In the deep end

DAVID MAYNIER is an Attadale resident who’s been a key player in the campaign against a proposed wave park at Alfred Cove. In this week’s THINKING ALLOWED he takes a look at the lease for the facility and says there’s an unusual power imbalance.

MY experience in dealing with large organisations is that the organisation has all the power and the individual bears the risk.

The agreements that we sign with our IT suppliers are an example—click “Accept” or you don’t get the app.

Airline tickets and bank mortgage agreements are similar. All one way.

Local governments also have the resources to hire good lawyers, the benefit of standard agreements and lots of experience to back them up.

John Citizen simply signs to their terms and hopes that nothing will go wrong.

Large organisations are also very risk averse.

Dealing with investors money, or ratepayers money, they are very cautious and much of the paperwork is there to minimise the risk to the organisation.

John Citizen bears the risk, and again just hopes for the best.

The City of Melville is just such an organisation, yet in the ground lease agreement for the wave park there is a truly remarkable turnaround of both power and risk.

The Lessee, Urbnsurf (Perth) Pty ltd has all the power!

• An anti-wave park rally last year. Photo by David Maynier

Urbnsurf can decide at any time that it has had enough and can walk away from this deal.

The test is simple, its Urbnsurfs “opinion” or its “absolute discretion”.

The city has no say in this at all. For the city, it’s quite different. For the city
to end the deal it must pass tests of default, reasonableness, good faith
and bona fides.

If that’s not enough, it must then negotiate with the lessee, who might just decide that termination is not a good idea at all.

If the city wants Urbnsurf to pay any rent, the city must first give a few approvals—demolition permits, building permits, building plans and more.

There’s a conflict of interest here.

Gone is the onus on the lessee to get it right. The city must deliver the approval or it won’t get paid. Simple as that.

And there’s no rent until the job is complete. Not sure what “complete” means—is it when the first water goes into the surf lagoon?

Or when the last café, bar or retail outlet is tenanted and making money? And is there a date for completion?

Well, no. And if there were, it could easily be extended.

The first rent payment could be many, many years away.

And the city has no say in any of this—its all up to Urbnsurf, provided the city gives the approvals, that is!

When it comes to risk, the city has to put up $10 million to get the site ready for the wave park, but there is no guarantee at all that the wave park will go there.

Urbnsurf can still walk away at any time, having spent none of its own money, even after the city has forked out the $10million and prepared the site.

So where and how did the city get it all so wrong?

What persuaded our most excellent award-winning, business oriented city to give away all its negotiating power so easily?

And wear the risk?

We’ll just have to wonder about that.

One response to “In the deep end

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google+ photo

You are commenting using your Google+ account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s