Council backdown costly for tenants
Nelson City Council's about-turn on closing the earthquake-prone building housing Prego Mediterranean Foods was not done to avoid costly compensation for the tenants, says councillor Eric Davy.
Business owners Claudia Kern and Peter (Mac) McNairney are $15,000 out of pocket in legal and accounting fees from seeking redress over the council's sudden decision in June to close the building they leased, after it was classified as earthquake-prone.
It was given a category E rating meaning it had a seismic grade of 0-20 per cent. A building with a seismic grade of 20-33 per cent is rated D. Both categories are considered high risk (earthquake-prone) with resistance to earthquake that is less than 33 per cent of the new building standard.
The Halifax St building has been given a final rating of 25 per cent of the new building standard, but this week the council reversed its decision to close it following a detailed assessment.
Despite the decision, Ms Kern and Mr McNairney said yesterday they were moving to new premises, which will leave the council $48,000 out of pocket in annual rental unless it can find a new tenant for the remaining six years of the lease.
Prego Mediterranean Foods will move next June to Buxton House commercial offices under construction in Collingwood St.
The owners of the specialty food store said they had always disagreed with the council's decision to close the building, because unless it was deemed dangerous, there was no technical or legal reason to terminate the lease.
Mr McNairney said the decision reversed a position taken by the council last September when it indicated neither strengthening nor demolition would be undertaken before the end of the lease in 2018.
The business presented its case, which included compromise proposals, at a special public-excluded council meeting last month.
Mr McNairney said they had initially sought compensation from the council for loss of the lease when Prego decided it would move, but the council's decision this week to revoke the closure decision meant they could not claim compensation.
They acknowledged the council's efforts to correct the mistake, but it had not altered the consequences for them.
"It has come at the cost of much personal anxiety and stress - to say nothing of financial and legal costs. The council backdown does not change that," Ms Kern said.
They are satisfied they can exit the lease without financial penalty. The decision to move was also driven by them learning they would have to absorb the cost of any building upgrades.
"It's not costing us to terminate the lease early. I think that would have been unusually unfair," Mr McNairney said.
Mr Davy, who is the council's infrastructure portfolio holder, denied the council had changed its mind to avoid having to pay compensation. The initial decision to close was "made in haste" without all the facts being presented.
He acknowledged it had left the tenant in a difficult position, but the council had allowed the lease to be broken with no penalty costs.
Mr Davy said councillors made the earlier decision to close the building based on information from council staff.
"Like a lot of councils around New Zealand we were left in a position of ensuring the building was safe. If we hadn't taken steps we could have been held personally liable in the event of injury resulting from an earthquake," he said.
The council would now have to consider whether to demolish the building or spend an estimated $500,000 to get it up to standard. The long term plan for the site was to extend the public library.
The Prego owners were looking forward to a larger and more modern building that would meet latest compliance codes.
"We have to pick the best option for our business looking forward, we can't go backwards," Ms Kern said.
Timeline of decisions over the council-owned building housing Prego Mediterranean Foods in Halifax St: September 2011: Council indicates that neither strengthening nor demolition would be undertaken prior to the end of the lease in 2018. June 2012: Council decides to close all its buildings categorised as earthquake-prone, with a "D" or "E" rating as a matter of urgency, also affecting the State Advances Building and the Riverside Pool frontage. September 2012: Council revokes the decision to close Prego building after receiving further information as part of detailed assessments undertaken after the June meeting. Prego announces it's moving out to new, modern premises.
The Nelson Mail