Department facing €31m bill over site

THE Department of the Environment is facing a bill of more than €31 million following a High Court ruling in a dispute between the Department of the Environment and construction company Durkan New Homes over a building worth €2.8 million.

In 2006, Durkan New Homes agreed to sell 215 houses and apartments at a €31.2 million discount through the State’s Affordable Homes Partnership in exchange for the Garda station at Harcourt Terrace in Dublin, which was due to be closed.

While the sale of discounted properties went ahead, the building company never received the Garda station in return, as the transfer of the property to it from the State ran into a number of difficulties. Last month Durkan New Homes sued the Minister for the Environment, Community and Local Government in the High Court.

Mr Justice Peter Charleton yesterday ruled that the building company was entitled to recover the €31.2 million plus special damages of more than €960,000 from the State. The Harcourt Street property was last month valued at €2.8 million.

State agency Nama is likely to be the main beneficiary of the deal, as the company borrowed money from AIB to fund the development of an office block on the site, which never went ahead.

The loan was subsequently transferred to Nama. It is understood that the agency acquired the debt at a considerable discount.

Durkan New Homes owes a number of debts to Nama and has agreed a business plan with the agency. It is likely that the proceeds from the case will go towards paying off its liabilities to to the State body.

The company did not comment on yesterday’s ruling. A spokesman for the Department of the Environment, Community and Local Government said that it would study the ruling but declined to say anything further.

The Affordable Homes Partnership was dissolved at the end of 2010. It was established in 2005 by the then minister for the environment, Dick Roche.

Under the scheme, the State swapped properties that it did not need with building companies and developers in return for discounted houses and apartments.

The partnership was designed to provide homes for first-time buyers who had been priced out of the market by the property boom.

Durkan New Homes was keen to buy the Harcourt Terrace property as it already owned the site next to it and wanted to develop the two together.

When the State sought offers for it in July 2006, it was valued at €17.7 million. Durkan’s offer, which was worth more than €31 million, was a considerable premium on this figure.

In his judgment, Justice Charleton pointed out that, according to the Affordable Homes Partnership’s evaluation, the deal represented excellent value. As a result, the State accepted the offer.

During the hearing last month, the minister’s lawyers argued that Durkan New Homes should only be entitled to recover the site’s market value, which was last month estimated at €2.8 million.

However, Mr Justice Charleton said that the State had accepted €31.2 million for the site, which Durkan New Homes had effectively paid in its entirety at the time that the sale was agreed. A number of problems prevented the final transfer of the property.