Failures of building firm cost housing association £36m
Back to work: after a near-three-year hiatus, construction has restarted on the Cherryfield’s Meatpackers site on Cherry Orchard Road
As recent examples including Homes for Lambeth, Brick by Brick and the calamity at The Fold demonstrate, meeting a 1.5m new homes target in five years is fraught with difficulties. BARRATT HOLMES, housing correspondent, reports on the case of 120 flats at East Croydon
Builders are back on the old Meatpackers’ building site on Cherry Orchard Road, almost three years after the original contractors went bust and stiffed a housing association for £36million.
Taken alongside the serious issues suffered by residents who moved into the Queen’s Quarter development that opened in 2022, the Meatpackers site in East Croydon provides another example of the difficulties thatlocal MP Steve Reed and the Labour government will have in hitting their self-imposed target of 1.5million additional new homes this parliament.
Planning permission for the site of the former Cherryfield’s Meatpackers factory at 40-60 Cherry Orchard Road was granted in 2019. Optivo, the housing association, and Henley Homes proposed to build a seven- to nine-storey building with 120 homes.
Then came covid, which stalled most development work across the country.
But building works came to a complete halt on the East Croydon site in 2023 when contractors Henley Construct went bust.
Optivo was by this time in the midst of a lengthy and complicated merger process with Southern Housing, creating one of the country’s largest housing associations (or what most people would recognise aslandlords), managing 30,000 homes for nearly 80,000 residents in London and the south east.
One of the newly merged landlords’ first major problems was a multi-million-pound hole in their construction budgets caused by the collapse in May 2023 of Henley Construct, affecting works on the Cherry Orchard Road site and several others.
The estimated total loss to Southern Housing was reported by their liquidator earlier this year as more than £36million – money that will not be recovered, and money that can now never be used to pay for resumption of works at East Croydon and elsewhere.
According to a report by Henley Construct’s liquidators, the contractor had been “engaged in a number of substantial projects building residential units for HAs”.
The final progress report from 360 Insolvency Ltd said the “respective HAs have claims pursuant to contract terms for loss and damage suffered as a result of the termination”.
One in theEye: Steve Reed will have problems delivering 1.5m homes, if examples in the borough he is supposed to represent are anything to go by
A subsidiary of Southern Housing submitted a claim to the liquidators for £36,045,633 which they said “reflect[s] the cost of works under those contracts”.
Henley also went down with trade and expense creditors totalling £6.7million.
Only now, after almost three years, has the housing association been able to budget to appoint a new contractor to work on the Cherry Orchard Road site.
Addiscombe West councillor Sean Fitzsimons said this week that he will provide locals with more information about the Cherry Orchard Road project once he and his council colleagues “get a full update from Southern Housing on timescales”.
Perhaps they’ll be finished by the time that the Bridge to Nowhere is open on both sides of the railway tracks?
Read more:The Fold folds: Hundreds of tenants given six months to leave
Read more:Croydon shamed over ‘dangerous squalor’ in council flats
Read more:‘I don’t think it’s helpful you ask questions like this’ says MP Reed
Read more:#TheLabourFiles: MP Reed, Evans and the Croydon connection
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News, views and analysis about the people of Croydon, their lives and political times in the diverse and most-populated borough in London.Based in Croydon and edited by Steven Downes. To contact us, please email inside.croydon@btinternet.com12 Responses toFailures of building firm cost housing association £36m
Would have to be on the hapless Croydon (Brick by Brick promoter) Sean’s doorstep for such a completely damaging disaster to happen. See this is the problem with his Labour Party claim to develop one and half million new homes during this Parliament.
It is reliant on a Sector who see bankruptcy and liquidation as a business opportunity to make massive short term profits and then just start up again afterwards as if nothing has happened. This sector will never deliver with the current system of regulation and their established business practices.MatthewPsays:
Well don’t forget, it was under the 14 years of the general Conservative government headed by David Cameron who removed the regulations on building firms (alongside vatious others), so they could get away with this while telling the general public to “tighten our belts” under Austerity.
Purley Marysays:
There are at least 3 stalled large building projects in Purley. Huge cranes standing idle on Russell Hill, Purley Way (Southern end) and Banstead Rd South opposite the library. Presumably building contractors gone bust.
David Wickenssays:
Never pay contractors more than the value of the work to date. And then hold a retention. Also don’t start unless a performance bond is in place. In that way the Client should not make the scale of losses detailed here.
Is that feasible in a over heated construction market where builders can demand the terms and condition on what the contract is made? What you propose sounds like the standard basis of building contracts when Housing Associations were overseen by the Housing Corporation.
The actual details of how the losses occurred on this particular contract are not stated in detail.
Johnathan Tandysays:
Barratt Holmes – great name if ever I believed it 🤭
It does get tiresome having to explain the need forPrivate Eye-style cod names. We’ve been doing it for 15 years, and some people think they’re the first to notice. Oh well…
There was once an estate agents near Norwood Park, which used the owner’s name in its title: Sherlock Homes. They used a magnifying glass in their logo, as they tracked down your ideal house…
Remember Russ Abott? “Barratt Holmes” was a Sherlock Holmes spoof character portrayed by the Russ in his comedy shows, notably “Russ Abbot’s Summer Madhouse”
Daniel Kellysays:
Maybe the time has come to allow the courts to take action against the shareholders. All too often they extract money from the company legally and then liquidate the company.
Unfortunately that is not possible in this case as it was a family run private limited company and so they can escape with limited liability for their losses. From what I read another Usmani Family company was involved in the collapse and Intelligent Steel Solutions bankruptcy put everyone on notice that Henley Construct was in severe trouble. There is another unrelated Construction company called Henley Construction Limited which always should flash an amber light as this too has had some trading difficulties in the past, but is now solvent.
For the record I can see another Usmani Construction Company called Reach CM Ltd continues to trade.
