Brick by Brick – Croydon council’s failed wholly-owned housing company – have sold the Red Clover Gardens development in Coulsdon to Regen Capital for £38 million.
How much Brick by Brick – or Croydon council – paid to build and / or acquire the development is not stated in the Croydon council press release announcing the sale.
But the release states: “The sale of Red Clover Gardens is the last major milestone before the council take steps to prepare Brick by Brick for solvent liquidation, as agreed at cabinet in February 2024.
“This transaction will enhance social housing availability in the borough, providing 85 homes for social rent and 72 private sale/rents.
“The properties, located in Lion Green Road, address the pressing need for social housing. “By increasing the available social homes from 79 to 85, the development aims to meet the high demand for affordable housing support.
“Regen Capital have acquired the freehold of the development.
“But the council will retain a long lease for the 85 social rented homes, sub-letting them to a housing association. “This arrangement ensures that these homes remain dedicated to social housing.
“Croydon council will retain 100 per cent nomination rights, which means the council can nominate residents from its housing waiting list for the homes. “This helps to provide homes for those in need while also reducing costs for temporary housing.
Regen Capital will either rent or sell the 72 private homes.
- In Croydon council’s own words: Brick by Brick was set up in 2016 to build new homes in the borough and deliver dividends to the council. Brick by Brick’s estimated losses of around £62 million have contributed to the council’s general fund debt, and the council took the decision in 2021 to stop any new projects being delivered by the company. (Source: Croydon.gov newsroom)
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A report to Croydon council’s cabinet meeting of February 14th this year includes the following:
1.1: This will be the final report to cabinet which requests the decision to formally begin the process of winding down Brick by Brick Croydon Ltd. This report updates Cabinet on the final expected write off position and discusses a range of options that have been
considered by the Council to achieve the most effective winddown.
1.2 Brick by Brick delivered a total of 751 residential units of which 385 have been affordable units and 366 have been private, this has come at considerable cost to the council and residents. The council have not received any dividend returns from the company, which was one of the intended aims.
Instead, the council will have no choice but to write off a large loan balance and fund the write off from its own budgets following
the non-repayment of debt by BBB. The wider impact of BBB poor performance has impacted badly on the reputation of the council and also highlighted the shortcomings in the governance of BBB by the then council administration. All of these factors and costs have contributed to the £1.3billion debt position which the council now finds itself.
1.3 In September 2014 Cabinet agreed to set up a wholly council owned housing company (BBB), with the aim to address the severe shortage of homes in Croydon and increase the supply of affordable homes.
1.4 In February 2021, on the back of the council’s significant financial and operational challenges, which eventually led to a Section 114 notice being issued, the council decided to cease any new activity within BBB and allow the company to build out 23 of 29 sites in its ownership and return the other six sites back to the council.
1.5 BBB have now completed the development of the 23 sites and four of the six sites have so far been purchased back by the council. With no new activity and immaterial assets and liabilities remaining within the company the council are now in a position to wind down the Company. BBB are currently insolvent but are supported by the Letter of Comfort issued by the council as shareholder. As part of the closure of BBB the council and BBB Board aim to wind down the entity on a solvent basis and this will be subject to the final debt write off position.
1.6 The company repaid loans to the council totalling £47.3m in 2022/23. This is in addition to the £30.4m which was repaid in 2021/22. The outstanding loan balance as at the end of March 2023 was £103.93m and all accrued interest has now been paid back to the council.
The net effect of these repayments will be to leave the council in a position of having to write off some of the loans made to BBB estimated between £62m and £68m. The exact final amount will be dependent on the final date
of the winddown and asset disposals.
1.7 The impact on the council’s financial position will not be as severe as it might have been due to the council making prudent provision within its accounts of charging the full Minimum Revenue Provision (MRP) on the loans to BBB…..
…..5.2 BBB’s significant work currently includes supporting the sale of the Red Clover Gardens site and deal with a number of defect queries coming through from disposals of various developments. Defects Management is time consuming, both in identifying, determining liability and rectifying defects, but also in terms of dealing with residents’ complaints, which more and more are being escalated to councillors and MP’s due to knowledge of the company’s future.
5.3 It is difficult to forecast with any accuracy the total cost of defect resolution. The final end date for defects to be registered is not certain, but likely to be December 2025 for the six apartments at Drummond which are under offer at present. For the period 1 April and 1 July 2024 onwards, there will be about 65 private apartments still at risk of defects being notified. With the end dates flowing through until 2025.
5.4 The council will need consider how best to deal with these warranties which BBB have provided to purchasers of its developments. Whilst BBB have resources to manage these as part of its ongoing operations, once Red Clover Gardens has concluded, consideration will need to be applied as to resolving any remaining defect liabilities.
5.5 BBB are currently dealing with an average 10-15 new defect queries a week. The total number of defects unresolved is currently just under 200. These defects range from wobbly taps through to windows, doors or floors needing to be replaced.
5.6 The council will identify resource to support the defects works in the event that liability is transferred to the council.
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