Covenant, Charge Elements
& The Trust
The Deed and Grant of Covenant
As a condition of the sales contract, the initial purchaser of a Sovereign Harbour property, is obliged to sign a Deed of Grant and Covenant which obliges the purchaser to pay the rent charges; this is attached to the property deeds, so the obligation passes to all subsequent owners of the property.
The Three Elements
The Estate Rent Charge, is comprised of three elements:
1. The Southern Water (SW) Charge. The SHT covenants with the homeowner to apply the SW Charge towards the cost of execution of the Littoral Drift obligations and of the maintenance and improvement of the beach and sea defences within the vicinity of the Harbour, and towards Harbour Maintenance. This was set at £75 in 1988 and varies in accordance with the change in the Retail Price Index (i.e. it has steadily increased).
2. The Marina Maintenance Charge. The Marina Costs are all costs and expenses reasonably and properly incurred in connection with or incidental to the cleansing, repair and maintenance of the Harbour and the waterways.
3. The Berth Charge. The Berth Charge is only applicable to berths that are privately owned. The basis for the charge is an agreement between Southern Water and Tarmac construction in 1988. At that time, Southern Water was responsible for coastal defences and Tarmac Construction was the owner of the development land at Sovereign Harbour.
Sovereign Harbour Trust (SHT)
The Sovereign Harbour Trust is a company limited by guarantee, set up to preserve and protect the environment along the beach frontage in front of Sovereign Harbour.
The SHT was originally registered as a charity but, in 2010, the trust’s charitable status was withdrawn as ‘it had never demonstrated any charitable activities’
In order to maintain the right to collect the rent charge the trust incorporated a wholly owned Community Interest Company (CIC) Sovereign Harbour (Sea Defences), to manage the administration of the income.
It collects the Estate Rent Charge and distributes the monies collected to the Environment Agency (EA) and the marina operator, currently Premier Marinas.
Estate Rent Charge
Sovereign Harbour is the largest marina development in Northern Europe. The marina business is surrounded by a large residential development of about 3,700 homes; a community of around 8,000 people. Also incorporated is a ‘waterfront area’, principally occupied by restaurants, and a large retail park. This 'marina village' was a massive project, which as a concept was started over 35 years ago by the Duke of Devonshire who had a dream of building a luxury marina with residential properties enjoying the marina facilities.
Nearly all Sovereign Harbour property owners are covenanted to pay an annual charge (currently about £250) to the Sovereign Harbour (Sea Defences) CIC, a subsidiary of the Sovereign Harbour Trust (SHT) , through an ‘Estate Rent Charge’ for flood defence work and harbour and marina maintenance.
The SHRA has battled with the relevant authorities and the Trust for greater transparency and clarification on just what the payments are for, their legality, and how the money that home owners pay is being used.
This page gives some of the background and history of the charge, and highlights some of our many concerns about the current arrangements.
Eastbourne Harbour Act of 1980.
The development, which was to be situated on a flood plain, went
ahead contrary to the recommendations of the Sussex River Authority
and Southern Water Authority, who petitioned against it throughout
the 1960s and 70s without success. Concerns centred on the potential
effects of the Harbour arms on littoral drift of shingle, and
consequential depletion of shingle in some areas of the adjacent
coast resulting in weakening of flood defences. A Bill in 1975 for
the construction of the harbour was defeated, but a second bill
promoting the Harbour was submitted in 1980 and subsequently enacted
in the Eastbourne Harbour Act.
The passage of the 1980 Act was on the back of the agreement of the Duke of Devonshire to maintain shingle on the beaches along a 9 km stretch to the East of Sovereign Harbour and this was enshrined in the Eastbourne Harbour Act as the power of the Southern Water Authority to recover costs from the developing company for making good weaknesses along the ‘protected beach’.
This left the developers, either the Duke of Devonshire, or successor companies, with a legal obligation in perpetuity to remedy any depletion of shingle along the stretch of coast between Sovereign Harbour and Cooden Beach at their own cost. The ‘justice’ in this was that those organisations who would commercially benefit from the sale of the land and the development of the marina and surrounding residential properties would contribute to any additional maintenance of sea defences required to compensate for the effects of the Harbour.
