The Scottish property fiasco
When statutory notice legislation was introduced in 1991 to protect Edinburgh’s historic tenement buildings, no one anticipated the scale of the crisis that would build over the next two decades. Here, Lydia Stockdale visits the capital to investigate what happened, and how the council intends to put things right.
It was meant to be an almost utopian piece of legislation designed to preserve historic tenement buildings in Edinburgh for future generations, but somewhere along the line, things went wrong.
In 1991 a law unique to the Scottish capital was introduced to give the city’s council the power to force homeowners to pay for essential repairs. Little did officials know then, but the law would lead to utter chaos, with the council hit by hundreds of complaints, a police investigation and the dismissal of four employees.
Under the City of Edinburgh District Council Order Confirmation, the local authority could issue statutory notices and organise for work to be carried out when multiple owners of private buildings couldn’t agree how to do it themselves. But what started out as a well-intentioned power spiralled out of control.
In September 2011, things came to a head when BBC Scotland aired a programme called ‘Scotland’s Property Scandal’. Edinburgh homeowners told reporters they felt they had been ‘ripped off’ by the local authority after their housing repair bills rocketed, leaving them with massive debts.
The BBC revealed that a storm was taking place within Edinburgh Council. There had been a lack of control over contracts and allegations of corruption among staff and contractors, employees had been suspended and an investigation by Lothian and Borders Police was underway.
After a two-year hiatus, Inside Housing visits the city to find a winter sun shining brightly in a clear, blue sky and council officers ready to discuss how things went awry. With more than 900 retrospective complaints relating to up to 700 projects to deal with, plus unbilled work amounting to £23.2 million, and a further £10.4 million of debt outstanding for work that has been invoiced but not yet recouped, they also explain how they plan to put things right.
We meet in the council’s City Chambers, not far from the medieval tenements that run along the Royal Mile on the approach to Edinburgh Castle. Statutory notices were first introduced to protect these types of properties, along with the Georgian and Victorian tenements that line the streets of the capital’s conservation areas.
‘Tenements are one of the main housing stocks in the city centre,’ says Peter Long, acting head of the property conservation service at Edinburgh Council, who is keen to stress that he’s only been in post since December 2011 and has a remit to wind up the failed property conservation service, and to launch its replacement.
Multiple ownership
‘Most tenement buildings are privately owned with 10 or 12 properties per stair, so it’s very complex for one individual owner to get basic maintenance undertaken. The consequence has been very little investment in these properties in the 100-plus years since they were built,’ he explains.
‘By the early 2000s things needed to be fixed - [the statutory notice system] was about maintaining the liveability of that stock.’
Public safety was also a consideration, with calls for emergency repairs to be carried out on older properties increasing following the death of 26-year-old Christine Foster, who was killed in 2000 by a chunk of masonry which fell from a city centre building.
At the same time, a boom in the city’s buy-to-let market led to a growing reliance on statutory notices to ensure work was carried out. ‘Increasingly landlords aren’t there and don’t have that direct interest,’ states Mr Long.
In 1991, 9 per cent of households in the Scottish capital lived in private rented homes, by 2009/10 the proportion had risen to 22 per cent. Statutory notices not only applied to historic buildings - they could be enforced on any property with more than one owner. They became a way of ensuring that private rented properties were up to standard.
Currently there are 25,668 people on Edinburgh Council’s housing waiting list, putting even more pressure on the private rented sector. ‘Housing supply is a real problem for us. Edinburgh relies on private rented housing to meet housing need in a way probably not a lot of other councils do,’ explains Mark Turley, director of services for communities at the council, who also emphasises that he was not involved in the statutory notice saga.
When the local authority’s property conservation department issued a statutory notice, property owners had 28 days to organise for the repairs to be carried out themselves. In the vast majority of cases, it is difficult to get everybody to give their consent, says Mr Long. ‘It’s typical that the person who has water coming in to their home wants the problem fixed, but others see it as a less relevant issue.’
Over the years, individual owners would ensure work got done by contacting the local authority and kicking the statutory notice system into action. ‘The council increasingly became the first resort,’ states Mr Long.
‘It became self-perpetuating, and ever bigger and more complex projects were undertaken. The value of work done under statutory notices increased almost exponentially, year-on-year from 2006 onwards. The whole system had overheated and was running out of control.’
Breaking point
In April 2011, prompted by internal concerns, the local authority commissioned forensic accountants from Deloitte to untangle the mess.
