A report going to Brent Council's Wellbeing and Scrutiny Committee next week LINK reveals that blocks built in 2009 on the South Kilburn Estate by Higgins suffer from water penetration and cladding, fire safety and window issues. The blocks are known together as Granville New Homes.
The problems are so bad that demolition was one of the options considered. Brent Housing Partnership purchased the properties for £17.1m and the estimated cost of remediation works is £18.5m.
The report summarises the issues:
First Wave Housing (FWH) is one of the Council’s wholly owned housing companies. It is a registered provider with 326 properties. Of FWH’s 326 properties, 110 are located at Granville New Homes. These 110 properties comprise of 84 social rented properties, 25 intermediate rented properties, and one leaseholder.Granville New Homes is a residential development that completed in 2009. It was developed by the Council and Higgins. The Council’s Arms Length Management Organisation, Brent Housing Partnership (BHP), purchased the properties at a cost of £17.1m. This figure met the Council’s development costs and was funded via a loan from the Council. BHP also received 45 one bedroom market rented properties in order to cross subsidise the acquisition, as on its own, the purchase of Granville New Homes would not have been viable for BHP. Since 2009, the properties have been managed as part of BHP/now FWH’s portfolio.FWH commissioned a report from Ridge Consultants to investigate water penetration, cladding, fire safety and window issues at FWH’s Granville, Princess, and Canterbury blocks (otherwise known as Granville New Homes). Ridge have recommended that works be carried out at the blocks to remediate these issues. It is estimated that the cost of works will be £18.5m.
A report going to Cabinet on October 11th after Scrutiny has considered the issue set out the options that were rejected:
The Ridge report stated that the issues identified are not easily repairable in a way which will offer a guaranteed and satisfactory solution. On this basis, the only available option is to replace the facades, roof coverings and balcony waterproofing systems. These works include:
· Removing and replacing all cladding (both cementitious and brick effect panel) with non-combustible A1 or A2 fire rated materials;
· Stripping external façades and removing all external doors and windows;
· Providing new external doors and windows within a new panelised cladding system;
· Replacing insulation; and
· Stripping roofs and providing new roof coverings. 3.9 Including consultancy services, the waking-watch, the fire alarm system and contingency allowances, the estimated total cost of remediation works is circa £18.5m (including VAT). This figure includes £2m of contingency costs. If the remediation is carried out as outlined, the estimated completion date is September 2023. At present these costs are not affordable for FWH. It should be noted that the £18.5m is an estimated value from Ridge; until works are tendered and completed the actual cost will not be known.
The Cabinet Report suggests the following complex option to resolve the issue:
5.1 The recommended option is for FWH to dispose of the blocks to the Housing Revenue Account (HRA) and for the HRA to carry out remediation works as recommended in the Ridge report. There are nuances to this option in regards to how the transaction would be structured. These are detailed in section 6.
However, broadly, under this option:
· The transfer occurs at zero value as the blocks’ asset valuation of £12.5m is offset by the £15.4m of works required to the asset (the figure excludes VAT as this is reclaimable by the Council). The HRA as part of the Council will come
within the scope of public law principles. Therefore, it cannot act unlawfully or irrationally. Therefore, the HRA cannot pay a sum for the blocks.
· The HRA carries out the remediation works.
· The 84 social rented tenants would become secure Council tenants.
· The 25 intermediate rented tenants would be transferred to i4B under the recommended option; the HRA will recharge i4B for its proportion of the works.
· FWH’s loan for the blocks would be refinanced to a more affordable rate.
· As the transfer will formally be valued at zero value by the valuer no capital gains or SDLT costs are anticipated. As the transaction is a commercial transaction to support the ability of FWH to trade as a going concern, any tax
implications to the transfer are incidental and would be in accordance with General Anti avoidance Rules operated by HMRC. Tax advice from the Council’s tax advisors have confirmed this position.
5.2 The following assumptions have also been made:
· It is assumed the housing management function will be managed within existing staffing resources. There will be a reallocation of resource time and cost from FWH to the HRA to reflect the work associated with the transferred units.
· Rent inflation at 1.5% in line with CPI+1 and cost inflation at 2% per annum in line with Bank of England target rates.
· The cost assumptions in this report do not include estimates for decarbonisation works, as this is a known budget limitation across the sector.
· Further major works at £2,000 per property assumed from year 8 of the HRA Business Plan.
5.3 This option balances the cost between FWH, i4B, the Council’s General Fund and the HRA. It also offers the minimum disruption to residents in the blocks by offering the most rapid solution to addressing the remediation works required.
Furthermore, it is acknowledged that this is a reasonable way to achieve appropriate levels of different types of housing tenure in the borough.
Higgins and Brent Council celebrating the start of the current Stonebridge scheme in December 2020 (first published on Brent Council & Higgins' websites)
The elephant in the room is of course Brent Council's partner in the development Higgins and what their responsibility is regarding these very expensive defects. Higgins, who appear to go under various names - Higgins Partnership, Higgins Homes, Higgins Group, seem to be a favoured partner of the Council with a £22m contract for 73 council homes in Stonebridge signed last August and another South Kilburn development at Chippenham Gardens.
I am sure councillors on the Scrutiny Committee will be keen to find out more about the partnership and its future.
UPDATE - Comment from Wembley Matters contributor Philip Grant
First Wave Housing Ltd is the same company as Brent Housing Partnership
Ltd - there was simply a change of name in 2017. It's details on the
Companies House Beta website (Company No. 04533752) make for interesting
reading.
The Chairman of the company appears to be Martin Smith
(other details unknown), and other directors are Akintoye Durowoju (who
appears to be a Chartered Surveyor and Brent Council employee), two
senior Brent Officers, Phil Porter and Gail Tolley (although there is
conflicting evidence about whether one or both have resigned or are
still in post), and Councillor Saqib Butt (appointed in November 2020,
after the previous councillor directors George Crane - to September 2020
- and James Denselow - Sept. to November 2020 - had both resigned).
The
most recent accounts submitted are for the year to 31 March 2020. These
include a £1.1m increase in the value of its properties, based on
valuations by Jones Lang LaSalle. It will be interesting to see what
their valuation is at 31 March 2021!
The balance sheet shows net
assets of around £26.7m, but this includes a revaluation reserve of
£15.5m. The cash flow (profit or loss) for the year showed a deficit of
£264k.
There were loans of £36.8m from Brent Council, and the
accounts were prepared on a going concern basis, as 'The Council has
confirmed, in writing, of its intention for FWH to remain as a going
concern for at least twelve months from the date of approval of the
annual report and financial statements.' The financial statements were
approved on 29 September 2020!
With the loss of rental income
when a third of its properties are passed to Brent Council (and i4B),
and the value of its Granville New Homes properties written down to NIL,
but still with interest to pay on the loan from the Council to purchase those homes in 2009, there must be
some doubt over whether First Wave Housing Ltd can continue as a going
concern.
First Wave Housing Ltd outstanding £17.8m loan on Granville New Homes from the Companies House Charges Register