The Duke bales out
The Duke of Devonshire, who had hoped to develop the harbour himself, became aware that his plan for a luxury marina was too expensive and he put forward a cheaper option with a less pronounced harbour wall. Concerns arose as to whether the Duke’s commitment and the safeguards in the Eastbourne Harbour Act would be affected by the new proposals. The Southern Water Authority gave assurances that the responsibility of the developing company to maintain flood defence provisions was protected. The new planning proposal was given permission in 1987.
However, a year later the Duke decided that the financial risks were too great and he sold the harbour site to Tarmac Construction. Even though responsibilities had been enshrined in law, in 1988 the Southern Water Authority and Tarmac signed an agreement and the responsibility to protect the 9 km of coast disappeared ‘overnight’.
● Why, given the work the Southern Water Authority had done to prevent the development of the Harbour and then to secure that flood defence provisions would be the responsibility of the developer, did they feel the need to enter into a weaker agreement?
Southern Water Agreement (SWA), 1988
The 1988 agreement was called the Southern Water Agreement (SWA), 1988 and amongst others Tarmac (later to become Carillion) and the Southern Water Authority (SWA) were key signatories, as was the Duke of Devonshire. Carillion developed the marina through a wholly owned subsidiary, Sovereign Harbour Ltd (SHL) and operated it through another company Sovereign Harbour Marina Ltd.
Amongst other things the Agreement committed the SWA to maintaining certain groynes to restrict shingle movement through littoral drift. It also committed the developers to set up a trust within 9 years (by 1997) of the Agreement that would provide the money for coastal defence work. The developers and the SWA agreed between themselves that a contribution to the trust funds would come from a rent charge levied on residential properties on the Harbour development.
This was the first time the developers (Duke of Devonshire / Tarmac) had tried to avoid their responsibilities under the 1980 Act and place an ongoing burden for sea defence maintenance on residents, who enjoyed no commercial benefit from the project.
● Why did the Southern Water Authority agree to this tactic, which was blatantly unfair to residents and contrary to the intentions of the 1980 Act?
However, all was not lost as far as future residents were concerned since, should the developers fail to set up the trust within the required 9 years, to the satisfaction of the SWA (now the EA), there was a provision that the developers would pay a bond of £2M, the income from which would fund the contribution. This would have released residents of Sovereign Harbour from any future responsibility for the maintenance costs and restore the intent of the Harbour Act.
The SW Agreement was the sole justification for residents being charged what is essentially a ‘second tax’ towards local flood defences. These flood defence provisions are part of an integrated scheme which protects not only the Harbour residences, but also more than 10,000 homes that share the surrounding flood plain, as well as numerous businesses. These properties and businesses do not pay the ‘second tax’.
● Why didn’t the EA enforce the requirement on SHL to pay the £2M bond in 1997 when it ‘became due’?
● Was the decision of the SWA to levy, what was essentially as an additional tax on residents, a matter of Government policy in 1988?
By 1997 the SW Agreement had been substantially breached by both the Environment Agency and the developers, SHL. The EA defaulted on the agreement by failing to carry out the work on groynes that they had committed to. Without the alleviation provided by these groynes there was an increased need to transport shingle to reverse littoral drift effects and consequently this would result in a higher annual maintenance charge on whoever accepted responsibility for it. SHL also defaulted on the Agreement because, having failed to set up the trust within 9 years, as required by the EA, they refrained from providing the £2M bond and the EA apparently made the decision not take action to insist on this condition. The EA also claimed that SHL had also defaulted on a commitment to move shingle.
● Having been substantially breached by both key signatories, at this point the SW Agreement was null and void. It was no longer worth the paper it was printed on and no longer a legally credible basis for imposing obligations on residents for an additional coastal defence levy.
