Inside Croydon’s editor, STEVEN DOWNES, reports on the latest massive set-back to the council’s loss-making house-builder
Brick by Brick, Croydon Council’s controversial in-house house-builder, has been forced to suspend all sales of shared ownership homes. The delay in selling the apartments under shared ownership schemes could last at least six months, perhaps as long as a year.
Dozens of prospective buyers have had to be put-off or disappointed after it was discovered that banks and building societies will not provide mortgages under shared ownership schemes on Brick by Brick properties because the company is not recognised as a “registered provider” of shared ownership properties.
Even a modest estimate suggests that the delays could affect properties worth more than £20million.
Brick by Brick was the brainchild of Jo Negrini, now the council’s £220,000 per year chief executive, and her sidekick Colm Lacey, with the enthusiastic backing of the Labour council’s political leaders Tony Newman and Alison Butler, who is the council cabinet member responsible for housing.
Brick by Brick was registered at Companies House five years ago, in 2015, but it was only in 2019 that it completed its first new builds, the majority of which are being sold on the private market.
Building on council-owned sites – sold by the council at vastly reduced values – and financed with £262million borrowed from the Treasury by Croydon Council and then loaned on to the company, half of the new homes Brick by Brick builds are supposed to be “affordable”.
So far, after five years, Brick by Brick has managed to complete just three one-bed flats for social rent.
The majority of its provision of “affordable” homes were supposed to be available through shared ownership, though it appears that Lacey, who has subsequently transferred off the council staff and now glories in the title of “chief executive” of Brick by Brick, forgot to do the paperwork to get his company recognised as a registered provider of shared ownership properties.
According to Brick by Brick’s own website, it is offering 24 shared ownership apartments in Flora Court, Thornton Heath, it has another 13 on offer in its development in Auckland Risse and Sylvan Hill in Upper Norwood (with one shared ownership home listed as “reserved”), while “coming soon” are 29 apartments in Longheath Gardens, near South Norwood Country Park.
One young couple looking to move into their first home in Croydon, but who have been left high and dry because they cannot finance the purchase through no fault of their own, told Inside Croydon: “We’re just annoyed because they are still advertising while potential buyers now are left in limbo having paid reservation and mortgage fees and such like.
“Now we’re being told that the wait could be 12 months.”
The first distress signals were sent out just before Christmas, shortly after Butler and the council were trumpeting the great success of Flora Court’s completion – nearly a year later than scheduled.
The shared ownership flats in Flora Court were aimed squarely at first-time buyers, and were described in the marketing materials as “stylish”.
Potential part-owners would be expected to take out a mortgage for £78,750 for a quarter share of a one-bed flat, which at full price would cost £315,000. They would then be expected to pay the mortgage, plus £700 per month in rent and service charges for the three-quarters of their flat that they wouldn’t own.
“Council welcomes first 100% affordable Brick by Brick development” it boasted on the council website – without realising that BxB had never registered to sell property under shared ownership schemes.
On December 18, the Brick by Brick sales team sent out an email to potential buyers wanting shared ownership properties.
“Following the recent handover of our first lot of shared ownership homes, it has been flagged that a number of lenders are not satisfied with Brick by Brick as a private provider of shared ownership, and whilst we have demonstrated our intentions to operate and abide by regulatory standards specific to shared ownership, it has been advised that we become a registered,” the email said.
“Although the necessary steps towards meeting this obligation are being made, all shared ownership related sales will now need to go on hold until complete. This however is not a straight forward process and can take up to six months.
“Our legal team are doing all they can to resolve this issue and are currently exploring an interim solution in which could have you in the property a lot sooner. This we are hoping to be updated on following Christmas which once confirmed, you will be notified immediately on.
“We sincerely apologise for the inconvenience this may cause you and will in touch as soon as we receive further update from our legal team.”
The post-Christmas update was duly sent out by a senior member of the sales team on Thursday this week. It was not good news.
“It has been confirmed that whilst we are not a registered provider, the opportunity to sell any shared ownership is very limited and only at the discretion of your lender,” Brick by Brick told their out-of-pocket and increasingly angry potential customers.
“We have now initiated the process to meet this requirement, however have been advised that it could take anywhere between six and 12 months.
“In addition to securing [registered provider] status, our priority is [to] manage the expectations of all purchasers and therefore would like to reassure you that we are doing our upmost [sic] best to not only accelerate this process, but also put in place an interim solution.
“One of these solutions entail a renting to buy concept at a subsidised rate, subject to BBB obtaining [registered provider] status. This, our legal team are working on, however as you can appreciate is not as simple as it may sound and therefore unable to provide either confirmation or an indication of timing.
“We are hoping to have further clarity on this next week which as and when we do, will send another update to you immediately.”
As well as being hugely disappointing for the eager house-hunters, the delay in being able to sell the properties – two-bed shared ownership flats in Upper Norwood are being marketed for nearly half a million pounds each – will put a massive dent in Brick by Brick’s already stagnant cashflow.
Lacey was boasting to trade journals last September that the company will be make its first profit in 2020. Unable to sell any shared ownership flats for at least six months, that must now be in serious doubt.
The delays in the sales while Brick by Brick completes its regulatory requirements – which might have been done any time in the past five years – is also likely to destroy the house-builders attempts of delivering on its promise that 50 per cent of its builds will be “affordable”.
It will be interesting to see how Butler, Negrini and Lacey try to spin Brick by Brick’s latest expensive disaster – they went at least £11million overbudget on the incomplete and unfinished refurbishment of the Fairfield Halls – to their various partners involved in the shared ownership schemes, one of whom is the Mayor of London.
- Shared ownership is an unaffordable joke
- A level of ineptitude which would be tolerated no where else
- Butler: We’ll let Brick by Brick build on all under-utilised spaces
- Croydon’s Brick by Brick model is well and truly broken
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