New Chinatown North Point Street
North Point's New Chinatown, one of Liverpool's most high-profile failed schemes of late

Liverpool ‘makes progress’ tackling troubled sales model

Neil Tague

The city’s ability to root out problematic developments funded by fractional sales has been bolstered by measures such as a draft code of practice for council officials and a new approvals process for the sale of any council-owned land, according to a report.

Although by no means limited to Liverpool as the Angelgate saga in Manchester showed, the fractional sales model (also known as buyer-funded development) had become a stark issue and embarrassment to the city, with a string of developments stalled due to company administrations, investor fall-outs and contractor disputes.

Projects at Pall Mall and Chinatown were among those that never reached the point of reflecting the glitzy CGIs used to sell the developments to a largely overseas investor community.

Liverpool City Council set up a Fractional Investment Scrutiny Panel in 2018 to examine the issue, and the report by Chris Walsh, the council’s governance manager, lists the actions taken in response to 11 recommendations made by the panel when it reported last August.

Some relatively quick wins have been ticked off, the report said. These are: the development of a fractional investment set of FAQs to be made available to interested parties, including an explanation that investors’ money will be at risk and that independent advice should be sought; the creation of a development process ‘diagram’ to increase transparency for investors; and the drafting of an endorsement code of practice, which sets out guidelines for council officials and members invited to events where they could be seen as showing official approval for a scheme.

The local authority’s due diligence framework document has also been updated, including a new approvals process in place for any disposals of council-owned land. As of December, any disposals must go before the weekly statutory officers’ group prior to approval at cabinet or by a delegated officer following a string of arrests made as part of Merseyside Police’s Operation Aloft corruption investigation.

December also saw a new officer appointed as assistant director with responsibility for the council’s property and asset management service.

A further recommendation of the fractional sales panel was that the cost to the council of all stalled or failed developments should be reported. The panel offered the example of a stalled scheme on Fox Street, which cost the council just over £300,000.

Other recommendations include strengthening contact with other organisations around improving processes, such as Companies House and the Solicitors Regulation Authority, while the issue of building control responsibilities lying with “approved inspectors” was highlighted as an area where national legislative changes are afoot.

Some people, including the Liberal Democrat opposition in council, last year criticised the length of time it has taken for these issues to be tackled in a market in which significant financial and reputational damage has already been done. Meanwhile, an independent inquiry into the council’s procurement practices is under way, and is due to report to Government in March.

The fractional sales report will be considered by Liverpool City Council’s regeneration and sustainability select committee on 27 January.

Your Comments

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One day Liverpool might be portrayed with a positive agenda.

By Michael McDonut

The main victims are the individual investors whether buying it as a home or as an investment. I do hope many of them can gain some recompense?

By Liverpolitis

As an expat living in Hong Kong I can tell you this has not played out at all well in the local press and investment community. I hope when all of the investigations are over and the dust settles there if still some faith left in LCC. Foreign investment is only going to get harder to come by in the coming years and investors will simply go elsewhere if trust is not rebuilt.

By David Chow

Trouble is that so many have their noses in the trough and it’s the innocent investors whose savings are lost. Do not invest in Liverpool off plan unless you have a proper professional conveyancing solicitor to start with. Even then beware if things start to slip.

By Campaigner

It will be interesting to hear Max Caller’s views in March. I’m not sure I’m that interested in a council report about council activity!!
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It is true that the problems aren’t limited to Liverpool, but of those outside the city you don’t have to scratch too much to find a Liverpool link.

Incredible to think George Osborne presented Chinatown and North Point to the Chinese delegation to the UK in an investment brochure. No wonder they left without spending a penny.

By Jeff

Can you point me in the direction of the FAQ, it doesn’t appear on the council website

By Chris

Although the current problem is very damaging it might actually be the start of a new era for the city based upon new standards of probity which will come about by a new city leadership , process changes and lessons learnt

By George

It’s very difficult to justify investing in Liverpool at the moment. As a city it has so much potential, I love the spirit of the place and the architecture is incredibly impressive, but it just seems to lurch from one crisis to another. There’s always a lot of talk about big ambitions but the city lacks strong leadership. The Combined Authority and the council are at odds with one another much of the time and most developers that I know are pulling their hair out trying to move things forward with very little help from the council. Such a shame and I hope they have a shake up because post covid, it’s going to need much stronger civic leadership if it’s going to recover and once again make itself a serious contender for investment.

By Simon