The city council’s quest to put an end to its issues around development funded by fractional investment takes its next step on Friday, with the cabinet asked to endorse changes including ramping up financial due diligence and restricting the release of council sites.
Fractional sales, or buyer-funded development, have become a popular way to fund residential and student accommodation projects in recent years, with Far East investors particularly targeted. Although such schemes have run into trouble elsewhere, Liverpool suffered particularly, and the Fractional Investment Scrutiny Panel was established in 2018 to look at the issue.
As reported by Place North West earlier this month, a set of eleven recommendations are made, including some demanding greater transparency with investors and some around council practice. The report for Cabinet outlines how the various council departments concerned have all been tasked with progressing changes immediately, for example rule changes around the disposal of council land for development.
One change is the development of a fractional investment FAQ document, which should explain that money may be at risk and that independent financial advice should be sought. It would also include hyperlinks to overseeing bodies such as the Solicitors Regulation Authority, and would include statements clarifying that schemes are not “endorsed” by LCC, which appears to have been an issue. The FAQ will go before Cabinet before 31 October.
Related to that, the report asks that there should also be an endorsement code of practice, setting out rules for council members and officers around the risks of being seen to be too closely associated with schemes and developers.
Other key parts are around due diligence, with the council’s regeneration and internal audit departments to progress a review by 31 October; and a recommendation that all council land sales are passed before select committee, noting that “save for exceptional circumstances, all proposals for the sale of council-owned land to developers using the fractional model be disbarred”.
The council is also seeking Government funding for a three-year pilot project that will allow it to employ building inspectors to carry out regular site visits on projects, replacing those approved by the developers.
In July, a Place In Focus report looked at how industry professionals and observers in Liverpool view the city’ attempts to make its processes more robust, with views varying on how much can be done to filter out the potentially problematic.