ASDA seeking ‘big savings’ and ‘price lock’ over land deal

The council’s lawyers say pursuing ASDA for breach of contractual obligations could cost them over £1,000,000 so Executive members are being asked to consider secret recommendations instead.

AsDA low prices lorry

The Walmart-owned supermarket chain that promises ‘big savings’ and ‘price locks’ for its customers is seeking the same for itself in a land deal with the Isle of Wight council.

The promise of approximately £20m from ASDA in return for land just outside Newport has been seen as good news for the cash-strapped council.

However, following planning permission being granted for the new supermarket and petrol station, ASDA are now arguing that, “it does not have the ‘satisfactory planning permission’ required for it to complete the lease for the site” and are seeking to reduce the purchase price by 12%.

Terms of the Lease could be varied
The Isle of Wight council does not share this view.

Rather than pursuing legal action against ASDA for a breach of contractual obligations, a paper being presented to the Isle of Wight Executive next week, seeks approval of a variation to the terms of the Agreement for Lease.

In February, the council received a letter from ASDA’s lawyers unhappy with two of the planning conditions.

One prohibiting deliveries between midnight and 5am, the other allowing up to four hours of free parking, which the supermarket chain believes would place an unreasonable burden on the use and occupation of its foodstore.

Agreement of the Lease needs to be completed by 15th May – just one day after the Executive meet to consider the recommendations or the council could be facing a protracted legal battle with the supermarket giant, which the paper states could run to over £1m.

Money off please
But the problems don’t stop there.

ASDA’s ‘aspirations’ as far as the Lease is concerned extend further to include:

  • A reduction of 12 per cent on the gross purchase price (around £2.4m).
  • Immediate transfer of the freehold to ASDA on completion.
  • Council to make a section 73 application to amend conditions 25 and 27 of the planning permission (those mentioned above).
  • Completion of the Agreement with Asda to take place on 1 September 2015 irrespective of the outcome of the section 73 application.

The recommendations
The following recommendation is being made to members of the Isle of Wight Executive.

That options (1) and (4) be adopted:-

(1) Agree to vary the terms of the Agreement for Lease with Asda as set out in confidential appendix 1 and enter into a deed of variation on 15 May 2015 and complete the transaction on the 1 September 2015.

(4) Agree to issue legal proceedings against Asda for breach of contract should it not complete the revised agreement with the Council on 1 September 2015

The press and public are unable to see the contents of the confidential appendix, so aren’t able to understand exactly what is being agreed.

Promise of jobs
450 jobs have been promised once the supermarket opens its doors – originally planned for late 2016, early 2017.

Full details are set out in the paper below. Click on the full screen icon to see larger version.


Image: didbygraham under CC BY 2.0

Any views or opinions presented in the comments below must comply with the Commenting 'House Rules' and are solely those of the author and do not represent those of OnTheWight.

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50 Comments on "ASDA seeking ‘big savings’ and ‘price lock’ over land deal"

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The Sciolist

Here we go again, big business runs rings around IOW council, now where have we heard that before, Ad infinitum.

BRIAN

That’s ASDA price !!

billy builder

In view of the fact that we already have enough supermarkets on the Island to meet the needs of the population, and that another supermarket so close to Newport can only take customers from the streets of Newport reducing the profitability and indeed viability of Newport shops. I would suggest we give Asda the salute favoured by English archers of old.

Colin

How do the council manage to get themselves in such a ridiculous tangle?

Will we ever know or is this another secret?

The Sciolist

My best guess would be poor legal advice, it is the most likely answer, but that’s an uninformed guess, not fact, just in case the lawyers read this blog.

garageelfiniow

The writing is on the wall for big supermarkets – can the IWC not see this ? there is overcapacity in the market place and with the number of big stores on the Island all that another one will do is drive more shoppers from the towns and eventually one of the big multiples will have tp close resulting in a loss of jobs

Cllr Bob Seely
Good afternoon, I am reading through the document as we speak but it looks like nothing more than sharp practise by ASDA lawyers to save some money at the expense of the IoW Council and residents. They are demanding 12 per cent off the price and some other concessions because two items, which they have not questioned before, they consider onerous. These are: condition 25, which Asda… Read more »
Cicero

Take a look at the way ASDA’s owners- Walmart- operates its properties in the US, Bob.

Bob Seely

Cicero, thanks. Spot on.

I watched a programme about it recently. Minimum wage pay, most stuff made in China, everybody poorer except Wal-art.

Bob

garageelfiniow

but surely one could foresee a sitution like this ? Its standard practise for big business if not an indiviual when buying residential property ???

If in doubt call their bluff please – its OUR MONEY & OUR LAND

Lord Bermondsey

Sounds like Asda are doing a Rob Da Bank, and trying to blackmail the council and its residents with holding people to ransom with threats.

I say to Asda as i said to Mr Bank….swivel.

