The future of a newly constructed £24million double block of student flats in Plymouth is in doubt after the owner collapsed into administration.
The imposing Crescent Point towers were only completed in autumn 2018 but have never been occupied with firms involved in their construction and operation enmeshed in a long-running legal dispute.
And now Plymouth (Notte Street) Ltd (PNSL), part of the London-based Harouni Group, has appointed business consultants at BDO LLP as administrators and they are already asking for creditors to come forward.
The two "ghost" towers, 10 and 13 storeys in height contain 348 apartments with ground-floor commercial units.
It is now possible the blocks could be sold but there is already speculation in Plymouth’s business community that they may end up being converted to another use such as flats or a hotel.
The buildings and surrounding land, on the confluence of the Crescent and Notte Street in Plymouth city centre, are listed as a £24million fixed asset in PNSL’s last set of accounts, having risen in value from £16million just a year earlier.
There is a mortgage on the parcel of land and buildings with Luxembourg-based Longbow Investment No3.
PNSL made a loss of £2.6million in 2018, according to accounts filed at Companies House.
Business Live has approached Harouni Group but not received any reply. It is awaiting a response from BDO.
The buildings, which contain “pod” rooms manufactured off-site and shipped in, have had a troubled history.
Built on a “long-abandoned” site next to Plymouth Athenaeum and the now-closed Reel Cinema, the two blocks were supposed to be open in September 2017.
But Pickstock Construction, which built them, was hit by “unavoidable” delays. It is understood these may have been caused by issues affecting the UK construction sector after the Grenfell Tower, fire in 2017.
Buildings nationwide had to change their external cladding after the disaster, and though Crescent Point is understood not to have been affected by issues concerning cladding, the programme appeared to have been delayed because of a general slowdown in the construction sector.
Then, in mid-2018, Plymouth City Council planners ordered constructors to remove brightly-coloured stickers applied to cladding without permission. More subtle green panels then went up in their place.
The buildings were completed by September 2018, but no one moved in and it later emerged a legal battle had started – all because some rooms were built too small.
The case of Mears Ltd v Costplan Services (South East) Ltd, Plymouth (Notte Street) Ltd, JR Pickstock Ltd, was heard in the Court of Appeal in 2019.
The court heard that PNSL employed Pickstock to build the double block, and entered into an agreement for lease (AFL) with Mears to manage it once it was practically completed. Mears' contract was dependent on the building being constructed exactly as planned.
But it turned out 56 of the 348 rooms were more than 3% smaller than shown on original plans – and the only way to put this right would have been to knock down the blocks and start again.
South West commercial property in the news
Mears claimed any breach of the 3% size threshold amounted to a "material and substantial breach " of the AFL, which would mean it could get out of the contract.
Mears obtained an injunction against quantity surveyor Costplan, to prevent it inspecting and certifying practical completion.
How to contact William Telford and Business Live
Business Live's South West Business Reporter is William Telford. William has more than a decade's experience reporting on the business scene in Plymouth and the South West. He is based in Plymouth but covers the entire region.
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A court threw out the injunction and Mears appealed. The Court of Appeal then agreed with Costplan’s interpretation that the breach of contract was not in itself "material".
Lord Justice Coulson (Sir Peter Coulson), the most senior construction judge in England and Wales, said it would be commercially unworkable if every departure from contract drawings had to be regarded as a breach of contract.
The Court of Appeal could not accept that trivial breaches were deemed material and therefore the certificate of completion could be issued and Mears could not break the contract. The appeal was dismissed.
