Old River Lane - Frequently Asked Questions

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 An outline planning application was submitted by Cityheart in December of 2022 which has since been withdrawn.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 space 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 (which has changed since the scheme was launched), existence of power sub-stations and culverts and restrictive covenants. We expect to sign the development agreement by the end of 2024, 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. 

Howells have been engaged to help the Board refine the idea of a public space before we undertake consultation on this feature of the ORL scheme. A public space could take many different forms and serve different purposes however we are clear it needs to accommodate different types of activities and be accessible to all members of the community. At the same time it needs to be built within a £1.5m budget and fit in with the rest of the development. Howells will help the Board develop these concepts into tangible proposals which can be tested with residents and stakeholders before a design is finalised. Their first presentation to the board on 22 February outlining initial concepts can be found here 
 

Howells are already familiar with the ORL scheme having been engaged by Cityheart to undertake design and architectural services. When the Development Agreement is signed, Cityheart will be responsible for submitting a planning application that includes the interim public square and given we have control over this aspect of the development, they will need a detailed design from us to do so. It therefore makes sense for Howells to undertake some detailed work for us now so that we can finalise proposals for both the design and different uses of the space through a public consultation. Howells will then be able to add the final designs and proposals into Cityheart's 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 up to 31 March 2022 here.

All spending for the year 2023/24 can be found 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.
 

See the answer above in terms of the sale of the land to Cityheart. The space originally earmarked for the arts centre and now for public square 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.
 

The site was sold to Hendersons in 2010 and then purchased back by the Council in 2015, although it should be noted the site included different assets.
 
In 2010 the Council owned and subsequently sold: 

• The land that Charringtons House is on but not the building itself
• No. 1 The Causeway
• Causeway Car Park
• Waitrose Car Park 

 After this the Council leased back

• The ground floor of Charringtons House
• No. 1 The Causeway
• Causeway Car Park
• Waitrose Car Park 

 In 2015 the decision was taken to purchase the following:

•  Charringtons House (land and building)
• No. 1 The Causeway
• Causeway Car Park
• Waitrose Car Park 
• 1-3 Old River Lane

 
The background to the report and minutes can be found here: Agenda for Executive on Tuesday 28th July, 2015, 7.00 pm - East Herts District Council 

See the answer above in terms of the sale of the land to Cityheart.

The scheme we are developing is different to the scheme Hendersons had proposed in 2010, which is understandable given they couldn’t make it viable. In addition, the value of the assets on the site have decreased since 2015, notably no. 1 the Causeway which has since been demolished and Charrington’s House which is now vacant.
 
The value of the site is entirely dependent on the market value after it has been developed (called the gross development value). The current land value is therefore not the starting point for understanding how much Cityheart will buy the leasehold for.
 
The developer will need to make a large investment to complete the development (this is called the gross development cost). As is usual for most developments, this figure includes a 10% profit margin for the developer to accommodate the fact they will need to borrow in order to finance the scheme and it needs to be viable for them as a business. These figures will of course change depending on property values and other variables over time. At the time of awarding the contract to Cityheart, the gross development value was estimated to be £72.99m. The gross development cost was estimated to be £70.22m. The difference between these two values (i.e. £2.77m) is known as the residual land value and this is the amount that Cityheart will purchase the leasehold of their part of the development for (which excludes the whole site apart from the footprint of the arts area). 
 
This residual land value figure comes with two additional checks and balances. One is that if the developer makes more than 10% profit then this has to be shared 50/50 with the council. The other is that the existing land value has to be validated through a Section 123 report before the development agreement can be signed. The purpose of this report, to be signed off by the council’s Section 151 officer, is to demonstrate we are achieving the best price reasonably attainable, ie. In other words that public assets are not being given away on the cheap. An updated report will be produced once the boundary issues are finalised which will take into account both the residual land value as determined above and the existing value of the assets on the site.
 

The council’s wider vision for Old River Lane, developed over many years through 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, which also covers the history of the original idea for an arts centre and how it has changed to a public square. 

Charringtons House was always identified for demolition as part of these plans (as was No. 1 the Causeway on the same site). This is the still the case to enable the wider development. However, we intend to keep the southern part of the foundations as the basis for the proposed temporary structure/pavillion on the public square. 

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. However, as part of the changes to the original scheme including moving a to a more modest public square in the interim period before the funding for an arts centre can be secured, the boundary of the development has been adjusted. This means Water Lane Hall is no longer part of the enabling works and does not need to be demolished. 

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.

As above, the hall was bought by the council for demolition to enable the re-provision of parking spaces and has thus had no additional investment made into it in recent years. Even if this had not been the case, the hall was already in a relatively 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. At this stage, the Council is focusing on the ORL development and has not yet considered options for Water Lane Hall. It continues to be open however and used regularly for events through the URC who are the current leaseholders.

Timelines will be determined within any fresh application submitted by Cityheart in regards to Charrington's House. As above Water Lane Hall will no be demolished. 

The URC Church lease the building and are responsible for the hiring of the hall and management of bookings. Groups that currently use the hall can continue doing so by contacting them directly. 

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 does have several interesting and unusual features, including memorial stones, roofing timbers and tiles.

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’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.