Although East Herts Council own the land, we do not have the necessary finance or in-house expertise to directly deliver such a large scheme. Therefore, the council decided to run a procurement exercise to find a suitable developer for the site. Following this process, Cityheart were awarded the contract in February 2019.
Under the terms of the contract, Cityheart will take on leasehold ownership of the site for development, however, possession will not be granted until a planning application is approved. An outline planning application was submitted by Cityheart in December of 2022 which has since been withdrawn.
The approach to the arts centre is slightly different. The council will retain ownership of this part of the site throughout the construction phase and beyond. However, Cityheart will build the arts centre on the council’s behalf and to our specification.
The document setting out the specific details between the council and Cityheart is called the Development Agreement. This document is commercially sensitive and cannot be shared.
We expect Cityheart to submit another application following the signing of the development agreement.
A change of ownership doesn’t invalidate the procurement process or affect the current relationship with Cityheart.
Cityheart have been awarded a contract through a fully compliant tender process. At one point a ‘unit buy back’ scheme was considered by the council for the main development however this was not taken forward due to changes in rules around local government borrowing. The scheme has thus remained as per the original intention of a sale to Cityheart with a capital receipt to the council for the main site.
The council approved the scheme in December 2017 and work has been underway since then. This includes the demolition of No. 1 The Causeway and the construction of the Northgate End Car Park. However, work on the main site has not yet begun.
The Development Agreement with Cityheart has not yet been signed. Many details had to be worked through including land assembly, the boundary of the development, existence of power sub-stations and culverts and restrictive covenants. We expect to sign the development agreement by the end of 2023, after which Cityheart are likely to consider submitting a new planning application.
Given the length of time between awarding the contract to Cityheart and now, the council sought independent legal advice in early 2023. This was to establish whether it was still possible to go ahead with the contract given the length of time between the award and the impending signing of the development agreement. As part of this approach, all the tender documents and draft development agreement were shared with the individual commissioned to provide advice.
The advice indicated that some of the changes to the scheme, outlined in the timeline and summarized in the presentation to East Herts Members in June, may leave us at risk of challenge from other bidders. Given there was only one, the council approached this organisation who confirmed they did not wish to challenge the procurement meaning the council is able to continue with signing the development agreement.
Cityheart will have done so as part of their planning application. This will also be the case for any new planning application.
Since 2017, the council has rightly invested significant time, effort and resources to prepare the Old River Lane site for redevelopment. Over the last six years, this amounts to £4m and includes the costs to buy property and assemble the land to be in council ownership and externally commissioned works such as design and feasibility studies, and legal, property and procurement advice.
See a full breakdown of the money spent to date here.
The financial risks of scrapping the current scheme are significant. The costs that have been incurred to date, as mentioned above, have all been capital spending. The distinction between revenue and capital spending is much stronger in terms of the sources of council finance than you might ordinarily expect in the accounts of a business or other organisation.
Revenue is the day-to-day expenditure and includes salaries, wages and running costs. The council funds revenue expenditure through revenue income sources such as council tax. If the council spends money on improving the council’s assets, then this is capital expenditure. This would include purchasing new assets, such as land and buildings, but also refurbishing and improving existing ones. Capital expenditure is funded through capital income sources such as capital receipts and borrowing.
Councils need to ensure, and also demonstrate, that they are complying with these rules by making sure that there is a clear separation between capital and revenue in all of its financial activities. These rules are set out in the Local Government Act 2003 (section 7-11, 21) and various Local Authorities (Capital Finance and Accounting) (England) (Amendment) Regulations from 2003 onwards.
If we were to stop the scheme, the £4m spent to date would need to be charged to the council’s revenue account. This means we would need to find another £4m of savings this financial year on top of an already challenging budget. The impact of this would be overwhelming on our finances.
Although we have not signed the development agreement with Cityheart, they have been awarded a contract and we have been working with them on the basis that it would be signed at some point. If we were to cease working with Cityheart, they would likely seek to recover some of the costs they have incurred to date, and these would need to be found on top of the £4m.
The figure is based on the opportunity costs for the site (which excludes the Arts Centre land), namely the residual land value. This is the difference between the gross development value (the value of the site when Cityheart have completed their development) and the gross development cost (all construction costs for Cityheart for development of the site including up to 10% profit). When the scheme was awarded these values were:
Gross Development Value: £72.99m
Gross Development Cost: £70.22m
Residual Land Value: £2.77m
In terms of the profits at 10%, the development agreement will include a clause that any profits over this level are shared 50/50 with the council. There will also be additional benefits to the council from the scheme once completed in terms of business rates from the businesses and council tax from the housing units.
During the disposal process we are also obliged to provide something called a Section 123 Report (Local Government Act 1972) to demonstrate that we are not disposing of property for less than what could be reasonably obtained. This can include selling a site for less than its market value (up to a certain level) provided we can demonstrate it will secure additional economic and social benefits. An updated Section 123 report, with independent valuations, will be produced and agreed before the development agreement is signed.
See the answer above in terms of the sale of the land to Cityheart. The arts centre is deemed to occupy around 20% of the overall space.
It is difficult to provide an accurate figure on this as the precise boundary of the arts centre footprint within the overall development has not yet been finalised with Cityheart. This will be done as part of the DA negotiations. The land bought from Hendersons in 2015 incorporated the Waitrose car park, 1,2,3 Old River Lane, No. 1 the Causeway and Charrington’s House.