Between 1997 and 2000 the situation ‘went quiet’ as far as the general observer was concerned, but in 2000 an acrimonious and very public argument erupted. Given the history it might be speculated that SHL’s failure to establish a trust and unwillingness to contribute a £2M bond had made the EA concerned that they would lose the contribution towards coastal defence they had anticipated. Of course they were themselves exposed in the context of the 1988 Agreement since they hadn’t fulfilled their own obligation under this. The argument was essentially conducted in the local press and national television in a BBC programme called ‘Living in the Death Zone’. The argument spawned press statements from both the EA and SHL with claims and counter claims of failures to honour the SW Agreement of 1988.
Not surprisingly this argument resulted in a loss of public confidence and house values on the Harbour fell. With SHL’s business interests threatened they sought Judicial Review of the EA’s decision. Following submission of the EA’s witness statements SHL agreed to postponement of the Judicial Review hearing, pending further negotiations with the EA.
Sovereign Harbour Trust (SHT)
We understand that the negotiations between the two parties were not carried out ‘face-to-face’, but each occupied separate rooms with solicitors shuttling backwards and forwards between them. This resulted in the EA signing onto a new agreement, the Sovereign Harbour Beaches Sea Defence Deed (24/8/2001). It is perhaps surprising that the signatories still claimed the 1988 Agreement as the legal basis for this, but it is of no surprise that both the EA and SHL absolved themselves of failing to meet their responsibilities under the SW Agreement.
Sadly, neither was willing to pay towards resolving this fiasco, which after all was of their own making, so they needed a source of funds to pay for both critical design features such as rock revetments as well as ongoing maintenance of the sea defences. As a result the idea of a trust was once again introduced even though the legal foundation for this, the SW Agreement had been discredited 3 years previously. This is when the Sovereign Harbour Trust (SHT) was set up. The only source of income for the Trust would now be the residents of Sovereign Harbour through what was known as the SW Charge. SHL, the house builders and the businesses, who all benefited from the construction of Sovereign Harbour contribute nothing towards maintenance of its sea defences through the Trust.
In addition the SH Beaches Sea Defence Deed introduced another charge known as the Marina Maintenance Charge that committed residents to subsidising the marina business (dredging the access channel, maintaining lock gates, paths, etc.). This had nothing to do with the 1988 Agreement, which was targeted at flood defence. The EA was party to the Sea Defences Deed and all the arrangements arising from it. They were allocated three of the six seats on the Board of Trustees of SHT.
So, a ‘happy ending’ to this mess. All arguments forgotten, and both players having avoided any responsibility for paying for the maintenance of coastal defences, the EA and SHL issue a joint press statement and property owners, just property owners, pick up the bill.
● It was not Government policy in 1988 that coastal communities should be charged for coastal defence maintenance. Why were the commercial properties in the area at risk (many of them owned by Carillion) excluded?
● The evidence suggests that the EA had a very strong defence to SHL’s challenge, why didn’t it fight the action?
The sea defences at Sovereign Harbour do not just protect the Harbour community which pays for them. They are an integral part of the flood defence scheme that protects an extensive flood plain that surrounds the Harbour and Eastbourne. A failure anywhere along this length of coast would potentially affect over 10,000 homes and cause damage estimated (in 2000) to be in excess of £1billion. Yet it is only the owners of 3700 homes on the Harbour who are essentially taxed twice.
● Why are property owners at Sovereign Harbour paying for flood defences that benefit a much wider area?
Representation for Harbour residents
The workings of SHT have not been transparent to residents over the years and detailed accounts have not been forthcoming. Sovereign Harbour Residents Association (SHRA) have made applications to get a resident, or residents on the Board of Trustees, but this has been rejected on the basis that there is no obligation on SHT to make provision for a resident Board member.
We have been told that the only obligations with respect to SHT are that Harbour residents have to pay an annual amount to cover sea defence and marina maintenance, and the SHT distribute those amounts to the EA and the marina company. For 5 years the EA declined to nominate representatives for their three allocated seats on the Board of Trustees, which had comprised only three trustees, who were all previous employees of Carillion. As a result SHRA suggested that the Agency nominate Harbour residents to fill their seats.
They declined to do this, but clearly felt pressure to fill the seats and nominated three trustees, none of whom had any connection to the Sovereign Harbour neighbourhood..
