UPDATED: Cost of putting Granville New Homes right rises to £25m. Brent Council purchased them for £17.1m

 

Tucked away in the Housing Management Update tabled for next Thrsday's Scrutiny and Wellbeing Committee is the above paragraph, devoid of context.

Granville New Homes were built via  partnership between Higgins and Brent Council in 2009, and purchased by Brent Council for £17.1m.

In 2021 mounting defects led to the independent Ridge report that put the costs of remediation at c£13.5m:

 

 

Philip Grant queried a report to Scrutiny in October 2021  that put the costs of remediation at £18.5m and Debra Norman replied for Brent Council LINK:

 

As you point out, page 26 of the Ridge Report gives the cost estimates as totalling £13,645,000 but the Cabinet, ASAC and Scrutiny reports refer to estimated costs of £18.5m.  You query why this is and whether there is a second specialist report on fire safety issues which accounts for the difference.

 

 

This figure of £13,645,000 is included in the £18.5m referred to in the reports.  As set out in paragraph 3.9 of the Cabinet report, that higher figure also includes the cost of fire safety work already undertaken and paid for by FWH, e.g. the waking watch over the premises and a new fire alarm system, and a contingency figure.  In addition, paragraph 3.9 make clear that the total figure is inclusive of VAT, which FWH and I4B, unlike the council, would be required to pay.  The final sentence of 3.9 should have read that the £18.5m is “based on” an estimated value from Ridge, but in the overall context of the paragraph I think the position was clear.

Brent Council had rejected various options to address the problems including a rebuild.

 Instead they settled for a complex financial arrangement with FWH (First Wave Housing) disposing of the blocks to the Council's Housing Revenue account. LINK

The Extraordinary Scrutiny Committee of October 2021 asked some tough questions, not least Ketan Sheth's on why Higgins was still being offered contracts by the Council after its Granville New Homes failure,. With superb irony Higgins having been involved with building a block that needed £13.5m/£18.5m remediation was awarded the remediation countract, for another faulty block, Merle Court.

The Committee were told that the amount of time that had passed since 2009 meant the Council were not likely to succeed in any settlement claim against Higgins. I believe that changes in the law about time limits means that is no longer the case and there are reports that the Council may be in tlaks with Higgins.

Certainly that is something that Scrutiny should take up with the Council as well as the failure to complete the works by October 2023 as first forecast and of course the rise of costs to £25m which with the original purchase price of £17.1m brings the total to c£42m. It would also be useful to know if the bald £25m is the end of the story or other costs will need to be added as in Debra Norman's response.

It may be instructive for Scrutiny Committee members to revisit the Minutes of their October 2021 meeting. Here is an extract:

The Committee queried whether the Council, as Guarantor of FWH, had chosen to challenge FWH on the issues. Minesh Patel advised that the Council’s role as a Guarantor was to meet with the Board of FWH on a regular basis to go through Key Performance Indicators and understand how the Company was running. The Guarantor had not been made aware of any issues prior to the final Ridge report.

Hakeem Osinaike (Operational Director Housing, Brent Council) advised that the properties were managed by Brent Housing Management (BHM) on behalf of FWH, and they had managed the repairs in those blocks up until the inspection. He advised that it was in rectifying the fire safety issues a decision was taken to rectify any other issues as well.

The Committee noted that Higgins had been appointed to design and build the blocks in 2009, and had heard from residents and staff that there had been problems with the blocks since they were built. They queried what legal action against Higgins, as the contractor, had been pursued, considering the roofs had been previously replaced when FWH took over the building. Peter Gadsdon confirmed that BHP had replaced one of the roofs before FWH took over, and once FWH had taken over they had done works on water ingress issues and had planned to replace all roofs over time as part of previously published business plans for the Company, with an original cost estimate of £2m – 2.5m. With regard to any legal action taken, Peter Gadsdon advised that the records showed the building had been signed off and handed to the Council, but he was unable to comment on anything before 2017 when FWH took over the buildings. He advised that FWH had not had any conversations with Higgins regarding the defects which they were made aware of in May 2021. Legal advice was previously sought about whether there was any chance of redress but due to the passage of time were advised it was unlikely. The Board’s priority was to ensure the properties were repaired back to safety.

Continuing to discuss the contract with Higgins, the Board queried why the Council were not communicating with them on this considering they were current contractors on other blocks being built. They queried whether there was a risk of this happening in other blocks that had been built or were being built. Minesh Patel advised that he did not have the details on the construction contracts with Higgins as that was a procurement process, but nothing had been brought to his attention that there were any concerns on any of the blocks Higgins had worked on.

Councillor Southwood advised that the contractor had been awarded work by the Council through a procurement process without prejudice, the specification of which would have applied modern building control and expectations to whatever they built, and which would include monitoring on the delivery of their contracts. From a FWH perspective it was highly unlikely any other stock would have these issues as Granville New Homes were the only medium rise buildings in the assets. Peter Gadsdon added that, like the Council, FWH and i4B commissioned stock condition surveys and had Fire Risk Assessments in place and there were no issues in that regard. Councillor Southwood agreed to provide written assurances to the Committee that there was no issues in any of the blocks Higgins had worked on, and further information on the procurement process such as whether past performance of a contractor was considered before awarding a contract.

 

Philip Grant adds:

 

 

Another interesting sideline on Granville New Homes is that Brent Council is supposed to have acquired Granville New Homes (for its Housing Revenue Account) from First Wave Housing Ltd for £0 in early 2021. [That should probably say early 2022]

This was part of a refinancing arrangement that would reduce the interest payable on the £17.8m loan Brent had made to Brent Housing Partnership Ltd (as it was then called) to buy Granville New Homes from Higgins (or to pay them for building the four blocks).

It appears that the £17.8m loan is still outstanding, but according to the Charges Register in the Companies House records for First Wave Housing Ltd (as at today, 16 November 2023), that loan is still secured on a property known as Granville New Homes!

How can a loan be "secured" by a 'Fixed Charge over land known as Granville New Homes, Granville Road, South Kilburn, London NW6 0JJ', when First Wave Housing Ltd no longer owns that property?

And another odd thing from the Companies House records. Despite owing Brent Council £17.8m on a loan for a property it no longer owns, as at 31 March 2023, First Wave Housing Ltd had £11,028,334 in its bank account, up from £4,231,167 at 31 March 2022. What is going on?

Perhaps the Community & Wellbeing Scrutiny Committee should be asking Peter Gadsdon, Corporate Director of Resident Services, about that, when he makes his Report to its meeting next week. He should know the answers, because he is also a Director of, and Company Secretary of, First Wave Housing Ltd (a company wholly owned by Brent Council, but a separate legal entity from the Council).

LINK TO FIXED CHARGE CERTIFICATE