See the answer above in terms of the sale of the land to Cityheart.
The council’s wider vision for Old River Lane, developed over many years through extensive consultation with the community, is to bring about a contemporary, mixed-use development that will serve as a lively town centre hub for leisure, business, and the arts. For details of key milestones and decisions taken to date, please see our ORL timeline.
Charringtons House was always identified for demolition as part of these plans (as was No. 1 the Causeway on the same site). Water Lane Hall was purchased specifically by the council in 2019 for demolition as part of the land assembly and enabling works for the scheme. Repurposing the existing buildings to meet modern standards in terms of flexibility, energy efficiency, and functionality would incur significant financial costs (see more detail in the next question below). Moreover, these buildings, even after renovation, would likely struggle to generate enough revenue to cover their running expenses. This would result in an ongoing need for subsidies from taxpayers, which is not a sustainable solution in the long run.
Since the local elections in May 2023, the council has looked at various alternatives for moving forward with the project. However, altering the scheme to repurpose the old buildings would essentially require starting the entire process anew. This would not only introduce significant legal and financial risks for the council but would also cause substantial delays and setbacks.
Instead, the construction of purpose-built, contemporary buildings presents an opportunity to create a vibrant hub for leisure, business, and cultural activities. A well-designed, high-quality scheme will not only enhance the community's wellbeing but also contribute to its economic growth. A public consultation will get underway soon, seeking input from residents on the arts and community facilities they wish to see at Old River Lane.
As above, the hall was bought by the council for demolition to enable the re-provision of parking spaces. Even if this had not been the case, the hall is in poor condition and requires significant capital expenditure for the property to be brought up to an acceptable standard. Moreover, as part of the government’s objective to increase energy efficiency and achieve net-zero carbon targets, all legally rented properties will need an EPC of at least Band C from December 2025. A significant investment would be required to refurbish the hall for it to be legally re-let. The council estimates these refurbishment costs, including new insulation, roof repairs, MEP (mechanical, electrical and plumbing replacement), windows and facades to total £2,275,000.
Timelines will be determined within any fresh application submitted by Cityheart.
The determination process involves careful evaluation of various factors, including the impact on the community and the need to reprovide lost facilities. The approach to development sequencing must be carefully planned to ensure a smooth transition and will eliminate any gaps in provision when facilities close.
Charringtons House has been empty since April 2023, with the remaining business tenants moving to new premises or the Launchpad (now located at Northgate End) and the council’s reception moving to the Shopmobility Unit in Jackson Square shopping centre.
Many of the groups that use the hall will be invited to move across to new facilities as part of the United Reform Church’s new extension, works for which are ongoing. This includes various support and social groups, light exercise classes, Brownie’s, coffee mornings and clubs. Other groups have already found new facilities at South Mill Arts or sports clubs.
Some of the groups that still use the hall regularly might not be able to be accommodated within the new church extension. This could include Karate/Kyokushin (twice a week), the Badminton Club (once a week) and the Comedy Club (once a month) as well as those who book on an ad hoc basis, for example kickboxing and Uncle Funk.
The URC Church lease the building and is responsible for the hiring of the hall and management of bookings. Groups that currently use the hall will be able to continue doing so for the foreseeable future. In the event of any future demolition, the development will be carefully sequenced to ensure lost facilities are re-provided.
Water Lane Hall is not a listed building and therefore has no protected historic or archaeological status. It is, however, in a Conservation Area and planning permission is needed for its demolition. The building does have several interesting and unusual features, including memorial stones, roofing timbers and tiles. The council will request that Cityheart prioritise the re-use of these materials in the construction of the new arts centre.
Where possible, the council shares information on the scheme. For example this includes minutes of the meetings of the Old River Lane Delivery Board.
However, not all information can be shared and exemptions under the Freedom of Information Act 2000 (see part II) are used where appropriate. This applies in the case of the development agreement with Cityheart (covered under section 43 – prejudicial to commercial interests) and the legal advice the council received on procurement (covered under Section 42 – legal professional privilege).
Releasing of information is considered on a case by case basis.
We are currently considering how to ‘carve out’ the arts centre element of the DA with Cityheart to provide some level of flexibility in the arts centre provision.
We’ve opened the new Northgate End multi-storey to consolidate parking and free up pivotal space in the heart of the town centre for redevelopment. The planning approval to build this new car park included a condition that Causeway car park must be closed in order to facilitate free flowing traffic through the town centre. It was also the view of Highways that having both car parks open undermines sustainable travel objectives. The planning application and decision notice can be viewed on our planning portal (see 3/18/0432/FUL).
It is highly unlikely that this condition can be varied without a significant change in circumstances to when planning approval was granted. Unfortunately, a preference to park in Causeway instead of the new multi-story car park doesn’t constitute a change.
This means Causeway and Charringtons can no longer legally be used for parking and are permanently closed ahead of redevelopment. However, the space is currently being used for a regular car boot sale and community events.
East Herts own the freehold of the car park and it is leased to Waitrose until 2040. Under the terms of the lease the same number of parking spaces need to be provided. Waitrose have indicated the current proposals to pre-provide lost spaces on the Water Lane Hall land is acceptable.