But hints that it would have liked to help, if only the ‘existential threat’ of leasehold reforms were dropped …
The Tchenguiz organisation has said that the government should stop demanding that freeholders pay to remove Grenfell cladding from 272 private apartment blocks.
It is a “hollow threat and it knows it”, says William Kenneth ‘Bill’ Procter, the Tchenguiz organisation’s head of property.
“I find it not only strange but bizarre that government points the finger of moral responsibility at the freeholder rather than accept it itself,” he added.
Mr Procter, who appears in the Panama Papers in his own right, was writing as director of freehold owning entity Citistead Limited to the 57 leaseholders at the Northpoint site, in Bromley, in south east London. It was also copied to local MP Bob Neill.
Tower block residents ‘ill with stress’ over combustible cladding
Leaseholders at building in London face having to pay £70,000 each to make it safe
Here leaseholders in a small site face a bill of £4 million to remove cladding – £75,000 each – along with a sizeable sum for fire marshals (although some of this work is done by the residents themselves, paid the minimum wage).
Mr Procter dismisses the government’s claim that it has given new powers to local authorities – aired again in the Lords this week – to remove cladding and bill the freehold owners.
“I firmly believe that the recent announcement by government that they would force freeholders to pay for remediation is a hollow threat and it knows it.
“The powers they claim to have granted local authorities are not new, they have existed for many years. Local authorities will be very loathe to commit funds to remediate unless they are confident that they can obtain repayment, if they failed to do so, they themselves would be failing in their fiduciary responsibilities to their tax payers and their councillors would face personal penalties.
“They know, as does government, that it is highly unlikely that they will be able to achieve secure repayment from us because of the legal position.”
LKP is aware of five cases where the courts have ruled that the leaseholders are responsible for paying for the cladding removal costs, or for the waking watch fire marshals, or both. No court has ruled that the freeholder should pay anything at all.
Mr Procter’s correspondence was referenced by Inside Housing reporter Jack Simpson today:
Building owner describes government’s cladding removal plans as ‘hollow threat’
Inside Housing, news, analysis, and comment about the social housing sector in the UK.
Housing secretary James Brokenshire announced in November powers for local authorities to carry out remediation work and recover costs off freeholders. These were repeated on Monday in a Lords debate by Lord Nick Bourne, under-secretary in the Ministry of Housing, Communities and Local Government.
To date, only 29 private towers having completed remediation work, 69 where no plans are in place to remove the materials at all.
Northpoint is a former office block converted to residential in 1999 by Alfred McAlpine Homes, which was bought by Taylor Wimpey for £461m in 2001. Taylor Wimpey sold the freehold on Northpoint to Citistead Limited in 2007.
Citistead Limited earns around £7,000 in annual ground rents, which can reach £150pa.
In his email to the leaseholders, Mr Procter widens his argument to address the “very real existential threat” to the residential freehold sector posed by leasehold reforms. These endanger investments by insurance companies and pension funds.
“Given the above threat any voluntary act by freeholders to pay for the remediation of cladding, which in the case of Northpoint amounts to 4m pounds, would divert funds that would otherwise be available to offset these losses or be set aside to help repay the loans … “
Mr Procter added: “If we and the pension funds were to pay company funds to remediate cladding, then it not be fulfilling not only its moral but its legal responsibility to pensioners.”
A debenture arrangement ensures that the ground rent income of Tchenguiz residential freeholds is paid to the pension fund investor Rothesay Life, while the consent fee income is received by the Consensus Business Group.
The mortgagee charges to Rothesay Life on Citistead Limited can be seen here:
Mr Procter made the point that were residential freeholders not facing an “existential threat” through government reform to leasehold, they might be able to do more for cladding sites:
“What I also explained to you was that in the absence of the current extreme threat to the future of our industry, i am confident that the freeholders and lenders would go very much further to extend funds to leaseholders afflicted by cladding issues notwithstanding it has no legal responsibility to do so.
“I have engaged with government to explain all the above and proposed how it could make the cost of remediation cheaper. If there had been any inclination by government to engage with us, then I am sure that the resolution of the appalling place you find yourselves in would be have been greatly advanced if not resolved.
“I would emphasise that my dealings have not been with low or even middle level civil servants but with government ministers up to cabinet level.”
Mr Procter suggests that “the honest thing for government to do, in the knowledge that they will have to pay anyway, would be to expedite remediation by funding the works directly”.
Mr Procter references that even LKP, “a pressure group hostile to freeholders”, accepts that responsibility lies with government not freeholders. (In fact, LKP believes responsibility is either government or developers, not leaseholders or freeholders.)
