All is not well in Galway City Council

Guest post: Enda Cunningham is a news journalist with the Connacht Tribune Newspaper Group in Galway, where he has worked on a freelance and full-time basis since 1997. He is also a regular contributor to several national newspapers and radio stations and while he is an ‘all-rounder’, he has particular interests in the areas of planning, property, business and finance. He can be contacted at ‘enda AT ctribune DOT ie’. We have previously covered his work on this site. – Mark

—

Environment Minister John Gormley might be wasting his time with the remit of his ‘planning review‘ in Galway County Council, when a probe into their counterparts in Galway City Council could throw up some real gems, as I discovered.

There’s a lot of info in this post, so please bear with me.

When it comes to paying Development Contribution Levies, some builders in Galway City have been a bit lazy, and it’s taking the Council up to three years to chase up some of the debts, such was the leeway being given.

In fact, the Council is currently owed around €5.4m in unpaid development levies, €1.3m of this is being chased up through the District Court and High Court, while the rest is the subject of enforcement orders or is being paid by installment.

The single biggest debt relates to the abandoned Crown Square development in Mervue – headed up by Padraic Rhatigan of JJ Rhatigan and Walter King of GK Developments – where almost €2.1m is owed.

I had a lengthy sift through a couple of dozen Galway City Council planning files which turned up some very interesting information on several of the biggest developers in Galway during the boom years, but the real golden nugget that emerged from my investigation that must surely be a real cause of embarrassment for officials – a typo on a planning condition which could cost the Council €468,389.29.

Basically, where the Council should have sought development levies for all 120 residential units in one particular development, they instead specified ‘apartments’ – of which there are only 28.

Harrmack Developments bought the site in Doughiska, which is near Merlin Park Hospital from a landowner with planning granted for 120 townhouses, semis and apartment.

The planning permission, which dates back almost a decade, stipulates that:

“Before the occupation of any apartment, the developer shall pay a contribution of £4,100 for each apartment with a gross floor area in excess of 65 sq.m. and £3,000 for each apartment with a gross floor area of less than 65 sq.m.”

The stipulation should have read ‘units’ instead of ‘apartments’, and the levies should apply to all 120 units, not just the 28 apartments. So, do the maths and you have a significant shortfall.

In correspondence with the developers, the Council admitted to the typographical error.

“It is acknowledged that due to a typographical error, the condition refers only to ‘apartments’ when it should have referred to ‘units’. However, it is obvious that you were at all times aware that the levy had to be paid in respect of all 112 units”

the Council said, pointing out that levies had been paid by the developers on two townhouses, suggesting this would have set a precedent.

In a solicitor’s letter to the Council last year, Harrmack indicated they would be “strenuously defending” the legal action.

The Council contend that the money is owed full stop.

Interestingly, since then, the Council has changed the levy scheme – contributions now have to be paid before construction work commences, whereas previously they were due prior to occupation of residential units. Doesn’t seem to have made much of a difference though.

LEEWAY FOR DEVELOPERS

Some developers escaped legal action for the non-payment of Development Contribution Levies for up to three years, which is particularly significant bearing in mind the property market started to tank mid-2007.

Because there are almost 70 cases of ‘defaulting’ on levies, I concentrated specifically on the cases currently before the courts, which constitute a total value of more than €1.3m which the Council is now attempting to recover.

It seems there was no real rush to bring any of the developers to court – the Council allowed years to pass after an initial warning letter was issued, before they issued Enforcement Notices and subsequently instigated legal proceedings.

Developers were also allowed to negotiate and renegotiate stage payments in some cases, while in another case, planners granted an extension of time for the ‘life’ of the planning permission, despite a warning letter being issued months earlier to the developer for non-payment of levies.

At the moment, the Council is pursuing 10 cases in the District Court for unpaid contributions valued at a total of €412,401, while a single case subject to High Court proceedings is valued at €468,389 (the ‘typo-gate’ case referred to earlier).

The local authority has already secured District Court Orders totalling €482,074 in relation to seven different developments around the city.

The highest-value actions are against Stephen Harris, or companies where he is listed as a director, with a total of €1,014,624 owed.

In another case involving an apartment development in Doughiska, developer Joe McNamara informed the Council he was suffering from ill health, while Anglo Irish Bank also confirmed they had power of attorney over him.

When the Council attempted to lodge a €50,000 cheque from Mr McNamara, it was returned by the bank marked ‘refer to drawer’, who had earlier admitted to ‘financial constraints’ and to being hospitalised four times in the same year.

I also uncovered details of missing insurance bonds – these are financial guarantees lodged with the Council to ensure public areas of developments are finished properly.

I’ve provided a breakdown below of the cases that are currently subject to legal proceedings and a little history of what’s happened to date to give you a flavour of the to-ing and fro-ing.

I contacted the Council for a comment when writing up the story for the Galway City Tribune. Here’s what Tom Connell, the Director of Services for Planning and Development had to say:

“If you compare with other local authority areas, our collection rate is extremely good.

I wouldn’t say that developers were given leeway. We have a regime here that we have been working off for the last five or six years. Prior to commencement of development on site, the levies have to be paid.

Where the contribution is significant, anything up to €500,000, the developers may come in and say they’ll break the development into phases and propose phase payments, which we would consider.

