A legal battle seems to be shaping up between the current Board of Directors of the National Housing Corporation (NHC), the past Chairman of the Corporation and Fresh Start Construction Company Limited over two housing projects worth millions of dollars.
Pronouncements made by all sides so far indicate that only within the ambits of a courtroom will clarity be found in this matter, which to date has revealed some shocking allegations.
The two housing projects, located in Talvern, Babonneau and Choc Estate, Castries, commenced under the previous administration headed by Allen Chastanet. Not too long after winning the general elections of 26 July, 2021, the current Board of Directors of the NHC terminated the contracts of Fresh Start, the company tasked with completing the two projects.
The construction company said it was surprised with the termination notices issued by the NHC on 10 December, 2021, saying that “it was an unexpected and sudden turn of events after two years of development work and constant communication between Fresh Start, NHC and all relevant agencies.”
However, Housing Minister Richard Frederick, at this week’s (Tuesday) sitting of the House of Assembly said the current NHC Board of Directors terminated both housing projects “for breaches that persist up to today.”
Frederick claimed that the infrastructural works on the projects has a myriad of problems.
One aspect of the agreement between Fresh Start and the NHC that was revealing was the repayment terms, which established that lot sales would be split between Fresh Start and the NHC on an 80%/20% basis, until Fresh Start recovered the full extent of its investment estimated to be somewhere in the region of $40 million.
The company claimed that once its initial investment was recovered all sales thereafter (at NHC set prices) would inure to the NHC. The agreement, according to Fresh Start, was that it would finance the entire infrastructural works and foot the development cost estimated at EC$40 Million. The NHC would provide the bare lands and Fresh Start would develop these lands into serviceable lots with all amenities.
However, to the Housing Minister, the 80/20 partnership between Fresh Start and the previous NHC Board of Directors with the construction company getting 80% of that partnership, was simply madness because Fresh Start did not take into consideration the value of the land.
“The current Board of the NHC cannot find any Board minutes confirming that the former Board had taken that decision,” Frederick told the House, adding that this arrangement was not a decision of the NHC’s Board of Directors at the time.
“If it was not the Board’s decision whose decision was it then?” Frederick asked.
The VOICE spoke to a member of the previous NHC Board of Directors who explained that the 80/20 arrangement was to ensure that Fresh Start recouped its investment quickly.
“For example, let us look at the Choc Estate development (residential). NHC was putting $6 million which is the cost of the land. Fresh Start was putting in $32 million which included the design and full development of the project. The land would have been sold at $20 per square foot. Fresh Start was getting $11.50 a square foot and NHC was getting $8.50 a square foot; a 57%/43% arrangement with Fresh Start getting the bigger percentage. However, to ensure that Fresh Start gets its investment quickly, the lots that are being sold first would see payments being divided 80/20 in favour of Fresh Start. When Fresh Start gets its full amount then everything that is left goes to NHC and NHC only,” the former NHC Board member said.
Minister Frederick spoke of the approvals given to the developer of the housing projects by the Development Control Authority (DCA) as “conditional approvals”, meaning that the developments were approved as long as the developer complied with the conditions prior to the commencement of the developments.
He read out just three conditions the developer was obligated to comply with as per a letter from the DCA.
These conditions, according to Frederick, stated that the developer was required to complete the installation of all infrastructure within the sub-division, establish an escrow account for the sale of the lots, submit cost estimates for roads and drains approved by the Department of Infrastructure and cost estimates for electrical supply approved by LUCELEC.
Copies of all the approvals were to be submitted to the DCA before works on the project were to commence. Frederick said the developer did not meet any of the conditions listed and that the DCA had to serve stop notices to Fresh Start.
He listed other conditions he claimed the developer did not meet, however, the former NHC Board member said that the conditions Frederick highlighted had nothing to do with Fresh Start because the application to the DCA was made in the name of the NHC.
The former NHC Board member stated that the conditions given by the DCA “were not exactly like what Frederick read” and that “no conditions were violated.”
The former NHC Board member went on to state that “if there were conditions to be fulfilled which were not fulfilled before starting construction, then the drawings would not be stamped and given to Fresh Start. Further, Fresh Start has been working on these projects for the past two to two and a half years, there isn’t a single letter of stop notice from the time approval was granted up until the time Frederick decided to fire Fresh Start.”
“If you have conditions to be fulfilled before you start and you do not fulfil those conditions and you simply go ahead and start wouldn’t the DCA stop the project? Nothing like that ever happened,” the former NHC Board member said.