Fresh building is to pay £100,000 for fire marshals … with more Grenfell bills to come
Brokenshire wrongly says freeholders have paid for Grenfell cladding removal
Although the government repeatedly states that freeholders have paid to remove Grenfell cladding from private sites, they have done so only where they have built the site. (The sole exception being Legal and General at the Hounslow Reflexion / Blenheim Centre, where L&G owns the shopping centre below and were in for a big bill in any case.)
At Northpoint, the position is complicated because Taylor Wimpey, which is paying to remove cladding at Glasgow Harbour and has supposedly “set a side” £30 million to deal with cladding, did not build the site but bought the company that did.
Inside Housing quotes Taylor Wimpey: “Taylor Wimpey does not have any ownership or legal responsibility for the building, and therefore the responsibility for the ACM cladding rests with the current freeholder.
“We are in ongoing dialogue with resident representatives and relevant third parties regarding the original conversion to the building relating to general fire safety, outside the scope of the ACM cladding remediation works.”
In addition to the cladding costs, a number of other fire safety issues have been found in the block, Inside Housing reports, including issues with non-compliant doors and fire stoppers.
Leaseholders have spoken to LKP of their misery of living in a dangerous building and having their lives on hold.
A number are desperate to sell owing to bereavement or work, but cannot: the resale market for Northpoint does not exist.
Some leaseholders are mitigating their likely losses by working shifts as fire marshals: one has carried out 1,775 hours of waking watch duties, while one retired resident carries out three night shifts a week from midnight to 7am.
Related posts:
Tchenguiz group says profiting from Grenfell cladding scandal would be ‘abhorrent’ and won’t happen
Brokenshire wrongly says freeholders have paid for Grenfell cladding removal
MHCLG ‘fundamentally flawed’ in expecting freeholders to pay for Grenfell cladding removal, LKP tells the FT
March 23: Cladding showdown begins, with Communities Select Committee questioning Tchenguiz group … and LKP
Grenfell cladding debate: Who thinks offshore freeholders will pay (apart from government ministers)?
Falling property prices expose pension exposure to equity release, warns LKP trustee
The whole cladding issue is a complete mess.
That said it is becoming more evident that freeholders are accepting(however reluctantly) that other parties are responsible for the cladding debacle .
A recent statement from Lendlease confirms that they are looking for third parties to resolve the cladding issue.
Even Adriatic Land put out a statement that “The company and property manager continue to take a proactive position, particularly in pursuing third party liability via developers and insurers to meet the cost of safety and remedial works.”
It is said that it has been established in court that residents are liable to pay for cladding works..
Actually what has been established at the FTT is the narrow question of the provisions of the lease that allow for freeholders costs to be recovered.
But the whole dynamic of the cladding issue could be changed, if it could be demonstrated in court that the cladding should never have been fitted?
On 5th April 1991 at Knowsley Heights, Manchester, a rapid fire spread via the decorative cladding.
11th June 19991 Garnock Court, Irvine suffered a fatal fire caused by a dropped cigarette butt.
Again as at Knowsley Court, fire was rapidly spread by the decorative cladding.
As a result of the Garnock Court ,fire, North Ayrshire council ordered the removal of all cladding from their blocks.
In January 2000,a Scottish Select Committee report into the fire led to the Building(Scotland) Act 2003 which in turn introduced the Building (Scotland) Regulations 2004, which came into force on 1st May 2005.
This act includes the mandatory regulation:
Every building must be designed and constructed in such a way that in the event of a fire within the building or from an external source the spread of fire on the external walls must be inhibited.
The safety of cladding was also raised by The Environment select Committee in Parliament in 2003.
Other serious fires involving cladding include buildings in Dubai,, Shanghai,Beijing and Melbourne..
So if the question is asked, as to why cladding was ever fitted, despite the wealth of evidence pointing to the dangers of the cladding, that surely must transfer liability to developers/insurers/enforcement agencies.
Surely, they must have been in a position to know, or ought to have known of the inherent dangers of fitting cladding?
And if this can be demonstrated in a court, that surely would take the liability away from leaseholders and freeholders?
Michael the whole cladding issue is a complete mess as you posted and whilst I agree that some Freeholders accept their responsibility, other Companies have allowed this debacle.
Third Parties such as Governments Local Authority – Planning Department – Building Control – Architects – Building Contractors – Sub Contractors – Material Manufactures – Designers, all have had an input, but not the Leaseholds,
Planning Approval
Building Control Consent
Designs for the Cladding
Build the Flats/Refurbish
Provide Cladding Expertise
Manufacture the Cladding
The Freeholders are responsible for all the above, they also have Insurance Companies who are paid to Insure so why have The Freeholders picked on the Little Leaseholders who because they purchased a Lease that included a simply clause.
