on pursuing the Crossrail
project of giving the sort of advanced purchase commitments that
Mr Hicks has asked for in relation to his property to investment
proprietors elsewhere along the route. The third point is the
point that I have already made, that there are literally hundreds
of proprietors of this kind and if this one, then in principle
all of them.
6578. My Lord, let me just clarify the position
in so far as what we have offered here is concerned. The ordinary
position in relation to the acquisition of property for the scheme
is set out in line 6 on the document in front of you. Ordinarily,
as I have said, where property is required to be taken for the
purposes of constructing a project of this kind, then the question
of compensation and negotiations in relation to compensation payable
ordinarily begins at the time when possession is taken of the
premises in question for the purposes of the works. As we have
said, that would be on current programme in June 2009, but we
have indicated, and I do want to reiterate this point, the effect
of paragraph 5 on your list is that we say here that we will begin
those negotiations, unusually in this case, in advance of that
date. What we have said is that if the parties are able to negotiate
satisfactory terms and board approval is received in advance on
current programme of June 2009, then we will purchase at that
earlier date, that gives some comfort to these Petitioners. We
have also indicated at 3 that the point of particular concern,
that is to say the constraining effect which the shadow of the
scheme will have in June of this year on the ability to re-let
the office element of their premises, we accept that, on compulsory
acquisition having taken place, that in principle will be a compensatable
loss; it would be an element of disturbance compensation. Of course,
if the commitment in 5, embracing the commitment in 3 and 4, is
to take effect, then there has to be active negotiation between
the parties and we expect that we will certainly stand ready at
the time we have indicated to proceed with those negotiations.
I have no doubt from what Mr Hicks has told you today his clients
will instruct their agents to pursue those negotiations vigorously
as well. There is a measure of comfort there over and above that
which would apply to other investment property owners of this
kind which we have dealt with here.
6579. My Lord, as to the question of Royal Assent
and funding being the trigger point, your Lordship has already
made the point you cannot do anything until you have powers. The
position on funding is this: your Lordships are very well aware
that the Prime Minister made an announcement last October which
identified the intended funding arrangements for Crossrail and
we heard something about that yesterday in terms of the progress
we have been making with Canary Wharf Group in negotiating one
element of that funding package. True it is also that the Chancellor
in his Budget statement indicated that funding for Crossrail was
in the Budget but, of course, final details of funding arrangements
logically and practically will be put in place once Royal Assent
has been given because then the arrangements for delivery of the
project procurement and so forth and, indeed, the finalisation
of the programme would all be slotted into place. That is what
we are alluding to when we talk about a Funding Notice.
|
