A Chatham lawyer is raising concerns over the details of a purchase agreement involving the purchase of the former Sears building by the Municipality of Chatham-Kent that are being refuted the municipality’s legal services team.
A Chatham lawyer is raising concerns over the details of a purchase agreement involving the purchase of the former Sears building by the Municipality of Chatham-Kent that are being refuted the municipality’s legal services team.
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Steve Pickard contacted local media through email Friday after examining a copy of the agreement of purchase and sale (APS) between the municipality and 100 King Street Holdings Inc., owner of the Downtown Chatham Center (DCC), which he obtained through a Freedom of Information request.
There has been significant public opposition to the municipality’s plan to purchase the section of the DCC that once was the Sears building for $2.95 million for a new city hall, library and museum, all under one roof.
“I was shocked to read provisions of 100 King’s right to buy the property back from CK,” Pickard wrote.
How he reads the APS is, in the future, no matter how many years, no matter how much investment by the municipality, if Chatham-Kent ever wishes to “change the proposed use of, sell, transfer, lease or otherwise dispose” of the property, then 100 King can force CK to sell it back to them at $2,950,000.”
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Pickard noted there is also a reference in the APS being the initial purchase price “plus any direct costs incurred by the municipality for any improvements to the option property.”
Speaking with The Chatham Daily News, Pickard said, “That’s a complete wild card, that’s completely unknown what that’s going to be.”
His email stated he is sure this “will be an item of hot debate in the future.”
He added it’s highly likely it will be determined by a Judge.
“There is no guarantee that this will be seen with the optimistic eyes of some who read this term,” Pickard said.
A media release from Chatham-Kent’s legal services team stated it reviewed Pickard’s email and called the lawyer’s suggestion that, if 100 King triggered the repurchase price, it would be for the original purchase price, “a major error.”
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Citing Pickard’s statement about “plus any direct costs incurred by the municipality for any improvements” to the property, the legal team said, “The direct costs are estimated at $53 million.
“As a result, if 100 King sought to re-purchase it, it would have to agree to do so within 15 days and would have to pay an amount that compensates the municipality for any costs it has incurred to renovate or improve the property. ”
Pickard also is concerned that, under the first right of refusal clause in the APS, every time the municipality is thinking of doing something different, they have to notify 100 King and that triggers a 15-day period to exercise its option to buy the building back. But, even if the mall owner doesn’t act in those 15 days, it triggers a five-year right of first of refusal that continues every time there is a “trigger point,” he said.
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The city’s legal team said Pickard’s interpretation the mall owners have the right to buy back the property at the initial purchase price for eternity also is wrong.
“That was not the intention of this section of the agreement, and is not what was reflected in the negotiations between the mall owners and the municipality,” the legal team said.
It added the mall owners were, “understandably, concerned that the municipality may buy the former Sears building and ultimately decide not to proceed with the community hub project.
“If the municipality didn’t decide to proceed with the project, it may instead decide to make some use of the former Sears building that was inconsistent with the vision for the remainder of the mall.”
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The buy-back provision is intended to cover a situation where the project is developed, but the municipality ultimately decides to sell the building in the following five years.
“The negotiations with the mall owners always reflected that if the project is developed, and five years had passed, then the community hub will not be subject to any future sale restrictions,” the legal team said.
Pickard decided to delve into this issue on the understanding from some councilors when they never received a copy of the APS or were made aware of provisions in the agreement.
“This raises some real concerns,” he said. “Why has there been such secrecy around the terms? Why was council not told of this? Why was the public not told of this? Who is making the decisions to keep these terms secret?”
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The suggestion council and the public have not been made aware the provision is “inaccurate,” the legal team said.
A description of the terms was included in a January report to council authorizing the purchase of the property.
“As is usual practice, the terms were summarized in non-legal language to allow for an easier understanding by the public,” the legal team said.
The legal team added the APS also was “willingly disclosed” to Pickard through his freedom of information request.
“This is the normal process for citizens to obtain government documents, and was followed in this case by Chatham-Kent.”
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