March 23: Cladding showdown begins, with Communities Select Committee questioning Tchenguiz group ... and LKP

The Communities Select Committee begins its investigation into the cladding scandal, taking evidence on March 23 from LKP, the UK Cladding Action Group and the usually taciturn Vincent Tchenguiz organisation.

The committee’s inquiry last year into the leasehold houses and ground rent scandals was a game-changer, that prompted last month’s outstanding mis-selling investigation by the Competition and Markets Authority.

Michael Gaston, managing director of Estates and Management which administers the Tchenguiz freeholds, will give evidence to the committee, which is still chaired by Clive Betts MP but with many new MPs in this session.

Martin Boyd, the LKP chair who has organised all the Westminster meetings over the cladding scandal, will be speaking, as will Ritu Saha of UKCAG, who so powerfully addressed MPs and demonstrators outside Parliament on February 25.

But it will be curious to see what the Tchenguiz organisation – ultimately owned by the Tchenguiz Family Trust in the British Virgin Islands – feels it can contribute to the cladding scandal debate.

Its freehold owning vehicle Citistead Limited owns the freehold of Northpoint, in Bromley, the site where Ms Saha lives, where 57 lease owners faces bills in excess of £4 million.

But the site is managed by a residents management company.

The Tchenguiz group only receives £7,000pa in ground rents from the site, and these are immediately passed to the Goldman Sach’s founded pension’s investor Rothesay Life, which has a debenture on the ground rent income of the Tchenguiz freeholds. (Goldman Sachs no longer has a stake in Rothesay.)

With no management fees or insurance commissions, the Tchenguiz group may only make a few hundred pounds a year from Northpoint.

Tchenguiz group dismisses government ‘hollow threat’ to make freeholders pay for Grenfell cladding removal

In January last year, Bill Procter, the head of Tchenguiz’s Consensus Business Group, dismissed government pressure that freeholders “do the decent thing” and pay to remediate cladding buildings as “a hollow threat and it knows it”.

In correspondence copied to local Conservative MP Bob Neil, Mr Procter also referenced an “existential threat” to the sector posed by leasehold reform.

Warming to his topic, Mr Procter suggested that funds could not be diverted to pay to remove cladding without harming the interests of pensioners dependent on Rothesay Life – a far fetched proposition that no one has suggested and which Rothesay Life, which has no legal liability whatsoever, would dismiss out of hand.

That aside, questions to a deregulated pensions investor and its involvement in ground rents have been asked by LKP trustee Dr Dean Buckner, an economist formerly of the Prudential Regulation Authority which polices pensions, and indeed the courts:

Would you want your former Prudential pension invested in Tchenguiz ground rents by Rothesay Life? FT reports concerns

Another cladding site where the Tchenguiz goup owns the freehold is Citiscape in Croydon, which has been evacuated owing to building flaws. The housebuilder Barratt is carrying out the work, even though the site was completed 20 years ago and it has no legal involvement in it whatsoever.

The freehold owning company here is Proxima GR, but the site has a tripartite lease with the property manageemnt company FirstPort – which as Peverel was a jewel in Mr Tchenguiz’s empire – owns the management company in perpetuity.

Again, Proxima GR’s ground rents go to Rothesay Life and the Tchenguiz involvement is minimal – beyond heading off to court to establish that leaseholders and not the freeholder – or management company pay to remove cladding.

LKP has always praised Barratt for is corporate social responsibilty for stepping in at Citiscape, even though it was not legally obliged to do so.

LKP and leaseholders will be hoping that the Communities Select Committee report into the cladding scandal will be as devastating as its inquiry last year into leasehold mis-selling and doubling ground rents.