Apartments at North Point Global's New Chinatown were sold using the fractional sales model CGI by Uniform

Liverpool fractional clampdown heads for cabinet

Neil Tague

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.

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I think I’m getting another migraine.

By Michael McDonut

Some schemes seem to sail through construction without any controversy eg 21 Strand St , Lexington,so why can`t we deal with and encourage these types of developers more than these rogue elements. However even then we have the NIMBYS to contend with eg ” the save Waterloo Dock” crowd who want it left as a wasteland or with suburban housing.
The council has allowed this embarrassment to fester for too long but never ceases to create new ones , like the Zipwire farce.

By sound

Until all the past ones who now purport to be bona fide property developers, are run out of the city nothing will change. LCC and Joe in particular need to heed the call and step up to the plate.

By Old Hall Street

Lets make sure someone professional is in charge of this from the council…

By Town Hall Tommy

Liverpool will never be able to attract proper investment until the issue of frational sales is resolved….Including the hotel market..

By Anonymous

This a legitimate funding model that several developers have made work very well, delivering thousands of homes as a result.

The problem lies when unscrupulous developers exploit the absence of regulation to get their hands on investors’ cash.

That said, I have little sympathy for investors in projects brought forward by those, er, ‘characters’. All they had to do was ring any lawyer in Liverpool and ask ‘Have you heard of developer X and what do you think of him?’ and in 99.9% of cases they’d have been told to hold on to their cash.

It’s called due diligence. Without it, caveat emptor applies in full force.

By Sceptical

The report is a whitewash, and as such cannot be described as a clampdown.

“Fractional sales” have been shown up to be mere junk bonds flogged by get rich quick spivs. Developments they actually complete are poor quality liabilities, while in all likelihood they won’t actually complete at all.

Yet the report is so weak on this, so weak on the dubious connections and opaque money flows involved, and uncritical off the council and its various culpable personalities, that, as far as real investors go, it may as well be titled “steer clear: business as usual”.

Without the removal of the individuals at the council who have got so much so incredibly wrong, how can any major investor have any confidence their money is safe, let alone well invested.

By Mike

‘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’ Really should be standard practice anyway and communicated appropriately.

‘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’ Is this actually relevant to the FO issue?

Transparency is the way forward.

By Anonymous

Liverpool was in the New York Times yesterday good read up about Baltic Traingle etc

By Dotty

No city does the fractional sales model better than Liverpool. Indeed I believe it was Chomsky, who observing phenomenon from across the Atlantic, opined that ‘if only New Yorkers were as culturally sophisticated and financially astute as those Liverpool Gentlemen and their fractional sale- financed development schemes that we too might attain the heights of economic, social and cultural development as evident in Liverpool; for theirs is a manner of being that is both culturally significant and globally important’.

By Liverpool Bromance

‘Fractional sales’…enough to make a grown man cry. If a development can’t be funded properly it shouldn’t be built.I’d rather have pie tomorrow than pie in the sky today. These developments have happened all over the country why is it Liverpool has suffered more?

By Frustrated

@Dotty. Liverpool is like no other. It`s offerings are second to none, its architecture, its nearby beaches, the calm and unrivalled serenity, its Beatles tours. The list is non exhaustive. There`s something for everyone in Liverpool. It`s also very family orientated so you can take grandad too.

By Liverpool romance

Once again it’s Liverpool that’s Supposed to suffer more than any other city. Why is investment in our once great city so hard to attract ?

By Huytonguy

Stable door and bolted springs to mind.

By BDAY

@Huytonguy. Signature living are making a comeback so the glass is always half full and never empty. Liverpool romance has got the right attitude. Chin up lad.

By Sam Walker

But it’s always us that seem to get the negative news. We need offices and real investment and not just these ill conceived so called investment ideas.

By Huytonguy

I don’t think we are going to have to worry too much about fractional development. There wasn’t too much money being spent here anyway and after the pandemic has had its way its back to the 70s I’m afraid.

By Anonymous