A £450,000 payment from the public purse to get a housing association out of a Bath building is set to be reviewed.
The Guinness Partnership said 23 Grosvenor Place needs substantial investment and asked to end its lease 39 years early.
Bath and North East Somerset Council was set to pay it a six-figure “reverse premium” so it could reclaim the listed former hotel – currently a block of 20 bedsits valued at around £1.5million – and decide its future.
Challenging a decision they branded “unjustifiable”, opponents slammed the lack of transparency and said the firm would be “laughing all the way to the bank”.
They condemned the loss of housing for vulnerable people and said the proceeds should be ring-fenced for social housing.
Leading the call-in with backing from Labour, Conservative and fellow independent members, Councillor Colin Blackburn told a scrutiny panel on 13th January: “This isn’t the first time I’ve seen dubious decisions come from this crucial part of our council [property services].
“It’s high time an independent review was done before any more damage is done to the financial background of our council.
“At minimum, this looks to have been incompetently handled. The lack of transparency might be masking something worse.
“We lose 20 social housing dwellings, reclaim the building with a current stated valuation of £1.5million, or about £3million when it’s refurbished, and it’s costing us £450,000 for the privilege.
“It appears we’ll look for a quick sale to recoup our £450,000 – a fire sale.
“We might get £1.5million but it will get redeveloped by a property developer into 20 luxury flats for £250,000 each.”
The building opened as a hotel in 1790. It was later bought by Bath City Council and turned into 20 flats, and then in 1993, the authority signed a 65-year lease with Guinness.
Cllr Blackburn said the housing association pays B&NES Council £20,000 a year in rent and probably gets £100,000 from its tenants, but it wants to surrender the lease 40 years early.
He said councillors had been given no explanation why the council should pay it £450,000 so it can walk away.
Former councillor Bob Goodman, a chartered surveyor, said Guinness “must be laughing all the way to the bank”, and called for a “root and branch” review of the commercial estate department.
Following a private session where members were shown commercially sensitive figures, Cllr Winston Duguid said: “We now understand why the principle of reverse premium exists on this property. That wasn’t clear to us before.
“We now understand why the reverse premium was appropriate and is in everyone’s interest to have.”
Cllr Andy Furse said there was a lengthy waiting list for social housing but the deal with Guinness meant the 20 tenants of 23 Grosvenor Place were being allowed to jump the queue.
He added: “All councils are strapped for cash. Are we just selling off the family silver to pay for some basics and the loser is the social tenant?
“By trying to ringfence the money, some social tenants will benefit from better dwellings. This could be a way to improve the social housing stock.”
The decision to approve the payment to Guinness was taken by Cllr Richard Samuel, the cabinet member for resources.
He told the scrutiny panel discussions about the council reclaiming the property began in 2015, under the previous Conservative administration – but cabinet members were unaware, as was he as the Walcot ward member.
Cllr Samuel said: “These questions should have been out there at the time. There’s a gap in the council’s decision-making procedures that needs to be plugged.
“When the council is operating in the commercial sector it’s in competition with other purchasers. At times, speedy decision-making is necessary.
“I don’t think the property team can be criticised for needing to do that kind of work.
“There’s a high level of delegation to officers in this particular arena.
“I don’t think that should be confused with a culture of excluding people.”
The panel upheld the call-in.
It said information should be shared at an early stage with cabinet members, and some of the capital receipt should be spent on social housing.
The council will also encourage Guinness to spend some of the money it receives on social housing.
A spokesperson from the Guinness Partnership said: “The building required substantial investment to bring it up to current standards for housing.
“Guinness offered to purchase a lease extension from the council in order to enable us to invest in the building, or to surrender the lease.
“The lease surrender was effected on terms supported by an independent valuer. Guinness owns 476 social homes in Bath and North East Somerset and we remain committed to investing in the area.”
Stephen Sumner, Local Democracy Reporter