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.
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:
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.
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.)
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.