Edinburgh Council cannot comment on the Deloitte report, as it has not been made public, however it has provided its own figures showing that the value of payments to contractors hired for statutory notice work rose from £9.8 million in 2006 to a peak of £18.9 million in 2009.
‘The council was effectively spending people’s money for them,’ says Peter Halton, one of the owners affected. ‘This is particularly unpalatable if it is being spent on a property you no longer own,’ he adds.
Even though Mr Halton sold his property in the New Town area of Edinburgh after a statutory notice was issued, he was still forced to pay £18,000 for work done after he left.
In 2010, the 50-year-old software engineer set up a Facebook group for those hit by notices - it now has almost 400 members. ‘The more I found out, the more I realised that [the council’s] surveyors and contractors were pushing the costs up,’ he says.
‘Lots of building companies in Edinburgh got very wealthy during that golden period of statutory notices. The bill for scaffolding on our project was £28,000, and for most of the time it was just standing there doing nothing, costing us money.’
The police investigation into the property conservation team’s work around statutory notices has found no evidence of criminal behaviour. However, the fact there were serious managerial problems within the property conservation department became clear in 2009/10 when complaints from property owners began flowing in. The essence of the complaints were that costs were shooting up way beyond initial estimates.
The bulk of allegations about the value of work were that it was increasing once contractors hired by the local authority were onsite. In March 2011 responsibility for the service was shifted from city development services into services for communities and the council began to try to get a grip on the situation. ‘There’s a massive tidying up exercise to be done,’ sums up Mr Long.
As a result, four employees have been dismissed, four were suspended but have since returned to work, two have retired or resigned, and a further two are still under internal investigation.
Without going into detail, Mr Long suggests the staff members had ‘inappropriate relations with contractors’ which did not recognise ‘professional boundaries’.
Mammoth task
Meanwhile, the council has put together a 16-strong specialist team, including external experts, to work its way through the 900-plus complaints. The most common problems are about repairs to roofs, explains Mr Turley. An assessment of the work that needed doing would often be made from the ground floor. Once the contractors were up on the roof, they would realise there was more to do. ‘Often with the best of intentions the job was increased,’ he says.
This meant many property owners were presented with a nasty surprise when the final bill for work carried out came through their letterboxes. Now some owners, like Mr Halton, are calling for the council to reimburse them for work done under statutory notices. Edinburgh Council says while it is ‘committed to addressing owner concerns’, it has not yet made any decisions regarding cases in which individuals are asking for money back.
The local authority admits that it simply did not have the infrastructure and controls in place to deal with its rapidly expanding statutory notice workload.
‘We have recognised that the service model that was adopted previously really isn’t viable. The way it was operating wasn’t fit for purpose,’ states Mr Long, citing the council’s failure to engage sufficiently with homeowners, its lack of clear performance standards and the fact that it met all the project costs upfront, only recovering them from owners once works were completed, thus exposing it to significant financial risk.
A new service will begin to be rolled out next month. Statutory notices will remain, but the council plans to ‘step right back and go back to basics’.
‘The intention is to deliver on the public safety agenda. We’ve then got the scope [to expand the service] in future years depending on how things are going and what demand looks like,’ the acting head of the service explains.
Last year the council conducted a community consultation exercise to find out what people wanted the new service to look like, and published its report in November last year.
More than 1,200 Edinburgh residents completed an online survey, and open meetings were held across the city. People told their local authority they wanted free advice and information about property repairs and, crucially, despite all of the negative publicity around its work, they still wanted the council to deliver emergency statutory notices.
Libby Strong, the service redesign manager, explains that the new service will be renamed, relocated and rebranded. The ‘shared repairs service’ will focus on all the things the previous system appears to have overlooked. Its procurement processes will be more transparent and its financial monitoring robust. There will be regular internal and external reporting, and a clear audit trail, which will enable the local authority to track enquiries.
‘It’s about making buildings safe,’ she explains. ‘Then there will be onward advice about further repairs that the owners need to take forward.’
The council plans to clearly specify the work that needs to be done with both contractors and owners. It needs to ‘make sure people understand the implications of the decisions they are taking or not taking’, adds Mr Long.
‘We’re very keen to not have the new service based on that very enforcement-driven rationale, but to be far more about working with owners to try to identify effective solutions.’
Putting things right
As for the retrospective complaints that are looming over it, the local authority plans to complete its first review of cases by the end of this month.
