A scrutiny panel for Liverpool City Council has outlined a national blueprint to strengthen regulations for development schemes amid a number of high profile failures. Tony McDonough reports
Liverpool is to push the Government for more powers over property development schemes in the city following the collapse of a number of high profile projects.
A scrutiny panel for Liverpool City Council has outlined a national blueprint to strengthen regulations for development schemes with a bid for a good practice pilot to be launched in the city.
In recent years Liverpool has seen a ‘Gold Rush’ of speculative residential developments. A number have been delivered successfully but there have also been high-profile failures such as the £200m New Chinatown development.
Of particular concern has been the use of what is called the fractional sales model, where deposits from often small investors are used to fund the development with the promise of generous returns upon completion.
Again, there are developers, such as Legacie Developments, who have used the model to deliver successful residential schemes. However, there are others where small investor, often from the Far East, have lost out. Added to that is the unsightly half-finished projects that can blight the city.
Last month a trio of residential developers, Legacie, Romal Capital and Mersey Regeneration, backed the idea of a panel that would oversee proposed new developments in Liverpool.
However, as things stand, the council has too few powers to scrutinise proposed schemes. Its planning committee has limited scope to refuse planning consent if a project complies with planning law, regardless of the reputation or background of the developer.
The scrutiny panel, led by Cllr Jane Corbett, was established to look at what kind of powers the authority would need to provide proper oversight of major schemes. It also aims to improve the public’s understanding of developments and how they take place.
Following a series of interviews with experts in the planning, financial, legal and construction industry, the Fractional Investment Scrutiny Panel has now tabled their report to the council’s Regeneration Select Committee which meets virtually next Wednesday (August 12).
It has made a total of 11 recommendations for the city council to consider, some of which include lobbying national government for a change in planning law as well as a call for more financial details to be recorded for company directors.
In a bid to protect the public from potential fraudulent schemes, another key measure includes a cooling off period for people looking to invest their savings in developments and for a new code of conduct for legal practices to make a greater emphasis on investment risks. It is also proposed that the legal sector publicise actions taken against solicitors who fail to meet the new code.
And in an attempt to address the issue of construction quality standards, the panel is asking that the Government give the green light to a three-year pilot in which the council leads a steering group which is given special oversight over all developments – including those which have appointed a private approved inspector.
This pilot would also be accompanied by a special working group that will trial an integrated planning, development and regeneration process with a report on its findings to be made public at its completion.
Cllr Corbett said: “These recommendations would create a huge step in providing greater protection and understanding around the risks of investing in development schemes. It’s a strange world where people have more protection buying a coat or a meal than investing their life-savings into plans for a property.
“This lack of clarity and understanding has meant communities around UK have been scarred by a litany of failed schemes, some of which are connected to criminal activity. This report will, I hope, help those who seek to invest in property developments and also by promoting good practice will lead to schemes which ensure more sustainable neighbourhoods.
“The world of property development is at best vague to a great many people, and requires a lot of trust from the investor that they are receiving the best possible legal and financial advice. Unfortunately our investigations have shown there to be a distinct lack of clarity on the financial risks people are taking and that has enabled some less than reputable people to take advantage.
The recommendations of the Fractional Investment Scrutiny Panel, some of which will require endorsement from the council’s cabinet, are:
1. Development of a Fractional Investment FAQ Document
The frequently asked question (FAQ) document would relate to potential investment in all proposed, and existing, developments within Liverpool. The FAQ would include key advice and warnings on the risks of any commercial investment, key contacts and clarity on the role of the council. To be approved by Cabinet by 31 October 2020.
2. Production of Development Process Diagram
This diagram would illustrate the process of concept to development completion and would be produced in tandem with the FAQ Document.
3. Endorsement Code of Practice
A Code of Practice is recommended for all Elected Representatives and Officers in relation to invitations from developers, contractors and investors to meet, sponsor and/or represent the Council, the City, or the Mayor, including at events (locally, nationally and internationally). To be drafted by 31 October with a view to completion by 31 December, following a consultation.
4. City Council Due Diligence Policy Update
To revise and reviews the council’s ‘Due Diligence’ Policy to ensure a range of requirements are addressed regarding financial and legal backgrounds of potential developers and for clarity on how proposed development meets the council’s City Plan, Housing Strategy, Economic Strategy, Financial Strategy and other relevant current and emerging policies; This update also includes the call to report fractional developments (where known) to the Landlord Licensing team and for the council’s Due Diligence Working Group to provide their feedback to this report by 31 October.
5. Approval process for disposals of Council land to developers
The Panel recommends that all sales are to be reported to the Regeneration Select Committee, with a review of delegated powers to ensure transparency and scrutiny, with land disposals linked to the City Plan and overall Housing Strategy. To be introduced by October 31.
6. Reporting of costs connection with third party failed/stalled developments
The Panel recommends that the cost to the Council, the Health & Safety Executive (HSE), and Merseyside Fire and Rescue Service (MFRS), of any work, actions, penalties and outstanding bills resulting from failed/failing/stalled developments in Liverpool during the period 2015/16 to 2019/20) be calculated. The panel also call for the drawing up of proposals regarding cost recovery, lessons learned and suggested actions both for the scheme/s concerned and for future application, placing their recommendations before the Cabinet for their full consideration.
7. Companies House & the Charity Commission Processes
The Panel recommends that the City Council write formally to Companies House and the Charity Commission asking them to consider introducing a requirement that all Company Directors and all Trustees of Charitable Organisations (new and those already registered) should be required to provide their National Insurance Number, to be held securely and in confidence, alongside their full name, date of birth and residential and business address.
8. Sharing of best practice between Professional & Accrediting Bodies
The Panel recommends that professional bodies associated with developers, development and the letting of units within developments in Liverpool work together collaboratively, committing to meet twice a year in Liverpool. This group would then report to the Council’s Chief Executive, Section 151 Officer and Monitoring Officer and inform the production of a Joint Annual Report to be considered at a special joint meeting of the Regeneration Select Committee and Audit & Governance Select Committee.
9. Solicitors Regulatory Authority (SRA) & Professional Bodies – Guidance & Practice Advice
The Panel recommends that professional bodies and in particular the SRA to consider a series of measures to enhance messaging around the risks of investing in commercial developments, with a cooling off period for investors, and suggesting disciplinary action be taken against practitioners who fall below an acceptable standard and publishing that action.
10. Local Authority Building Control Oversight
Government be requested to set up and fund a 3 year pilot project in Liverpool to allow the Council to be given specific powers to include as part of the Planning Conditions, inspection of development sites that have chosen private approved inspectors. The results of which to be shared locally and nationally.
Legislation associated with both Trading Standards and Consumer Protection to also be reviewed and that Government allow for a statutory cooling–off period for the benefit of consumer investors be put in place, responding to the impact of misleading marketing, loss of investment and poor standards of build.
11. Trial of Integrated Planning, Development & Regeneration Process Model
A special cross-sector working group be established and that Government be requested to grant specific and relevant powers and devolved funding to trial an integrated planning, development and regeneration process. The Special Working Group, developers and pilot will be guided by Blueprint for Better Business principles already embedded within the Council’s Fair City Policy, Inclusive Growth Plan and the emerging City Plan.