Agenda item

RESOLVED:

That the Cabinet:

  I.  Authorised entering into a a Side Letter  to the Woodberry Down Principal Development Agreement (Phases 2-8) with Berkeley Homes and Notting Hill Genesis.

  II.  Authorised

(i)  the variations to the Woodberry Down Development Compulsory Purchase Order Indemnity Agreement (as set out in Schedule 7 of the Principal Development Agreement) for Phase 4 with Berkeley Homes as set out in this Report; and

(ii)  entering into such Compulsory Purchase Order Indemnity Agreement on such terms as are agreed between the parties.

  III.  Delegated authority to the Group Director of Climate Homes and Economy and Group Director of Finance and Corporate Resources to agree to the market value purchase with vacant possession of leasehold properties in Phase 4 of the Woodberry Down regeneration, and the award of compensation to the leaseholders affected by the purchase.

  IV.  Authorised entering into the Fifth Deed of Variation to the Woodberry Down Principal Development Agreement (Phases 2-8).

  V.  Delegated authority to the Group Director of Finance and Corporate Resources in consultation with the Mayor to enter into the Block D Supplemental Agreement to the Woodberry Down Principal Development Agreement (Phases 2-8). 

  VI.  Delegated authority to the Group Director of Climate Homes and Economy to approve any further necessary variations to the Principal Development Agreement (Phases 2-8).

 VII.  Authorised the Director of Legal Democratic and Electoral Services to prepare, agree, settle and sign the necessary legal documentation to effect the proposals contained in this report and to enter into any other ancillary legal documentation as required. 

Reasons for decision

Side Letter to the Principal Development Agreement 

The Side Letter between Berkeley Homes and the Council will enable the regeneration of Woodberry Down to continue to progress in line with the target delivery programme, and will therefore ensure the delivery of much needed high quality homes.

The partners agree it is appropriate to carry out a review of the masterplan, which was approved in 2014, however there is not sufficient time to progress a hybrid application for Phases 4-8 without delaying the target start on site date for Phase 4. The Side Letter will therefore enable the partners to bring forward a standalone planning application for Phase 4, with a clear timetable and process in place for agreeing a revised masterplan. 

The separation of Phase 4 from the masterplan will also allow more time to consult and develop the wider masterplan; work on which will commence once the Phase 4 application has been submitted. 

The Side Letter sets out the process for agreeing a new masterplan including the key stages and target timetable for submission. The document is still in draft form, however further details on the principles of the legal agreement are included in exempt Appendix 1. As this agreement will be a Deed, Cabinet authority is sought for the Council to enter into it.

CPO Indemnity Agreement (Variation to the Agreed Form)

On 28 February 2022, as part of a wider report seeking authority to commence preparations to make a Compulsory Purchase Order (CPO) for Phase 4, Cabinet approved the commencement of negotiations with leaseholders in Phase 4 to buy back their properties. The purchasing of leasehold properties is a critical step in achieving vacant possession, which is necessary to enable the redevelopment of Woodberry Down to progress.

The previous Cabinet Report set out that purchases and compensation would not be completed and paid until the Council had entered into a CPO Indemnity Agreement (CPOIA) with Berkeley Homes, to indemnify the Council against all of the costs involved in achieving vacant possession of the phase.

Under the terms of the PDA, the Council enters into a CPOIA further to planning consent being achieved and a successful (or waived) post-planning viability test (an agreed form of the CPOIA is included in Schedule 7 of the PDA). This trigger point is currently expected to be reached in summer 2023, however Berkeley Homes are targeting an earlier start on site for Phase 4, which would require the Council to achieve Vacant Possession by January 2025. 

There are currently 41 leasehold properties remaining in Phase 4. Waiting until summer 2023 would allow just eighteen months to complete all property purchases before the scheduled demolition date. It is therefore recommended that the process of buying back properties commences sooner - in order to ensure the continuity of delivery of new homes. 

Under the terms of the PDA the Council could progress and complete buy-backs from leaseholders without a CPOIA in place (and other activities related to vacant possession). While the Council’s costs involved with this would ultimately be recouped by the CPOIA, once entered into, they would only be repaid if Phase 4 proceeded, and these costs would therefore be incurred at risk to the Council. 

The Council and Berkeley Homes have therefore agreed to enter into a variation to the agreed form of the CPOIA for Phase 4 which would allow the programme for vacant possession to be brought forward. 

