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Failed Developments Liverpool – Millions Owed to Local Communities

Failed property developments and the city of Liverpool are shamefully becoming synonymous, but worryingly, what we’ve seen so far only seems to scratch the surface of an infestation that is dramatically sinking the city’s reputation into oblivion. Yet, anyone in a position of authority seems to shirk any responsibility and stand by as more and more stories of small investors losing their savings in Liverpool pour out. Is this the image we want for our city?

The consequences leave investors financially ruined and blight the city’s landscape. But projects have left millions owed in Section 106 payments to Liverpool City Council – money that is supposed to be invested back into communities to offset the burden of new development schemes.

The fractional sales model used to fund the property schemes works by persuading hundreds of individual buyers to purchase an apartment in a multimillion pound residential complex, before the development starts. In many cases, the buyer’s investment is spent on the entirety of the project, including marketing costs, professional fees and even sales commissions – so, when a developer goes bust, the money has already been spent. In many cases the sales agents, contractors, architects and marketing companies behind the property schemes share the same directors as the developers themselves, meaning they get paid, while investors lose their money – in some cases life savings.

Widespread across Liverpool, sadly, the hotbed for dubious property investments seems to be right here in Vauxhall. This is best illustrated in Liverpool City Council’s ambitious Pumpfield Regeneration Framework, that endorses 10,000 flats to be built in Vauxhall, which all look to follow the same flawed fractional sales model. The £600 million proposal aims to create mostly 1-2 bedrooms apartments that would stretch from Leeds Street to the Eldonian Village and from Pall Mall to Scotland Road. But, if you take a look around the area, there are no signs of ‘luxury accommodation’ – instead, just deserted worksites.

The first for completion in the council’s regeneration strategy was the North Point Global Pall Mall scheme, but the developer has gone into receivership after taking millions in deposits from investors around the world. A representative of the investors from the North Point Buyers (Pall Mall) Limited informed Scottie Press that there is still £18 million owed to buyers but, due to the investor company yet to be put into liquidation, it is still unknown whether any of the £18m is even left to reimburse investors or alternatively, allow the buyers to make a legal claim.

The Metalwork development on Vauxhall Road was due to be completed next, with construction initially estimated to start in winter 2018. Work has yet to begin, aside from the demolition of the Lawton’s building, which has left the land unsecured and full of holes and mounds of rubble that now attracts fly tipping. Scottie Press can also reveal that, after speaking with planning enforcement co-ordinator, Andrea Dimba, that the developer Pumpfield Regeneration Company still has an outstanding Section 106 debt to Liverpool City Council of £903,723.35.

Next in line in the council’s plan is The Tannery on Edgar Street. The development was granted planning permission back in 2016 to build 381 apartments, but since the demolition of the former leather factory on site, no construction has taken place. Scottie Press contacted LCC to see if developer, Jamworks Bevington House Limited, which has now changed its company name to The Tannery (Liverpool) Limited, had paid any of the ‘owner covenants’ and 106 fees set out in the project’s legal agreement with the council, totalling a staggering £1,099,134.50. A representative of LCC says, “Hoardings have been erected around the site but development has not commenced. On commencement, the council will invoice for the planning obligations required in line with the terms of the Section 106 agreement.”

“I really do believe there needs to be some kind of external inquiry into the whole situation because there are so many elements involved. But looking at it partially from the perspective of the council and their whole investment/ development strategy, and where the whole thing has gone so dramatically wrong,” Peter adds.

Under the legal agreement between the developer and LCC, ‘commencement of development’ triggers the requirement for Section 106 to be paid, under section 56(4) of the Town and Country Planning Act 1990. It legally deems demolition as ‘material operation’, meaning that technically, the demolition of the leather factory started the development work. Also, on 12 March 2019, Scottie Press received an email from a representative of The Tannery, Oliver Neill from Meridian LLP, who told us, “The construction work started on 25th of February, ground works have been enabled.” Scottie Press has since recontacted the council to see if any of the monies have been paid, but we’ve been unable to get an answer as yet.

The largest development in the Pumpfields proposal, Infinity Towers, headed up by the Elliot Group, aims to build three towers comprising 1,003 rooms. So far, minimal work has started on site and the development currently has an outstanding debt of £280,500 in Section 106 money. LCC says, “An invoice has been raised and the council awaits payment for the sums which became payable prior to commencement.”

Outside the Pumpfield regeneration zone, the trend of investor-led fractional selling continues in Bevington Street, where the Grade II-listed mock Tudor Eldon Grove sits. Granted planning permission in November 2016, apartments have been flogged to investors, but no progress to renovate or protect the delicate structure from the elements has taken place, aside from the roof being removed from the already dilapidated building. According to LCC, no Section 106 agreement was required for this supposed multi-million pound property development, due to the ‘viability’ of the project and the ‘onsite amenities provided’.

If you take a walk down the road to Everton, you’ll see Fox Street Village, which hit ITV news after tenants were forced to evacuate after it was deemed a fire hazard and unfit for inhabitants. Unfortunately, this is only part of the issue, after the developer went into administration, leaving shoddy unfinished blocks of apartments and £10 million owed to investors. As stated in the last Scottie Press in July/June in the Fox Street Failure article, due to the legal agreement not being signed off on the development in the 2016 amendments, the 106 agreement of nearly £1million was unable to be billed to the company and, according to an LCC spokesperson, “approximately £560,000 is owed” in 106 fees.

A clear problem devastating the city, a scrutiny panel was set in up August 2018 to resolve the issue. Although the report was originally set to be published in March 2019, there is still no signs of its release.