Man at the Hustings

Tough talk. You’ve been very quiet during the election campaign Bob, is this because you were hoping to take over from Turner and thought it best to work in the shadows?

Tim

This is standard bully boy big business tactics, IWC need to tell ASDA that they are considering an upward revision in the site value of 25% if it is mutually acceptable to both parties to renegotiate

Bob Seely
Tim, I think standing one’s ground is better than engaging in the same tactics. Thanks for your comment, Man at Hustings or wherever you are, which has so much to do with the subject. You are wrong on several levels. I was very busy with Blanchards and Atherfield development stories in my patch in the long campaign. In the past 2-3 weeks, yes, I haven’t said much… Read more »
Tim

Bob, I can’t agree, ASDA are blatantly trying to renegotiate a done deal. These matters almost invariably end in some sort of compromise and merely standing your ground leaves you nothing to bargain with. ASDA appear to be untrustworthy, the best deal for the taxpayers may be to abandon the whole transaction and find a new purchaser.

Bob Seely

typo, should read in first line, ‘whoever’, not ‘wherever’

Niton Wight Satin
There’s a few things I’m not comfortable with here: 1) Surely, anyone worth the negotiating salt at IWC should offer this to other businesses (supermarkets if we really have to), so Asda know they’ve got competition and stop acting like such bullies. 2) I don’t get IWC attitude, it’ll cost £1m to fight it, so we won’t do it. Asda are asking for £2.4m off. £2.4m –… Read more »
Bob Seely
Am trying to find out more, but I think there are four options. 1. We stand our ground, call their bluff and they accept defeat. 2. We fold and lose £2.4 million. 3. We fight and lose (total in the region of £3.4, on assumption we pay legal costs for all) 4. We fight and win but have to pay out own legal costs (cost unclear but… Read more »
Niton Wight Satin
Are Asda (and their potential customer) really happy to know Asda are effectively trying to take £2.4m out of the pockets of every Islander? The money they’re attempting to grab off us will lead to further council services being lost, like public toilets, etc. Shouldn’t we be writing to the top people at Asda head office about this? They might not know of the these tricky moves… Read more »
Mrs Retired Hack
These are strange times: I agree with Cllr Seely. It is distasteful to give in to bullying of any kind, least of all corporate bullying from types whose main interest is profit for their company. Furthermore, if the IWC doesn’t fight this, then it sets a bad precedent for every other big contract which they try to negotiate in the future. If a deal has been agreed,… Read more »
Bob Seely
NWS, Have just been on thisismoney.co.uk and it lists CEO Andy Clarke’s email address as: andy.clarke@asda.co.uk Aslo, https://www.facebook.com/Asda In addition they have just been named Community Retailer of the Year !!!! If we can start commenting on why they are trying to rip off the IoW Council, I suspect that we will get a reaction. I will post on their FB and email the chairman this weekend.… Read more »
peaceful_life

If folks think this is bad (which it is), then ponder the ISDS element of the TTIP ‘deal’.

‘David Cameron has promised to put “rocket boosters” behind talks to secure the deal, saying TTIP is central to his vision of a reformed competitive Europe’
(Source..BBC)

The island doesn’t even ‘need’ another* supermarket, indeed..it is the opposite direction of travel required for stimulating and encouraging a more local and internalised economy.

retired Hack
Here’s a question. What other interpretation can be placed on Asda’s wish for “immediate transfer of the freehold (to them) on completion (of the lease, on September 1)” (rather than on the opening of the store, as previously agreed); other than that they want to open up an option to be able to not open, or indeed build, a store, but rather to dispose of land acquired… Read more »
retired Hack
I also have to take issue with one of Bob Seely’s points, although I agree with much of what he says. The economy of scale (to shoppers) which supermarkets bring make them a necessary evil in an economy with a very wide income distribution. This particular Asda store would serve a large and growing residential development where “shopping locally” would indeed mean going there. Farm shops, and… Read more »
peaceful_life
@Retired hack. There is, on the face of it, some truth in an economy of scale being cheap*, however…a more detailed look unearths an entire system of subsidised (tax payer) unaccountability, so the market gives a distorted reference in the first place. Check out the website ‘sustainable food trust dot org’ and/or the work of Colin Tudge. Even with these market constraints, it is possible to at… Read more »
The Sciolist

Bob Seely may be very vocal on here, but he has no voice on the subject at the council, he’s a conservative.

This looks like simple and cynical early electioneering?

