True costs of council's estate purchase revealed

EXCLUSIVE REPORT by EWAN LAMB

Scottish Borders Council's highly controversial decision to purchase a country estate and nine properties near Melrose to accommodate house building and other developments will cost taxpayers approximately £11 million, Not Just Sheep & Rugby can reveal.

In December the local authority announced it had bought the 109 acres at Lowood from the Hamilton family for £9.6 million. It is believed the price paid exceeded the value placed on the land by the District Valuer although details of that official's estimate are being kept a tightly guarded secret.

But a Freedom of Information request submitted to SBC asking for a breakdown of costs linked to the property transaction has produced a set of figures which add up to £10.232 million. One of the most interesting figures is the £72,170.55 forked out by the council to cover the seller's "Solicitors Legal Fees & Outlays."

The other items of expenditure on top of the £9.6 million land deal include Surveyors Fees £80,944.03; VAT on Surveyors and Legal Fees £30,596.92, Land & Buildings Transaction Tax £422,250.00; Deed registration Lowood, Melrose £7,500; Valuation reports £16,163.80; and Foreign Options £3,100.00.

SBC was also asked about the cost of borrowing relating to the Lowood transaction. They said: "The costs of temporary borrowing for the purchase of Lowood were estimated at £780k. Assumed period of borrowing is 10 years." When that sum is added in total spending stands at £11.012 million.

But when it was asked to reveal the District Valuer's calculations the council claimed it could not disclose these and quoted FOI exemption clauses citing "confidentiality of commercial and industrial information".

According to SBC: "It is the Council’s view that its disclosure would be likely to cause the substantial prejudice envisaged by this exemption.

"The Council accepts that there is public interest in making information available in order to improve accountability and transparency, ensuring effective oversight of expenditure of public funds and that the public obtains value for money. However, it is the Council’s view that disclosing the information requested would prejudice the Council’s ability to negotiate in private and consult on matters internally and externally. Releasing would inhibit the Council’s ability to carry out transactions with third parties. It is also considered that the public interest in interrogating transactions is effectively met through other restrictions such as approvals being made by full Council.

"In addition, the Council is subject to a legally binding duty of confidence in terms of the report (obtained on the valuation) between the Council and the District Valuer Scotland (DVS). The Council consulted with the DVS and it is their view that no information should be released, as stated within the report.

"Disclosure of the information would cause substantial harm to the legitimate economic interests of the Council by releasing this information as it could prejudice the ability of the Council to compete in the open market in the future. Furthermore, it could put in jeopardy the Council’s integrity and trust with the DVS.

"It is the Council’s view that the DVS’ economic interests may also be damaged by providing this information and it is therefore the Council’s decision that the public interest lies in favour of withholding the information at this time."

Councillor Stuart Bell [SNP] who leads the Opposition Group on SBC told December's council meeting: "The separate Lowood Estate acquisition which we are undertaking by ourselves remains a tortured tale. The £9.6 million outlay, plus expenses, plus cost of maintaining the land and assets, plus the cost of borrowing mean we’ll need to sell it all for over £11 million just to break even.  Reports we have seen in private say there will also be significant infrastructure costs to develop the site. 

"I don’t believe this site is worth £9.6 million, when you go into the detail of the terms and conditions of the sale; and that – as we know – was the opinion of the District Valuer whose assessment with vacant possession (which we will not have) was much lower than £9.6 million. Even when adjusted up for a “special assumption” she valued the land at a price lower than we are paying".

Councillor Bell described the deal as a speculative and risky expenditure of public money at a time when – quite apart from Brexit - there was shuddering uncertainty in markets. House prices and land values can down as well as up, he warned.

The FOI request on Lowood also contains the following statement on infrastructure costs: "Estimated development costs contained in the Business case related to the purchase of Lowood were £90 million (including acquisition costs).  However this figure includes some infrastructure estimates that are shared between the Innovation Park development on the former quarry site (currently under construction) and the development of adjacent Lowood land for business purposes.

"The estimate provided was not split between the two sites.  The final infrastructure costs associated with developing the site will be dependent on the precise form and scale of the development details of which are not currently known."