This variation to the agreed form of the CPOIA will indemnify the Council against 50% of all of the ‘Relevant Expenses’ for Phase 4 (primarily the compensation payments paid to leaseholders over and above the purchase price of the properties, as well as any professional fees incurred), in the unlikely circumstance that Phase 4 does not come forward (i.e. a satisfactory planning permission is not received, or the phase is not viable). Berkeley Homes would not compensate the Council for the purchase price of the properties, however the properties would remain as an asset in Council ownership to be managed as appropriate. 

If Phase 4 does proceed as expected, the usual PDA process will apply, and Berkeley Homes will reimburse the Council for all land assembly costs incurred (including any third party property purchases) on the trigger date as set out in the PDA. The document is still in draft form, however further detail on the principles of the CPOIA is included in Exempt Appendix 1. 

The Council has already begun to purchase properties back in Phase 4 on an ‘out-of phase’ basis. To date fifteen properties in Phase 4 have been re-purchased. As these were early buy-backs, no compensation was paid to leaseholders. The variation to the CPO indemnity will enable the Council to negotiate with the remaining 41 leaseholders, who will be eligible for compensation payments. 

The Council’s preference is always to reach agreement by negotiation with leaseholders and freeholders regarding the buy-back of their properties, however it is recognised this may not be possible in all cases. In such cases, the Council would need to exercise its compulsory purchase powers in order to acquire the properties, as well as any other rights and interests together with adjoining roads and any private rights, including utilities, within the redline boundary of the property. Without the exercise of such powers, vacant possession of the Phase cannot be guaranteed and this could cause delays to the regeneration programme.

A further report will be submitted to Cabinet in due course to request authorisation to make a Compulsory Purchase Order for Phase 4. 

Block D Community Facilities - Deed of Variation to the PDA and Supplemental Agreement to the PDA

Block D is a residential block in Woodberry Down, which was completed in early 2021. The ground floor area was initially designed to be used as a private gym and swimming pool for residents. 

In 2017 the Council and the Woodberry Down Community Organisation (WDCO) objected to this proposed ground floor use as not being tenure blind or supporting the delivery of a mixed community. Subsequent negotiation with Berkeley Homes resulted in the ground floor being redesignated as a community space for the wider Woodberry Down community. 

A set of principles relating to Block D were agreed, which are captured in the  Deed of Variation to the PDA (Phases 2-8) and the Supplemental Agreement to the PDA (Phases 2-8). This includes that the space (approximately 1,000 sqm) will be leased to the Council at a peppercorn rent. The eventual use for the space in Block D must serve the community and meet the definition below: 

‘Any uses which the London Borough of Hackney or any statutory successor shall reasonably designate shall be for the benefit of the local community and/or any parts of the local community including (without limitation) use as a community centre, care centre,  local advice centre, nursery, crèche, health centre, medical centre, doctors or dentists surgery, housing management or advice centre, job clubs, education and/or training centre, use as meeting rooms, clubs, sports, social and other facilities for local residents generally and specific sections of the community including young people, parents and carers, children,  toddlers and the elderly.’.

The Supplemental Agreement establishes that overall the community space must remain cost neutral to the regeneration partners. The Council must not take any surplus from letting the units, and if a surplus arises it must be reinvested back into Woodberry Down. The details of the cost involved will be brought to the Group Director of Finance and Corporate Resources for approval before entering into the agreement. 

Further details on the legal agreements are included in Exempt Appendix 1.

The Council has two years and six months from Practical Completion (PC) of the building to instruct the lease from Berkeley Homes. PC was achieved in March 2021 and the Council has until September 2023 to draw down the lease. 

A draft lease is appended to the Supplemental Agreement, negotiated by the Council’s Strategic Property Services (SPS). Due to the length of the lease, SPS will seek separate Cabinet or equivalent authority to enter into it.

The Council is committed to working with WDCO and the regeneration partners to agree a use for the building. A Working Group including WDCO, Berkeley Homes, Notting Hill Genesis and the Council has overseen feasibility and marketing for Block D, and is in the process of reviewing proposals. The Council will seek to agree the approach to Block D with the Working Group, with input from the wider community where possible.

Cabinet authority is sought to vary the PDA and to enter into the Supplemental Agreement in relation to Block D.