Scottie Press spoke to leader of Liverpool’s Liberal Democrat Group, Councillor Richard Kemp, who sits on the scrutiny panel. He says, “I know it’s not been written because I have to approve it – or not approve it – as the case might be. And I think it’s more likely that I wouldn’t approve it at the moment with the way it’s shaping up.”

Cllr Kemp expresses his frustration with the report’s delay. “They’re hoping I’ll just stop pressing and people like you will stop pressing as well. I’ve not had an explanation of why it’s taken this time,” he says.

He reveals some details of the meetings. “We discussed the big generalities about fractional investment and we looked at whether the council has used its power properly. We looked at the role of solicitors, surveyors, estate agents, charted surveyors and we took some evidence about the market in Liverpool. What we weren’t allowed to do was to raise any specific developments. One I wanted to particularly raise was Chinatown, to find out why we sold it to a company which had no track record, rather than a company that did have a track record. The other one is The Paramount development on London Road, which I can not believe – after three years – is half occupied and still unsafe. I wasn’t allowed to raise specific items, I was just ruled out of order – although I was given no legal reason for that.”

Cllr Kemp also states his concerns of the fractional selling model is now ‘morphing’ into yet another problematic sales tactic. “The agents have recognised problems with fractional investment and getting their permission and so they’re selling property bonds,” he says. “So you don’t buy a flat or two in a block, you buy 10% of the block. There are big similarities, but it’s not a quite the same. In my view most of it is still a scam – which is why we need to get this information out to people.”

Richard Kemp says the failed developments have, “betrayed the trust of our city and our country. That’s why I want to see this report produced, so we can say to people as a council that we did make mistakes, we as a country have made mistakes – we need to clean up. As far as I’m concerned, and as far as the city is concerned, it’s to try and get our reputation back.

“There are lots of people all over the world and all over the country who are disgusted. The only good thing I can see happening is, from my understanding, the police and Revenue and Customs are investigating the circumstances behind these developments very hard indeed.

“Liverpool is the epicentre. We’ve got more abandoned buildings than the rest of the country put together,” he adds. “Liverpool as a city has to ask itself one big question – why did so much of it happen here? And, if we are not prepared to answer the question, the next lot of scandals will come in as well.”

Scottie Press meets with former Walton MP Peter Kilfoyle, who’s covered the topic extensively in his blog. Peter says, “The harsh reality is, you’ve got all these damn buildings that are either semi-built, not built or built and falling down – death traps.

“Its like a combination of Ponzi scheme, fractional selling and god knows what else – but there is obviously something radically wrong.

“You see buildings being torched, allegedly, and it’s the same companies all the time.

“Its on a scale I’ve never seen,” Peter adds.

He also questions how realistic LCC property development projections are. “Who’s going to fit in all these flats? Where are they all coming from? And what are they all going to do? What is going to be the commercial base or industrial base that will keep them going? It just doesn’t fit. It’s just not a logical conclusion to draw that somehow you build all these flats and it will magically draw in people.”

“What is as equally dismaying in all of this happening is the failure of anybody in a position of authority to act. You wonder why they’re not acting,” he continues. “Is it because they’re stupid? Is it because they’re scared? Is it because they’re bought off?

“It’s a bit like the Wild West and there is no sheriff in town,” Mr Kilfoyle says.

“What is for sure is that the council is not getting the 106 money but it’s not them, it’s us – it’s the people who live here and pay the bloody council tax that are getting ripped off! Why is that? That’s where you’ve got to ask the questions.

“The district auditor is supposed to pick up on these things – to my knowledge they have said absolutely zilch.

“I’m not an MP any more. But if I was, I’d be raising mayhem about it,” he says.

Peter gives his opinion on the issue not being raised by any current standing MPs in Liverpool. “I think it’s absolutely essential for the sake of the city. I’m still party political and I think, for the sake of the Labour Party, it’s very important that you’re seen to be whiter than white, because otherwise your credibility goes out the window – your credibility locally as a party and the credibility as a city for inward investors.

“Investors will think not just twice but at least three times before they put any money into Liverpool,” he believes. “The little investors are all getting their fingers burnt and the bigger investors, well, they just wont touch it.

“I think it’s a black hole for investment, that’s how people see it. It will swallow up your money – forgot about it – it’s gone. Unless it’s covered on a far wider scale, people in this town are still oblivious to it.”

We discuss with Peter how the topic is covered by local and national news sources. “I think locally it’s a complete abdication of their responsibility to actually report without prejudice on what the realities are,” he says, “and to actually investigate what’s going on rather than just printing what’s put out by a press officer in the council. And to let the scales drop from their eyes and see what actually happening – which they don’t. On a national level, I think they just seem to have got tired of it, in the sense they just sort of shrug their shoulders now and say ‘what do you expect, that’s Liverpool?’ I think it’s shocking.”

“I really do believe there needs to be some kind of external inquiry into the whole situation because there are so many elements involved. But looking at it partially from the perspective of the council and their whole investment/ development strategy, and where the whole thing has gone so dramatically wrong,” Peter adds.

Scottie Press also spoke to an investor who put £60,000 into a property development in Liverpool and will remain anonymous for legal reasons. “My plan was to come over here to live after I retired,” they told us. “My pension is now the only thing keeping me running – I’m now delving into my pension for expenses I never catered for. I have absolutely no assets, I can’t go anywhere at my age to get a mortgage and I have nothing in the bank because that’s all I had – so I have no lump sum to put down to buy another place. Hindsight is a wonderful thing, I could have bought a three-bedroom house for £110,000 and I wouldn’t have the crap I’m dealing with now. And the other thing is, when I die, I always wanted something to leave to my kids, but that’s not there now.”