PORTSMOUTH City Council has lost out on hundreds of thousands of pounds of income a year, The News can reveal.
The authority has been collecting around £850,000 in rent each year from Mapeley Estates Ltd, as it holds the lease of the HMRC tax office in Cosham.
But when the deal came up for renewal, the firm made the case for paying less as the figure would have been higher than the market value of the property.
And following negotiations, it has managed to knock £350,000 off the annual rent.
It now means more savings will have to be found in the council’s budget.
Cllr Gerald Vernon-Jackson, opposition Lib Dem group leader, said: ‘That’s a commercial deal where the council is now going to get £350,000 less than it did last year – that’s a real disappointment.
‘It means more cuts having to be made because the council has lost that money.
‘The council has to become more commercial – it has to work in that way, and with this deal it doesn’t seem as if it’s gone in the right way.
‘That’s £350,000 that can’t go on social services every year.’
But Tory Councillor Luke Stubbs admitted the council would have lost thousands more in legal fees trying to challenge keeping the rent price the same.
Cllr Stubbs, Tory cabinet member for planning, regeneration and economic development, said: ‘As a landowner, we don’t want this to happen.
‘The situation is, had we gone to court and demanded the same rent, we would have definitely lost.
‘It’s something we’ve already taken into account for our 2015/2016 budget, but it will result in further cuts in future years.
‘I’m disappointed, but the council’s relationship with its leasee is bound by the terms of the lease.
‘And in this case, the lease allows the tenant to challenge any rent above market value.
‘Market rents for office space has gone down lately, and the problem is the building is getting old.’
Cllr Stubbs added English Heritage might grant the 1970s glass building listed status – meaning the cost of any maintenance work could go up given its protection against drastic changes.