APPENDIX 3 Allocation of risks between the Department and Land Securities Trillium

Risk		DWP	Mainly DWP	Shared	Mainly LST	LST	Comments
Retail Price Inflation Risk	PRIME PRIME expansion						Property component of Facility Unit Prices is indexed to RPI
Rents of leased premises rise above inflation	PRIME PRIME expansion						For a number of properties on the Estate, the rent charged to the department was higher than the prevailing market rent. Under the contract, LST bears the risk of such 'overrenting'
LSTs life cycle capital expenditure is higher than budgeted	PRIME PRIME expansion						Extent of risk transfer increased by PRIME expansion through changes to reconciliation mechanism
Costs of dilapidation are higher than expected	PRIME PRIME expansion
Accommodation is unavailable for reasons attributable to LST	PRIME PRIME expansion						There are a number of relieving events
Failure to recognise surplus space for vacation	PRIME PRIME expansion
Service Charge Risk	PRIME PRIME expansion						No risk was transferred under PRIME, but subsequent negotiations have resulted in a mechanism for sharing Service Charge savings
Rates Risk	PRIME PRIME expansion						Proposed to continue benefit-sharing regime but continue to treat rates costs as a pass through
Residual Value Risk	PRIME PRIME expansion						The Department have improved occupancy rights upon contract expiry under the PRIME expansion
DWP instigates vacation of core properties	PRIME PRIME expansion						DWP pays LST’s unavoidable costs
LST makes net losses on property development	PRIME PRIME expansion
LST makes net gains on property development	PRIME PRIME expansion
LST fails to make development gains on DWP property vacated at LST’s request	PRIME PRIME expansion						LST guarantees a minimum deduction of £1m in prices. Department will share any higher gain
LST makes losses through failure to find alternative tenants for surrendered space	PRIME PRIME expansion
Costs associated with the vacation of flexi-core properties	PRIME PRIME expansion					N/A	New designation of property
Costs associated with the vacation of flexible properties	PRIME PRIME expansion
Insurable risks such as public liability	PRIME PRIME expansion						But LST need not insure if cover is not available on commercial terms or if not obliged to insure under the relevant lease
Accuracy of information on titles and leases	PRIME PRIME expansion
Facilities costs rise higher than indexed in the deal	PRIME PRIME expansion
Service Delivery is below required standards	PRIME PRIME expansion						There are a number of relieving events
Department requires different service	PRIME PRIME expansion						Change mechanism comes into play
Furniture	PRIME PRIME expansion						LST has to supply all furniture to the Department free of charge
Force Majeure	PRIME PRIME expansion						No Change
Change of Law	PRIME PRIME expansion						No Change
Compliance with Health and Safety requirements	PRIME PRIME expansion						LST is required to bring the buildings up to standards required by Health and Safety regulations within 2 years of the start of the contract
Default by LST	PRIME PRIME expansion
Default by the Department	PRIME PRIME expansion
Data Accuracy	PRIME PRIME expansion						(Some specifics with DWP). LST will have recourse against surveyors under direct warranty. LST to undertake its own due diligence and satisfy itself