The grievance felt by residents increased in what felt like a concerted policy by SHL and the EA to not only commit residents unfairly to a pay twice for flood defences, but to then exclude them from the process which collected and utilised their contributions. The SHRA asked questions under the Freedom of Information legislation that gave them a better insight into what was considered a potentially unsafe legal background to the charges and formation of SHT. The marina was being managed by Sovereign Harbour Marinas Ltd. (owned by Carillion), but was then bought out by Premier Marinas. At about this point SHRA was offered an opportunity to have an observer attend Board meetings.
This offer was taken up, but then it was found that the observer was being excluded from some meetings on the basis that discussions, commercially sensitive to SHL and Premier Marinas, were taking place. It should be borne in mind that we are talking about a Trust, not a commercial company, and SHRA’s concerns grew.
Community Interest Company (CIC)
SHRA then made a formal complaint to the Charity Commission. Ironically it investigated, but would not uphold the complaint because SHT should never have been a charity and didn’t act as one. The fact that the Charity Commission had registered it as a charity was glossed over. An odd position to take, but SHRA felt its concerns had been vindicated. In parallel with this it later became apparent that SHT realised their position was untenable and to avoid criticism after having run for about 8 years, the Trust, the EA and Premier Marinas decided to form a Community Interest Company (CIC) using the same board members as the SHT, which was still to be kept on in name, now as a non-charitable trust. With the change of ownership in the marina business the 3 Carillion nominees resigned, leaving just the EA nominees who have moved across to the CIC. Subsequently, two additional trustee/directors were appointed, both employees of Premier Marinas.
Guidance on the formation of CIC’s, not unreasonably anticipates that the community involved with the CIC will be consulted as part of its formation. No community consultation took place.
In 2011 one of the EA nominees resigned and the Trust/CIC reluctantly appointed a resident (Cllr Patrick Warner) to the board to fill the vacant EA seat.
In 2012, when the marina was sold to Premier Marinas (PM), the SHL nominees resigned and two PM executives were appointed.
In 2014, harbour resident, Rick Runalls was appointed to the board, as the third PM nominee, giving harbour residents a second seat.
In June 2015, one EA and one PM trustees resigned and in December of that year Patrick Warner resigned and another PM executive was appointed.
At this point, all three PM seats were occupied, but there were
two EA vacancies.
Then, in a surprise move, in March 2016, the EA nominated two harbour residents to fill its two vacant seats, Cllr Penny di Cara and former SHRA Chairman, Jan Weeks. This is when the situation became farcical. It had always been the trust’s position that only the EA and the marina operator could nominate trustees but, in the face of a situation where half of the board could be harbour residents, the trustees suddenly decided that they had the sole right to nominate new trustees.
● Why, for 8 years, was the EA party to a trust that did not meet its charitable objectives and acted contrary to its M&A’s?
● Why is the EA still willingly participating with SHL and Premier Marinas in what is a legally questionable strategy to allow the companies who have responsibility for flood defence to avoid those responsibilities, whilst supporting a ‘second tax’ on residents?
The CIC’s sole function is to collect the rent charge, which is does through a company of Tunbridge Wells solicitors, a partner in which is also the secretary of the CIC and its legal advisor. Since the formation of the CIC, administration charges have risen substantially, to about £175K pa. These costs are taken from the fixed part of the Rent Charge, resulting in a loss of income to the EA of about £130K per year. This issue has been raised with the EA at both local and national levels, but no action has been taken to reduce the cost. Enquiries by the SHRA have shown that the collection could be managed by Eastbourne Borough Council for about £5K. It would seem that the EA has been content just to take whatever income the SHT passes on, without question in order to avoid scrutiny of the process.
● Why, has the EA never robustly audited the SHT accounts or demanded that it should provide “value for money”.
● Why, when give evidence that “value for money” was not being provided, has the EA done nothing to remedy the shortfall?
The Rent Charge and the SHT have been the source of much dissatisfaction on the part of residents, not least of all because of the lack of transparency. For example, massive increase in administration charges mentioned above. By working to get residents represented on the Board of Trustees, it was hoped to get fuller disclosure of where the money is spent, but it seems the trustees are reluctant to allow this to happen.