Deputy Mayor Bramble introduced the report on behalf of the Mayor.

RESOLVED:

That the Cabinet:

  I.  Authorised entering into a a Side Letter  to the Woodberry Down Principal Development Agreement (Phases 2-8) with Berkeley Homes and Notting Hill Genesis.

  II.  Authorised

(i)  the variations to the Woodberry Down Development Compulsory Purchase Order Indemnity Agreement (as set out in Schedule 7 of the Principal Development Agreement) for Phase 4 with Berkeley Homes as set out in this Report; and

(ii)  entering into such Compulsory Purchase Order Indemnity Agreement on such terms as are agreed between the parties.

  III.  Delegated authority to the Group Director of Climate Homes and Economy and Group Director of Finance and Corporate Resources to agree to the market value purchase with vacant possession of leasehold properties in Phase 4 of the Woodberry Down regeneration, and the award of compensation to the leaseholders affected by the purchase.

  IV.  Authorised entering into the Fifth Deed of Variation to the Woodberry Down Principal Development Agreement (Phases 2-8).

  V.  Delegated authority to the Group Director of Finance and Corporate Resources in consultation with the Mayor to enter into the Block D Supplemental Agreement to the Woodberry Down Principal Development Agreement (Phases 2-8). 

  VI.  Delegated authority to the Group Director of Climate Homes and Economy to approve any further necessary variations to the Principal Development Agreement (Phases 2-8).

 VII.  Authorised the Director of Legal Democratic and Electoral Services to prepare, agree, settle and sign the necessary legal documentation to effect the proposals contained in this report and to enter into any other ancillary legal documentation as required. 

Reasons for decision

Side Letter to the Principal Development Agreement 

The Side Letter between Berkeley Homes and the Council will enable the regeneration of Woodberry Down to continue to progress in line with the target delivery programme, and will therefore ensure the delivery of much needed high quality homes.

The partners agree it is appropriate to carry out a review of the masterplan, which was approved in 2014, however there is not sufficient time to progress a hybrid application for Phases 4-8 without delaying the target start on site date for Phase 4. The Side Letter will therefore enable the partners to bring forward a standalone planning application for Phase 4, with a clear timetable and process in place for agreeing a revised masterplan. 

The separation of Phase 4 from the masterplan will also allow more time to consult and develop the wider masterplan; work on which will commence once the Phase 4 application has been submitted. 

The Side Letter sets out the process for agreeing a new masterplan including the key stages and target timetable for submission. The document is still in draft form, however further details on the principles of the legal agreement are included in exempt Appendix 1. As this agreement will be a Deed, Cabinet authority is sought for the Council to enter into it.

CPO Indemnity Agreement (Variation to the Agreed Form)

On 28 February 2022, as part of a wider report seeking authority to commence preparations to make a Compulsory Purchase Order (CPO) for Phase 4, Cabinet approved the commencement of negotiations with leaseholders in Phase 4 to buy back their properties. The purchasing of leasehold properties is a critical step in achieving vacant possession, which is necessary to enable the redevelopment of Woodberry Down to progress.

The previous Cabinet Report set out that purchases and compensation would not be completed and paid until the Council had entered into a CPO Indemnity Agreement (CPOIA) with Berkeley Homes, to indemnify the Council against all of the costs involved in achieving vacant possession of the phase.

Under the terms of the PDA, the Council enters into a CPOIA further to planning consent being achieved and a successful (or waived) post-planning viability test (an agreed form of the CPOIA is included in Schedule 7 of the PDA). This trigger point is currently expected to be reached in summer 2023, however Berkeley Homes are targeting an earlier start on site for Phase 4, which would require the Council to achieve Vacant Possession by January 2025. 

There are currently 41 leasehold properties remaining in Phase 4. Waiting until summer 2023 would allow just eighteen months to complete all property purchases before the scheduled demolition date. It is therefore recommended that the process of buying back properties commences sooner - in order to ensure the continuity of delivery of new homes. 

Under the terms of the PDA the Council could progress and complete buy-backs from leaseholders without a CPOIA in place (and other activities related to vacant possession). While the Council’s costs involved with this would ultimately be recouped by the CPOIA, once entered into, they would only be repaid if Phase 4 proceeded, and these costs would therefore be incurred at risk to the Council. 

The Council and Berkeley Homes have therefore agreed to enter into a variation to the agreed form of the CPOIA for Phase 4 which would allow the programme for vacant possession to be brought forward. 

