Homeless charity Focus Ireland is preparing to step in and pay a ‘materially higher’ price for 16 houses even though Limerick Council signed a contract for the homes last year for a lower price.
This newspaper has established that Limerick City and County Council willingly backed out of its lower- priced contract because the builder sought a higher value to reflect rising costs of materials and Covid-related delays.
The council cannot change its offer under procurement rules and is afraid the houses won’t be built if the higher price is not paid.
The local authority said Focus Ireland has more flexible access to money and so has allowed it to step into the council’s shoes on the deal.
The Irish Independent learned of the agreement when details of Focus Ireland’s role were provided to lenders in Estonia who had been financing the developer, Top Drawer Developments, through a so-called online crowdfunding platform until the builder entered examinership in recent weeks.
Focus Ireland has agreed in principle to buy all 16 homes at the more than €3.5m development at Pallaskenry, 24km outside Limerick city.
The charity last night insisted the deal, despite being struck at a much higher price than the council agreed, still represents value for money.
The council confirmed it signed a fixed-price contract in August last year to buy the homes following approval from the Department of Housing and that it was unable to pay more at the builder’s request and feared the homes would not be built at all.
“As the contract was executed as a fixed-price contract, there is no mechanism for the local authority to seek additional funding from the Department of Housing, Local Government and Heritage under the direct turnkey programme as a result of increased costs due to material inflation, supply chain issues, construction site shutdowns and a general shortage of construction labour,” the council said in a statement.
“Due to Approved Housing Bodies having greater funding flexibility and to ensure that these homes are delivered for those on the housing waiting list, the council has decided to assign the contract to a nominee, to step in and take over the contract,” it added, in reference to Focus Ireland.
The council claimed not doing so would result in an unfinished ghost estate, “with no plans for construction nor any delivery of social housing units in the short to medium term”.
Focus Ireland confirmed it is considering buying the homes “subject to approval by our funders”.
Property Bridges, which has opposed the appointment of an examiner to Top Drawer, has told investors in Estonia that Focus has agreed to buy the 16 unfinished homes at a “materially” higher price than the council was set to pay.
The charity did not say how much more it is paying for the properties, but said the increased cost reflects higher construction costs and labour shortages.
“As part of our due diligence processes, Focus Housing Association obtained a report in October 2021 from an independent cost consultant who verified that the purchase cost of the homes represents value for money and is reflective of the difficulties facing the construction sector at present,” it added.