Annexes to SEC(2003)254 - European Parliament on the exercise of the option to purchase under long-term leasehold contracts concluded by the Commission under buildings policy in the Brussels region

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dossier SEC(2003)254 - European Parliament on the exercise of the option to purchase under long-term leasehold contracts concluded by the ...
document SEC(2003)254 EN
date March  4, 2003
agreement, although the saving is partly offset by the financial cost of major maintenance work to the buildings.

* The contracts provide for an option to purchase, which the Commission may exercise before the end of the leasehold; this would enable the Commission to become the outright owner of the property at no significant extra cost; until the Commission takes up this option, the landlord retains ownership of the ground.

* The contracts enable the Commission to exploit the property in accordance with its specific criteria and needs.

* Under the special tax status of these contracts vis-à-vis the Belgian authorities, no property tax (précompte immobilier) is due.

The disadvantage of these contracts is that in event of insolvency or bankruptcy on the part of the owner, i.e. the other contracting party to the long-term leasehold agreement, it might not be possible for the Commission to acquire ownership of the property on which it had paid the leasehold fees for 27 years, since third parties other than the bankrupt owner of the property would not be bound to honour the purchase option in the long-term leasehold contract concluded by the Commission.

It is highly advisable to eliminate this risk so as to preserve the Commission's financial interests.

To this end, the Commission wishes to inform the budgetary authority that:

* as a first step, it intends to take up the purchase option under the long-term leasehold contract for the Palmerston nursery on avenue Palmerston; this was mentioned as a possibility in the note from Commission departments with prior information to the budgetary authority on the long-term lease with option to purchase on the Palmerston building sent on 18 March 2002 to the President of the Council's Budget Committee and the President of Parliament's Committee on Budgets;

* the budgetary and financial cost is a symbolic sum of EUR1; taking up this option will not change the financial conditions of the contract, since the Commission will continue to pay the leasing fee, in accordance with the contract, for the remaining term.

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FINANCIAL STATEMENT

The budgetary and financial cost is a symbolic sum of EUR1; taking up this option will not change the financial conditions of the contract, since the Commission will continue to pay the leasing fee, in accordance with the contract, for the remaining term.

Exercising the option to purchase will eliminate the risk to the Commission of the owner's becoming bankrupt, and preserve the Commission's financial interests.

Budget heading : A 02000-C1-OIB - Rent and ground rent