This variation to the agreed form of the CPOIA will indemnify the Council against 50% of all of the ‘Relevant Expenses’ for Phase 4 (primarily the compensation payments paid to leaseholders over and above the purchase price of the properties, as well as any professional fees incurred), in the unlikely circumstance that Phase 4 does not come forward (i.e. a satisfactory planning permission is not received, or the phase is not viable). Berkeley Homes would not compensate the Council for the purchase price of the properties, however the properties would remain as an asset in Council ownership to be managed as appropriate. 

If Phase 4 does proceed as expected, the usual PDA process will apply, and Berkeley Homes will reimburse the Council for all land assembly costs incurred (including any third party property purchases) on the trigger date as set out in the PDA. The document is still in draft form, however further detail on the principles of the CPOIA is included in Exempt Appendix 1. 

The Council has already begun to purchase properties back in Phase 4 on an ‘out-of phase’ basis. To date fifteen properties in Phase 4 have been re-purchased. As these were early buy-backs, no compensation was paid to leaseholders. The variation to the CPO indemnity will enable the Council to negotiate with the remaining 41 leaseholders, who will be eligible for compensation payments. 

The Council’s preference is always to reach agreement by negotiation with leaseholders and freeholders regarding the buy-back of their properties, however it is recognised this may not be possible in all cases. In such cases, the Council would need to exercise its compulsory purchase powers in order to acquire the properties, as well as any other rights and interests together with adjoining roads and any private rights, including utilities, within the redline boundary of the property. Without the exercise of such powers, vacant possession of the Phase cannot be guaranteed and this could cause delays to the regeneration programme.

A further report will be submitted to Cabinet in due course to request authorisation to make a Compulsory Purchase Order for Phase 4. 

Block D Community Facilities - Deed of Variation to the PDA and Supplemental Agreement to the PDA

Block D is a residential block in Woodberry Down, which was completed in early 2021. The ground floor area was initially designed to be used as a private gym and swimming pool for residents. 

In 2017 the Council and the Woodberry Down Community Organisation (WDCO) objected to this proposed ground floor use as not being tenure blind or supporting the delivery of a mixed community. Subsequent negotiation with Berkeley Homes resulted in the ground floor being redesignated as a community space for the wider Woodberry Down community. 

A set of principles relating to Block D were agreed, which are captured in the  Deed of Variation to the PDA (Phases 2-8) and the Supplemental Agreement to the PDA (Phases 2-8). This includes that the space (approximately 1,000 sqm) will be leased to the Council at a peppercorn rent. The eventual use for the space in Block D must serve the community and meet the definition below: 

‘Any uses which the London Borough of Hackney or any statutory successor shall reasonably designate shall be for the benefit of the local community and/or any parts of the local community including (without limitation) use as a community centre, care centre,  local advice centre, nursery, crèche, health centre, medical centre, doctors or dentists surgery, housing management or advice centre, job clubs, education and/or training centre, use as meeting rooms, clubs, sports, social and other facilities for local residents generally and specific sections of the community including young people, parents and carers, children,  toddlers and the elderly.’.

The Supplemental Agreement establishes that overall the community space must remain cost neutral to the regeneration partners. The Council must not take any surplus from letting the units, and if a surplus arises it must be reinvested back into Woodberry Down. The details of the cost involved will be brought to the Group Director of Finance and Corporate Resources for approval before entering into the agreement. 

Further details on the legal agreements are included in Exempt Appendix 1.

The Council has two years and six months from Practical Completion (PC) of the building to instruct the lease from Berkeley Homes. PC was achieved in March 2021 and the Council has until September 2023 to draw down the lease. 

A draft lease is appended to the Supplemental Agreement, negotiated by the Council’s Strategic Property Services (SPS). Due to the length of the lease, SPS will seek separate Cabinet or equivalent authority to enter into it.

The Council is committed to working with WDCO and the regeneration partners to agree a use for the building. A Working Group including WDCO, Berkeley Homes, Notting Hill Genesis and the Council has overseen feasibility and marketing for Block D, and is in the process of reviewing proposals. The Council will seek to agree the approach to Block D with the Working Group, with input from the wider community where possible.

Cabinet authority is sought to vary the PDA and to enter into the Supplemental Agreement in relation to Block D.