Urgent demolition work has started on a Yorkshire seaside landmark previously owned by a businessman at the centre of a multi-million-pound investor fraud investigation.
Last month, Yorkshire Bylines revealed how Khalid Bhatti had been disqualified from being a company director for 13 years after improperly securing £550,000 worth of Covid bounce back loans from the government for property firms in his Daniel Johns Group. At the time the loans were made, most of the run-down buildings owned or managed by his companies were disused, with empty rooms in them having been sold as buy-to-let ‘opportunities’ to unsuspecting overseas investors.
Investors left at least £5mn out of pocket
The disqualification by the Insolvency Service also covered one development in Manchester where leases were sold on 107 apartments in a development that had been abandoned, after the city council refused to transfer the freehold to one of Bhatti’s companies. According to the Insolvency Service, investors in that scheme have been left at least £5.4mn out of pocket following the company’s eventual compulsory liquidation.
However, property litigation experts now handling claims from other disgruntled investors say the Manchester case is the tip of a much larger iceberg. They are currently investigating other schemes involving Bhatti’s companies in Leeds, Bradford, Preston, Leicester, Liverpool, Blackpool, London and Scarborough.
Storm damage accelerates Scarborough demolition order
In Scarborough, the situation surrounding the former Marine Residence hotel in Belmont Road took a new twist last week when North Yorkshire Council started urgent demolition work on the derelict property. The council says the work is necessary to ensure the safety of the public.
The building had already been deemed unsafe after a fire in July. Following the blaze, the council applied to Scarborough Magistrates Court for grant of an order requiring the freeholder to start demolishing the building by 5 December. However, further damage caused by Storm Babet, coupled with a lack of any response from the freeholder, has forced the council to take on the work itself. Karl Battersby, the council’s corporate director of business and environmental services, said:
“Keeping the general public safe is paramount and given the structural damage to the privately-owned building, which has been exacerbated by Storm Babet, demolition must begin immediately.
“We therefore have no choice but to carry out the work ourselves, make the site safe and allow us to re-open the roads in the area so that residents and local businesses can continue to go about their lives safely.
“We have made numerous attempts to get in touch with the property freeholder bands for them to take action but due to a lack of communication the time has now come to address this ourselves.”
Current ownership remains unclear
The council says it is “not in a position” to name the freeholder and it’s unclear who currently owns the Victorian-era landmark. It had been owned by Daniel Johns Ltd – with Bhatti listed as sole director. In 2018 the company was fined £23,000 by Scarborough magistrates after pleading guilty to three charges relating to fire safety breaches at the property.
Daniel Johns Ltd went into voluntary liquidation in 2021 and joint liquidators subsequently discovered 43 long leaseholds on rooms in the property had been sold to investors between 2016 and 2020, while the freehold itself was sold by that company in September 2020. However, branding for DJ Suites – another Bhatti company name – can still clearly be seen above the front door of the Scarborough property and on a number of window awnings.
Liquidators investigating freehold and lease sales at multiple sites
The liquidators are still examining whether the Scarborough freehold was sold at market value, and enquiries into other Bhatti-run firms have uncovered numerous examples of freehold acquisitions being made between companies.
The liquidators are also looking into leasehold sales at three other properties owned by the company in Leeds, Preston and London. In their most recent report, they say:
“We have received many enquiries from creditors who believe they have been defrauded in their purchase of leasehold interests. Total losses to creditors and investors could be in excess of £25m.”
Meanwhile, work to demolish the derelict fire-damaged shell of the former hotel in Belmont Road is expected to be completed by Christmas.