We do not give leeway. We are looking for monies and we are looking for full payment. Where a developer is willing to enter into installments, we’ll consider it. We are consistent on the collection of levies, because that money is due for public services.”

However, he conceded they may have been a little too reasonable. When asked why legal action was not immediately initiated against some developers, he said:

“Maybe we were too reasonable in certain cases. We have to go through a process in collecting levies, and show if we do go to court that we acted in a reasonable manner.”

THE BREAKDOWN

Harrmack Developments €861,664

This company, which is headed up by Stephen Harris (and formerly, at different stages, Joe McNamara and Bernard McKeon), is involved in High Court proceedings valued at €468,389 (‘typo-gate’) over unpaid levies at Fionnuisce in Doughiska – a development of 120 semi-detached houses, townhouses and apartments where road surfacing has also been left incomplete.

Harrmack already has a District Court Order for €393,275 for a development of 50 apartments at Fionnuisce which are half-built and left as a building site.

The Council’s Senior Parks Superintendent, Stephen Walsh, also asked the authority to ‘draw down’ a €192,000 insurance bond because Harrmack had ‘failed to make adequate progress’ in relation to landscaping on the site.

According to Bank of Scotland (Ireland), who ‘underwrite’ the bonds, bonds from April 2007 and July 2008 had to be re-issued as they were advised they “had been lost and had not been delivered to Galway City Council”.

Stephen Harris €145,500

A development of 23 apartments at Maigh Rua on the Doughiska Road. The Council first wrote a warning to Mr Harris in September 2008 that the levies had to be paid or he would face legal action. Further warning letters in April and July 2009, when the matter went to the District Court.

It is currently before the District Court – on adjournment – pending Mr Harris paying by installment.

Iggy Foy & Leo Maher €85,150

The development of a four-storey shopping complex (nine retail units) and 150 homes at Sraith Fada in Doughiska. To date, only 72 apartments have been built, with a current market value (according to the developers) of €8m.

The developers sought, and were granted, an extension of two years (to June 2011) for planning permission due to a “slow demand for completed units … building to demand”.

The Council refused to review the agreed stage payment plan and issued a warning letter in October 2009, while the previous year, the developers indicated that Kieran Burke Construction had responsibility for some of the built units, which itself had issues in the payment of installments. Currently subject to District Court proceedings.

Joe McNamara €77,053

In relation to 32 apartments at Inse Beag, Doughiska. Harrmack Developments indicates in 2006, that Mayo-man Joe McNamara (a former partner in Harrmack) took the sole interest in the development. Indicated he cannot meet agreed installments that year – and attempts to renegotiate. Took part in the Niall Mellon Township house-building project in South Africa that year.

Appoints Dan Hurley of Econ Developments in October 2007 “on a consultancy basis to regularise matters”. Mr McNamara also indicated that year that he had health problems, which caused him to be hospitalised four times.

In January 2008, a cheque for €50,000 from Mr McNamara to the Council for levies was returned ‘refer to drawer’.

December 2008: Council informed that Anglo are “lawfully appointed attorney of Joe McNamara”. District Court Order obtained.

John Curley €58,076

Warning letters issued in relation to the ‘Born’ store development at Newtownsmyth in November and December 2009, and Enforcement Orders issued in January 2010 and again two months later. Currently subject to District Court proceedings.

Paul Connolly €40,200

Mr Connolly, of Honeyglen Homes, developed 8 apartments on the Doughiska Road. His solicitors claim he is owed money by the Council in relation to the widening of the road and suggest they offset €5,750 of the debt.

Warning letter issued to Mr Connolly in August 2008, and Enforcement Notice follows 10 months later. At one point, the developer offers to pay the levy over 10 monthly installments. Currently subject to District Court proceedings.

Matt Ryan €37,790

In relation to the development of seven properties at ‘Fordfield Court’, 93 Upper Newcastle, the first warning shot was fired by the Council in June, 2007. Follow-up letters sent in November 2008, and then in January and February 2009, before an official warning letter sent in January 2010.

An Enforcement Notice followed in February 2010, when Mr Ryan was ordered to pay the due levies, complete landscaping work, removed staircases to attics and to remove a satellite dish. Currently subject to District Court proceedings.

Tom Keary & Sean Davoren €27,050

The development of three apartments to the rear of Villanova, Upper Salthill. The Council spoke with Mr Keary in July 2009, warning him the file was being passed onto the Enforcement Unit. Currently subject to District Court proceedings.

Henry Greally €11,175

In relation to 8 apartments in Upper Salthill. Warning letter sent in April 2009, followed by an Enforcement Notice the following month. Currently subject to District Court proceedings.

Others €19,204

Joe McNamara/Harrmack (€5,204) at Fearann Rí, Doughiska

James Clancy (€4,301) restaurant on Dominick St. (order obtained)

Frank Burke (€2,412) house on Taylor’s Hill (order obtained)

John Corcoran (€2,069) house at Menlo (order obtained)

Adrian O’Connor (€1,500) apartments at Nuns Island (order obtained)

Royal Rock Liosban (€1,462) office at Liosban Industrial Estate

Harrko (€1,296) warehousing at Ballybrit Business Park

And remember, these are just some of the 70-odd cases where levies are owed at the moment. I’m sure, when I get around to them, the other cases will make interesting reading.