Liverpool Council has lost a minimum of £1.8million on a home refurbishment project off Smithdown Road.
In June the ECHO reported that the council had spent millions of pounds on refurbishing 25 terraced houses on Tunstall Street in south Liverpool. The procurement process to refurbish the terraced homes was awarded to local builders Flanagan Building and Maintenance Services Ltd.
A cabinet report has now revealed the council spent around £5,084,00 on the project. The local authority has now agreed to sell the refurbished homes to Pine Court Housing Association for £3.2m, and faces a loss of around £1.8m.
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The same report also reveals that the council is paying around £7,000 per week to pay for Carlisle Security to monitor the site. The document states that Tunstall Street is blighted by anti-social behaviour, fly-tipping and other enforcement issues.
The report, which estimates security to cost a total of £200,00, states: "Enhanced security has been put in place to ensure the houses are protected and the Council’s investment safeguarded until they are sold. It should be noted that security is presently costing the Council in excess of £7,000/week and although this is budgeted for until the end of September, it is financially prudent that the houses are disposed of at the earliest opportunity to remove this financial cost and create a capital receipt."
The report also reveals the council was in dispute with the Flanagan company over defects in their work worth around £30,000.
The report reads: "Following a detailed inspection of the houses, defects totalling c. £30,000 have been identified by the Council. The contractor has been advised of the works together with the costs and asked to remedy the defects. Should they refuse to undertake the works under the contract the Council has the right to appoint a third party to carry out them out."
The report states that Home England agreed to help fund the council's purchase of 1-65 Tunstall Street. Homes from 25-33 had to be demolished for structural issues.
The report reveals that the homes bought with the assistance of Homes England funding are now subject to a legal restriction, which complicates their sale.
Homes England are also entitled to a share of the sale, but that share has not been revealed to the public. The council is currently negotiating with Homes England with respect to the legal restrictions and the share of the sales money.
The report states: "Under the funding agreement the Council is contractually required to share any sales income with Homes England in accordance with the formula set out in the agreement. Where there is disagreement on the calculations both parties shall refer the dispute to an independent accountant."
Richard Kemp, leader of Liverpool's Liberal Democrats, said: "This is yet another example of the completely inability of our Labour controlled council to properly undertake regeneration schemes.
"We know that this deal has cost us at least £1.9 million on the sale price and up to £150,000 for security whilst we have waited for building defects to be rectified. We may lose more because there are repayment issues with Homes England and they might want a cut of the sales price.
"Who in their right mind would spend £225,500 on a property that would, at best only be worth £139,000 when complete. These properties could have been demolished and ones built at this sort of price.
"We have called this item in for further explanation and to seek assurances that mistakes like this which will have lost council taxpayers between £2m to £3m will not be repeated"
Steve Radford, leader of the city's Liberal Party, said: "To develop a site for in excess of £5m and then sell it for little more than 3.2 million displays incompetence in valuation and project management.
"I hope those responsible have been dismissed but I doubt it with this cabinet of chaos."
Last week's cabinet approved recommendations to sell the homes to Pine Court Housing Association subject to a premium of £3,200,000, and for the Interim Strategic Director for City Development to negotiate and settle with Homes England.
A council spokesman said that the Strategic Development and Housing Select Committee recommended that the report on Tunstall Street be sent be back to cabinet on September 23 for a final decision.
The ECHO approached The Flanagan Group for comment.
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