In early March 2011 SHRA wrote to the CIC about the large increase in their administrative charges. We also asked for clarification on a number of points raised by our members. Click here to read the letter from SHRA. The CIC responded shortly afterwards and their letter does clarify some points we raised and contains information about costs and liabilities that residents may find useful. Click here to read the response from the CIC.
Authority to collect
Whenever SHRA representatives have expressed the opinion that the changes to the 1988 SW Agreement were unlawful, both the SHT and the EA have challenge them to “take us to court”. This has been done in the full knowledge that both organisations have far greater financial resources and far greater access to legal professionals. However, in 2014, having obtained the consent of its members, the SHRA sought the advice of counsel. The SHT, of course has no money to contest a legal action, other than the income from the Rent Charge, so the costs of both parties in any legal action would ultimately be paid by residents.
That advice indicated that there are good grounds under which collection of the charge could be challenged. Consequently, the SHRA Chairman wrote to the Chairman of the Sovereign Harbour Trust, setting out the grounds for the challenge, and requesting that the trust should re-examine its authority to collect the charge in the light of the advice received. The initial response from the trust seems to suggest that the trustees consider this to be an issue for the Environment Agency and that they bear no responsibility. This was at variance with the advice we received, so it seemed, as anticipated, that no early resolution would be likely.
Meetings with Environment Agency
In September 2015, SHRA representatives, Rick Runalls and Ian Weeks were joined by Sovereign Ward County Councillor, David Elkin, on a trip to the House of Commons for a meeting with the Secretary of State for the Department of the Environment, Fisheries and Food (DEFRA), Liz Truss MP and Eastbourne’s MP, Caroline Ansell. This was a follow-up to a meeting that took place at Sovereign Harbour in March 2015. The Environment Agency reports upward through DEFRA.
The purpose of the meeting, which had been arranged by Mrs Ansell, was to discuss the injustice of the Marina Rent Charge and of the failure of the EA to respond to legal evidence provided to it, showing it had no authority to collect the charge. Ms Truss was sympathetic to the arguments presented and said that if, as seemed the case, the charge was cross-subsidising sea defences that protected other areas, residents had a valid case. She also said that the EA needs to explain how the rent charge, about £180 per household per year, is spent and would help to arrange a further meeting with the relevant EA managers.
That meeting, with the EA Area Manager, took place in December 2015 in Mrs Ansell’s constituency office. Unfortunately, he was clearly not interested in seeking a solution. His stance was very confrontational, and he openly challenged the SHRA to take legal action. Although a follow-up meeting was suggested, it was considered to be of little value and unlikely to change the situation. As a result of this intransigence, the SHRA took further advice of counsel. This advice totally reinforced that previously obtained.
In May 2016, MP Caroline Ansell again invited RR, IW and DE to a meeting in Westminster with the Deputy Head of the EA. This meeting was far more open, and the EA committed to obtain its own legal advice.
Unsurprisingly, that advice was totally at variance with the advice we had received and the SHRA counsel’s view was that the conclusions drawn could not be substantiated. However, any further comment would require additional investigation with, inevitably, additional cost. Equally unsurprisingly, the SHT accepted the EA advice without question.
In early September 2017, after more than a year's delay since their nomination, two local residents, SHRA committee member, Cllr Penny di Cara, and former SHRA Chairman, Jan Weeks, were formally appointed to the Board of the CIC joining resident Rick Runalls who joined the board in 2014 (see above).
Paying the Charge
Although we think the charge is unfair, we would urge you to make the payment as failure do so could have very serious consequences, but, as in previous years, we suggest you add the following statement:
“Please note that my payment is made under protest and that my sending it is not to be interpreted as confirmation of my satisfaction with or acceptance of the validity of the current invoice or its level. My payment is made without prejudice to any action taken, or assertions made by me or by others on my behalf, at any time.”
The SHRA committee did think that resolution of this issue would be impossible without resort to the courts. However, SHRA is investigating a number of further options and continues to research and work on aspects of the rentcharge issue including its legality. It is proving to be more difficult and is taking longer than we would wish to obtain and verify some of the information we require, but progress is being made and we expect to make further announcements in due course.