It will take a view about its own liability in each one, property owners will be contacted, and if they are unhappy with the decision, their complaint will move to a second stage. Only if they are still unsatisfied by the end of this stage can owners take their complaints to the ombudsman service.
Mr Long admits that a mammoth task lies ahead. ‘[The cases] are all very complex, and with the sheer number of owners involved, and contractors who are no longer trading, there’s not necessarily an easy path through them.
‘My notional timescale is that by late autumn we need to be done,’ he adds. ‘It will be hard for people to view the new service as a positive development while we still have the spectre of some of the old stuff hanging around. We need to tidy that up and move on as quickly as we can.’
The council will not speculate about whether property owners will end up taking it to court, but there are solicitors out there ready to take on the cases of those with unresolved complaints on a no-win-no-fee basis.
As for the future of Edinburgh and its tenements - problems around old buildings falling into disrepair and getting owners to stump up the money to pay for work to be done are going nowhere.
The reputational damage sustained by the council due to the statutory notices scandal is likewise set to linger. ‘The main issue for me is how this has impacted on people’s trust,’ concludes Mr Long.
‘Frankly, it doesn’t matter what we actually do now, people will come to it from a certain starting point.
‘The paradox is that there’s still demand out there for somebody to intervene and to make things happen.’
One owner’s story
Peter Halton used to own one of eight apartments in a tenement block in the New Town area of central Edinburgh. He recalls how, in 2003, one of his neighbours decided they wanted to sell their property and thought the building needed upgrading, so they contacted Edinburgh Council and it served a statutory notice.
The council carried out a ground-level inspection and concluded work that needed doing included replacing missing slates, renewing weathered masonry at the front of the building, repointing brickwork at the rear of the building, and replacing broken or missing balustrades.
Mr Halton’s neighbour obtained a few estimates about how much it would cost the building’s owners to get the work done independently - then he managed to sell his flat and moved out, leaving the statutory notice system he had unleashed behind him.
In 2006 the council contacted the owners to say that, as they hadn’t organised for the work to be done, it was going to use its powers to do it and they would be billed for their share. The independent quotes for the work had been around £40,000 - a third of the £120,000 estimate given by the council - but arranging for the work to be done at the lower price had proved impossible.
‘The biggest problem with tenement buildings is you will never get everyone to agree, and builders won’t take the work on unless an agreement can be demonstrated. The council became the only option,’ says Mr Halton.
In June 2006, Mr Halton sold his property. His second child was on the way and living in a second floor flat with four flights of concrete stairs was no longer practical.
But as the statutory notice had been issued to Mr Halton he was still legally obligated to pay for any repairs done under it.
‘As far as the solicitors were concerned, that was the accepted norm and nobody seemed prepared to entertain anything else,’ Mr Halton explains.
When the sale of his property went through, one eighth of the council’s estimate for the work that needed doing, plus a contingency of 10 per cent, was held back by solicitors.
By the time the bills were issued in 2008, the spend had risen to around £140,000, leaving Mr Halton liable for around £18,000 for work on a property he no longer owned.
He contacted the council and disputed the bill, arguing that much of the work done had been unnecessary, inflated or outside the scope of the original notice, but got nowhere. The local authority began an internal investigation into Mr Halton’s case, but in 2010, before this could be resolved, Mr Halton’s buyer re-sold the property and threatened him with legal action unless he agreed to release the retained cash.
Mr Halton says he has made numerous further attempts to get Edinburgh Council to review his case and to reimburse him for work that he believes wasn’t necessary. However, now it is systematically going back and reviewing all complaints, these attempts were in vain. ‘I’ve complained for years, and now I’ve been told that I have to start again,’ he says.
Dependent on the outcome of the latest review, Mr Halton says he may reluctantly take the council to court. ‘I think my case is a good one, so I am consulting other owners and experts about their plans,’ he states.
Edinburgh Council says it cannot comment on individual cases but reiterates that it is ‘committed to addressing owner concerns’.
Putting the past behind him for a second, how does Mr Halton want the local authority to handle statutory notices in future? It should only impose statutory notices where the public’s safety is at risk, he answers, and should ensure there are ‘no incentives for surveyors and contractors to do more work’.
‘The whole saga has become a series of gravy trains and an embarrassment to the council,’ he states. ‘Edinburgh is not the only place in the world where there are shared buildings, but it’s the only place where this has been allowed to happen.’
