Rescuing residential homes from contractor insolvency – now shortlisted for an award

Sadly, in today’s climate, contractor insolvency is becoming commonplace in the housing construction sector.  

A recent case, which occurred just a few weeks ahead of practical completion, happened when  Agudas Israel Housing Association (AIHA) was preparing to welcome residents into 22 family homes at Roberts House in Golders Green.  The totally unexpected news was delivered by the contractor’s administrators.

As the scheme’s project managers, the Askival team – lead by Tim Cork – acted very swiftly on behalf of AIHA to assist with the on-going delivery of these homes Initial meetings with AIHA’s solicitors, Devonshires, helped to formally terminate the original contract and various negotiations took place to keep as much of the on-site team together.

Askival established that being self-employed, the contractor’s site manager, Gary Mahony, was unencumbered by the insolvency and was keen to continue.  The cost consultant – Daniel Scharvona of Trogal Griffiths Associates – was also retained.  Working alongside them, Tim Cork identified all that needed to be done with the aid of Askival’s Contractor Insolvency Toolkit – a comprehensive checklist of actions.

The biggest challenge was re-engaging and negotiating with the sub-contractors – many of whom had not been fully paid by the main contractor.

“Agudas Israel’s payments to the main contractor were all up to date,” explains Tim Cork.  “But these hadn’t been utilised to pay the sub-contractors’ respective invoices.  Some claimed to be owed as much as £200,000 and used pending certificate signoffs as a bargaining chip.  However, the non-payments had to be handled by the administrators, and it was our job to negotiate a fair deal for our client from the situation as it now stood.”

It also transpired that the contractor’s costs were overstated which made negotiation to complete remaining work agreements complex and difficult in some instances.  

Through skilful negotiation, most of the sub-contractors agreed to modified terms and, with Devonshires’ assistance, Askival – on behalf of AIHA – entered into bespoke agreements with each of them to complete the works.

Working alongside the cost consultant, Askival ensured that the cost to the client was minimised.  Askival also assisted with obtaining all required approvals, signoffs and certifications to achieve practical completion, including issue of the final certificate from building control and release of the building warranties such that legal exchanges and completions could take place.

At the outset, Askival helped to optimise the site’s density from the original 15 homes to 22. 

AIHA chief executive Chaya Spitz said that she and her director of property Malcolm Rogers appreciate all that has been done by Askival and the rest of the on-site team to complete the task.

“Of course, the unexpected contractor insolvency incurred considerable delay and additional cost to the scheme, but we realise how much effort Tim Cork, Malcolm Ward, Gary Mahony, Daniel Scharvona, the remaining sub-contractors and Devonshires have put in to help us minimise this impact.  The overall cost implication in percentage terms is better than we could ever have anticipated.  And we are thrilled that our residents are now moving into their very beautiful homes.”

Commenting on behalf of Askival, managing director Malcolm Ward said:

“While this contractor insolvency has been a very unwelcome situation for Agudas Israel, it has demonstrated how we can put an effective rescue plan into action at short notice.  Tim Cork and the rest of the team pulled out all the stops to achieve the best result.  However, there’s always something new to learn.  In this case, a message to all sub-contractors – if you’re not being paid in line with your payment terms, raise the issue at the earliest opportunity with all parties – not just the main contractor – so that an early resolution can be reached.”

For more information about Askival’s Contractor InsolvencyToolkit, please contact us via contracts@askival.org

In addition, this scheme has been shortlisted for has the best urban shared ownership development in the #InsideHousingDevelopmentAwards. The awards celebrate outstanding residential developments in the UK over the past year, and highlight the very best in delivery, innovation, and partnerships.  The results, which will be announced on 24 November, are eagerly awaited.

Client: Agudas Israel Housing Association

Development Managers:  Askival Ltd

Architect: Rivington Street Studio

Cost Consultants:  Trogal Griffiths

Engineers:  Bannerman Consulting Engineers,  Vertex Engineers

Solicitors:  Devonshires Solicitors

#affordablehousing #London #contractorinsolvency #solutions #gettingitdone