Niton Wight Satin
This looks like a monumental balls up. Who was the senior officer in legal at IWC oversaw this contract? Are they going to be held responsible? We’re talking about a potential loss of £2.4m here. Can you imagine what would happen to a person in business (the real world), who was responsible for a loophole that lost that business £2.4m? Was the Head of legal who left… Read more »
Chris

Where’s the balls up? Public sector bodies rarely have the cash, or the political capital, for expensive legal battles and this makes them vulnerable to private companies that do.

retired Hack
The loophole seems to me to be the use of the word “satisfactory” in the description of the planning consent which appears to have been included in the contract. It’s a word open to any number of interpretations, and what’s considered satisfactory to the IWC is almost bound to not be by Asda. Asda also knows perfectly well that the IWC isn’t supposed to interfere in the… Read more »
Bob Seely
Hi again, Retired Hack, I see your point but the assumption that supermarkets are always cheaper is a bit of a myth, as we have seen from the exposure of fake discount deals in recent months. In addition, you are much more likely to make compulsive purchases in a supermarket (indeed they spend millions designing the layout of stores with that in mind), and you may well… Read more »
retired Hack
Bob: re Plan b (selling for housing). That’s more or less what I said at 4.04pm., including the fact that if they manage to get their hands on the freehold before they’ve even built the supermarket (as they’re apparently demanding), then they needn’t even bother building it. And re “driving further”. The residents of Pan could walk there. Some of them don’t have cars. They will regard… Read more »
Geoff Lumley

As I understand it the ‘call in’ provision on Executive reports has been waived by the Chair, Cllr Stewart, as the proposed new arrangements with asda have a deadline of the day after the Executive or it will become a Court case.

The Sciolist

From your refusal to answer a simple question we must conclude you did not support Andrew Turner at all in the election? If I am wrong, perhaps you would explain your role?

Bob Seely

Sorry, should also read ‘spark, lead and take part in, join public debate/conversation … ‘

Cicero
It would be interesting to know who currently owns the freehold of the land in question. Has SCL sold it to Asda yet ? If so, which to part of that group? If not, could SCL face a lengthy and expensive legal battle over planning problems? Know your enemy! Walmart/ASDA tax reduction strategy appears to be use myriad subsidiary companies to trade with each other. Will the… Read more »
S Osmund
To my knowledge no-one, elected or permanent officials of the IOW Council have ever been held to account for their appalling negligence in public office. In the case of Cowes Enterprise College, not only was the company chosen totally inadequate, but some-one authorised a cheque in the sum of over £500,000 to be paid after the company went into liquidation. At what level was this decision made?… Read more »
Robert Jones
Is there not some way in which the Isle of Wight Council could tell this rapacious and discreditable company to, in effect, just bugger off? There will be others who will want the land and will be prepared to establish a business: all this one will do, having scalped the Council Tax payer, is drive Newport businesses into bankruptcy and destroy the town centre. Ian Stephens is… Read more »
isleoflove
It’s clear that Asda no longer can afford to develop the site, given the losses recently announced by Tesco, Sainsbury and Morrison you can see why. Tesco have halted the bis store builds. The “local shop”model is working and the large supermarkets can’t compete with Lidl/Aldi. The IW Council are being taken for idiots, they should hold firm, this is public land that was earmarked for light… Read more »
Bob Seely
Hi, Sciolist, thank you for your question. I canvassed for Andrew Turner twice in this election, and delivered Andrew’s leaflets to one of my villages. Andrew and the Association were well aware that I had been asked by CCHQ to work in target marginal seats, which I did. I did about 32 canvas/leaflet sessions in all, so the amount of time I had to work on the… Read more »
retired Hack
Bob: re “I look forward to working on the referendum campaign with him, should the team wish.” Your Government’s position on the EU is that there will be a referendum after it has sought to renegotiate the UK’s membership terms, and we won’t know what the Tory recommendation, if any, is until after the “renegotiation”. In May last year, after the European Elections which UKIP won, Mr… Read more »
retired Hack

Answer came there none…

Jim Moody
It is not just when there are deals involving councils that there should be open and public accountability. Everything that large companies do impinges on the rest of us. So I am totally against the use of this cover of commercial secrecy or whatever balderdash is used to hide important matters from public view. Open the books and let’s have complete transparency in all matters. A public… Read more »
Cicero

If South Coast Leisure still owns the freehold, does it have deep enough pockets to threaten a lengthy court action?

Geoff Lumley

For clarification, the land in question belongs to the Council. The SCL own the adjacent football ground land that also has retail planning permission, but Asda chose not to deal with them.

Cicero

@Geoff, So who is threatening legal action- ASDA?

davimel
I have said it before, and am happy to say it again.. ASDA don’t seem to have any desire to open here, they constantly move the goalposts and are using delaying tactics to screw the Island out of a few extra Millions! It is what they have done from the very start of this fiasco, and when the Council looked like getting wise to them, they offered… Read more »
BRIAN

Interestingly, In the Times today Sainsburys are doing the same thing with a council somewhere (can’t remember) using the same excuse about lorries late at night – the same objection as ASDA.

Cicero

Interesting! I wonder if the Sainsbury and ASDA applications are being managed (manipulated?) by the same planning agents?

BRIAN
Biggles

•Immediate transfer of the freehold to ASDA on completion
can’t see anywhere if this was agreed? If it was they will just sit on the land ad take a profit when the value goes up.