I believe the Courts right up to the Supreme Court will fight this out over the next how many years and decide that the clause was never meant to cover the mistakes or criminal behaviour by either the Freeholder or Landlord including the Managing Agent.
Cladding that was not Fire Proof as expected, along with Poor Design allowed by the LA or Private Building Controls – Approved Inspectors, and Builders who ONLY followed plans/drawings.
Where in any of these Companies or Organisation above mentioned is the Leaseholder mentioned???
The Whipping Boys have been resurrected by Freeholders.
I DONT THINK SO – DO YOU???
Further to my last posting another issue has come to light thanks to the Guardian Newspaper as follows:-
The Guardian – 29/04/2018 By Robert Booth & Frankie Crosley
The former deputy leader of Westminster City Council Robert Davis is being investigated over links to property companies. Almost one in 10 Councillors in London either work for property businesses or have received gifts or hospitality from them, a Guardian investigation into the depth of links between town halls and the property industry has revealed.
Nearly 100 councillors in the capital work for property companies or lobbying and communications consultancies involved in planning, according to declarations of interest made by elected representatives. Some of them also sit on planning committees making decisions over major developments, including volumes of affordable housing.
Is this not another reason that Leasehold Reform has failed on so many fronts.
Surely it is the responsibility of developers/planners/surveyors/enforcement agencies to know that the cladding fitted had already been proven to be dangerous?
And what of cladding that had been approved and then substituted for a lower specification cladding?
These issues are the ones that should be pursued through the criminal courts.
Perhaps it is the knowledge of this that has “encouraged” some developers to take responsibility for cladding rectification.
Whist Bill Proctor hints that more assistance could be given provided proposals for the future of leasehold were watered down, I remind him that even as I write this post, there are people living in blocks with the lethal cladding that his company own the freeholds for, could be burning or choking to death.
And for what reason?
Because Bill Proctor’s priority is to service pension fund loans.
Thanks LKP and comenters for these many articles and insights about the cladding issues. What a mess. Tragic for those locked in.
Dear Bill Proctor,
If you were truly concerned about the safety of those living in blocks with the unsafe cladding that you own I have a suggestion?
How about using some of the £16,000,000 post balance sheet dividend declared by Estates & Management payable to Fairhold Services, despite E&M’s trading profits falling?’
Off (specific) topic – In November last year, despite having a virtual freehold (999 year lease) and a fixed ground rent of £35 per year, I decided to go ahead and purchase the freehold of my bungalow. I asked Sebastian for suitable solicitor and he duly supplied one.
My appointed solicitor discovered (from land registry documents) that the outfit I pay ground rent to and who had quoted me a figure for purchase of the freehold, didn’t in fact own the freehold -. they had the head lease. This was pointed out to them, but they insisted they owned the freehold. After investigations within, they came back and acknowledged that, indeed, they only had the head lease, someone else owned the freehold.
This is where my intended purchase of the freehold began to unwind. I had negotiated a reasonable figure for purchase of the freehold which turned out to be the head lease. Still an acceptable amount (for the head lease) as my solicitor told me the freehold without a head rent – and this was likely – meant I would only be paying minimal expenses to freeholder for the freehold.
It turned out that the managers for the freeholder are Estates and Management, notoriously slow and uncooperative/obstructive even. My solicitor told me it was possible that her fees to me would likely double as the statutory process might have to be followed. Further, she suggested that a costly court process might even be likely, “this expense would be recoverable”, she added.
This was the point when I abandoned the intended purchase of my freehold, I cut my losses. What the hell, I have “virtual freehold”, and I can live with paying the fixed ground rent of £35 per year. But what really concerns me is the home owners(?) with escalating ground rents who would no doubt face similar – almost certainly greater – problems quite simply because the system is loaded against ordinary people .
Leasehold must be abolished -and with retrospection, that is all that needs to be said.
Bill Proctor,
Referring to the Law Commission and MHCLG report into leasehold in your notes to the accounts of Fairhold Services (of which you are the director that signed off the accounts) you write that proposed changes “Would be very damaging to the residential property market and against the interests of consumers and other property owners”
How so?
I note Vincent Tchenguiz says that “Proposed changes to leasehold could lead to consequences ranging from higher home prices and bad property management to pension funds being forced to write down loans”
So Mr Tchenguiz, Peverel was a bastion of good property management was it?
And the Parliamentary Early Day Motions concerning your stewardship of freehold properties were a figment of the imagination?