Recommendations to clear up Liverpool’s Property scandals

The Paramount on London Road. One third was completed 3.5 years the other two thirds has been rotting ever since with some surveyors claiming that the uncompleted part is now dangerous

In view of the failure of Liverpool Council to issue a report into Liverpool’s Fractional Investment Property scandal I have issued my own.

It is a disgrace that 9 months after the Fractional Investment Task Group had its last meeting and 18 months after it held its first the Council has still failed to issue a report on what to do about the mess that the Liverpool property market is in. How many more people have lost money in ill-advised property investment in our City during this period?

In my report I have suggested a number of recommendations to the Council, Government, Royal Institute of Chartered Surveyors, the legal profession and estate agents about what needs to be done to prevent future scandals of the type that has left about 20 blocks in Liverpool part developed and with more than £200,000,000 and possibly up to £500 million of investors money lost or wasted. I have made 13 recommendations in total in addition to some directed at would be investors.

Although there is no more fractional investment as people have realised just how risky it is a plethora of other schemes have entered the market to promise way above average returns on investment. Housing Bonds; Housing Loans; Housing Corporate Bonds and Loan Notes have all been marketed with high promise of returns but low mention of the risks involved. What Liverpool needs is institutional investors like Banks; property management companies and developers who use their own finance. Until we acknowledge what has happened in Liverpool and come up with firm recommendations to deal with investors like those will stay away.

Anecdotal evidence suggests that people in China have committed suicide because of their losses and we know that the property scandal has been a cause of concern to both the Chinese and Hong Kong Governments. It has also caused the bankruptcy of many small local businesses who failed to receive payment for work done.

This situation has been caused by professional greed and lax standards, government complacency in key fields of consumer protection and building safety and a ‘devil may care’ attitude from Liverpool Council as it sought to attract investment, at any price from any source, at any quality.

There were many ways in which Liverpool Council could have sought to strengthen its own planning role and used its powers of persuasion and exposure to stop some, at least, of the shaky investment. Instead it welcomed any developer which has left our City with a hotch potch of uncompleted and possibly never to be completed developments. Many of those blocks which were completed failed to give the promised yields and many more have been late in completion and late in paying out guaranteed rents. This has left many people who have raided their pensions to invest in what they thought was a one-way bet facing penury.

The professions have failed to cover themselves with glory.  Some members of the legal profession; chartered surveyors and estate agents seem to have thrown away normal concepts of good practice to create a ‘market place’ in which anything goes. There needs to eb a science to establishing values for properties which can be relied on. Solicitors should act only for one side or a contract without long established links with both sides. Estate agents should be subject to the same laws on describing an asset as any other company.

The Government needs to act on two aspects. Firstly, in bringing back into council oversight the signing off as habitable buildings before occupation. We have seen in Fox Street and Grenfell Towers the problems that can arise if the surveyor is employed by the developer. It appears that the developers needs have paramount importance and not the needs of the end user of the properties.

Secondly, the Government needs to allow Councils to have more power in deciding what is needed for the areas that they have been elected to run. Some of the planning problems which caused the problems were caused by the Council but equally the fact that the Government tries to micro-manage planning throughout the Country through the National Planning Framework, causes real problems. These problems are made worse by the fact that the NPF is really only relevant to London and the South East and certain housing pressure points such as parts of Cheshire.

One area that I do not stray into is legalities! The Police announced a review of certain sites and certain developers last year. In December a Developer and a council officer were arrested but have not been charged and may never be. I urge people not to speculate on the matter further as any speculation might lead to legal problems further down the line.

This is without a doubt a problem that the Council will end up dealing with for many of the blocks. Whilst it is really good to see the Norfolk Street site, which was derelict for 3 years, being completed this will not happen for many of the blocks which are wasting and rusting away.

But my report also makes 7 key recommendations to ordinary punters like me:

  1. If it looks good to be true it probably is! High returns only ever follow from high risk. That risk needs to be fully evaluated.
  2. Research the developer. How many times have they been in financial difficulty, what their development track record or what other even more difficult things can you find out?
  3. Never pay more than 10% of a property before it reaches practical completion and never the remaining 90% (with appropriate hold backs for snagging) until you are about to get the keys.
  4. Visit the area and find out for yourself what the area and the market look like.
  5. Look at sites like Zoopla to see how many properties are on the market in the area and what the resale value is.
  6. Always use your own solicitor. It’s never a good idea to use a solicitor recommended by a developer.
  7. Always get your own valuations and market projection from someone that you employ.

My full report will be sent you as a PDF if you email me at richardkemp68@yahoo.co.uk

As ever I am interested in feed back about your thoughts on my thinking.

About richardkemp

Leader of the Liberal Democrats in Liverpool. Deputy Chair and Lib Dem Spokesperson on the LGA Community Wellbeing Board. Married to the lovely Cllr Erica Kemp CBE with three children and four grandchildren.
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