1.96 Under the July 1999 agreement the Armouries transferred its share of the future proceeds from the Clarence Dock development to RAI, to be used in paying back RAI's debt. The master agreement for the site's development was signed with Berkeley in March 2000. Under this RAI will eventually receive £3.8 million as its share of the total development gain.
1.97 The Armouries has sub-let the museum buildings from RAI on a full repair and insure basis. Under this new sub-lease the Armouries is now responsible for the rental payment due to the British Waterways Board. The buildings will revert to the Armouries once RAI's bank debt (set under the revised agreement at almost £21 million) is repaid in full or when the lease expires in 2057. Should RAI go into receivership before this, the Armouries' position is protected as it will be occupying the museum under the terms of its own sub-lease.
1.98 Following the signing of the revised agreement, there was a period during which the Armouries took over financial responsibility for the museum operation, while RAI still managed the operation of the museum. The Armouries took over financial responsibility in this period as RAI had no banking facilities available to it to fund the payment of its liabilities. The handover period was also needed to allow the finalisation of various detailed matters. The period ended in January 2000 when the Armouries took over full operational responsibility.
1.99 As part of the revised agreement the Armouries had agreed to contribute to the cost of work carried out on its behalf by RAI during this handover period. The total contribution from the Armouries amounted to £203,000, mainly in respect of liabilities incurred by RAI prior to the revised agreement but from which the Armouries received benefit during the handover period. This figure could increase as there is a possible claim for a sum retained by RAI on the original construction contract. The Armouries told us that it considers that it is not liable for this claim under the terms of the revised 1999 agreement. RAI disagree. The Armouries has also had to pay consultants and legal fees of £28,000 and extra staff costs of £20,000 because of the handover. The Armouries also incurred costs associated with the transfer of about 90 RAI staff, estimated at £1.3 million a year.