Letting Agent needs urgent advice – please help

Hi Don, I agree with your sentiments, but in reality it is a commercial agreement, and if there is a breach, there is a breach and a lender can enforce the terms according to the contract. It may seem very unfair, but it is the lenders prerogative, as harsh as it may be.

I spent two decades warning landlords that this could happen if they signed up to commercial lending with LTV and interest cover covenants post completion instead of BTL mortgages which have no such covenants. I am also aware of other borrowers affected by the National Australia Bank withdrawal from property lending in the UK. This affects Yorkshire Bank and Clydesdale Bank customers. In 1993 my firm was the number one referrer of business rescue cases to the Coopers and Lybrand Leeds office, the flagship of their insolvency team at that time. They flew a team of three people twice a week from Manchester to my offices in Norwich in order to review files of businesses (mostly landlords) with exactly these problems. Most ended up doing a "phoenix" (liquidate one company and start another) or a Voluntary Arrangement. However, at that time lenders were accepting haircuts and had real people making real commercial decisions. Sadly, I don't see any of that right now. If you have signed up to a facility with covenants you are effectively screwed in the lender wants out in recessionary times. If you do have facilities like this with a lender who has their backs against the wall or may pull out I strongly recommend you refinance now if you possibly can. Forget asking your lender to take a haircut though, you will find your business in LPA receivership before you can blink an eyelid! You can see from this thread the real impact of that.

When a lender appoints an LPA receiver it is after the relationship with the borower has broker down. The only line of communication is then with the receiver. However, it is wise to send any correspondence to both the lender and receiver.

Glenn has given sound advice on a shortfall. It also depends on who the borrower is. If in the landlord's personal name, the lender may pursue a shortfall. The first thing they would do is obtain a statement of means and then may apply for a charging order on his residence/other property if it had equity.

If the borrower was a limited company, the directors may be protected from liability. However, the lender may have taken any other security, by way of a debenture on all company assets, and/or personal guarantees from the directors (which may be secured on unsecured). If the company has other assets, your director may want to have a review of these assets himself and if there is cash perhaps it is time for a dividend distribution! If there are PGs, again the lender may obtain a charging order.

There is another issue of protecting your credit rating. This could be harmed over time as tenants vacate, the receiver may not replace them, causing arrears on the loans. Eventually this can lead to bankruptcy, so if there is any chance of salvaging the portfolio, as I said act fast.

My background is 30 years as a professional specialising in property finance. I have been dealing first hand with cases like this over the last 3 months and have already named 5 lenders I know of that are accepting discounts of 10-20% because they want the loans off their books.

Hi Dave

Are you a member of the NACFB?

If so, will you be at the AGM on the 23rd of this month? It would be great to catch up for an offline chat.

If not, please drop me an email - mark@property118.com

Hi Mark

Yes I am an NACFB mermber and of course I'll be at the AGM - after all, I did get the tickets at a discount! Hope to see you there.

Excellent, did you know that it's 20 years this year since the first meeting? My business partner and I drove all the way from Norwich to the Wirral and back one evening for the very first meeting. Advance fee fraud was rife back then and we needed to sort it out as an industry as opposed to relying on regulation. I served on the steering committee and subsequently as the first membership Director. I retired from broking 3 years ago but I have retained my NACFB membership. It's astonishing how the industry has grown over the last 20 year and especially the size NACFB membership and patrons list. The association has very kindly offered to pay for my room and my tickets at the gala dinner this year as a gesture of thanks for my input in the early years. I am so honoured by that gesture I can't put it into words. I look forward to meeting you there.

Hi

Re Mike's comments about valuations I have had similar experiences. I have had two portfolio valuations over the last 3 years and typically RICS surveyors have come in at ca 20% below my valuations. They are very conservative and value the properties based on the equivalent of a forced or quick sale. Interestingly the overall valuations were about the same but no property from each valuation was valued the same.

I carried out a three house development recently and the valuers down valued the Gross Development Value, also the land value and added £50 000 on to the build costs and came to the conclussion the development was not viable. I did it anyway and it worked well and gave a good profit. Valuers typically take the worst case scenario.

Agree that comparables are often suspect and have had a terraced Victorian property compared with a terraced ex council house with a £40 000 variation. Similarly had an internet based surveyor do a valuation of a completed restoration of a fire damaged bungalow and got hung up on floor area rather than market value. He was saying he did 6-8 valuations a day and his initial valuation was ca £50 000 below the final sale price of the property. I felt he was too busy to get suitable comparables and possibly didn't have enough knowledge of the area.

Regards

BobG

I had a similar problem with the same company. They revalued a property in my portfolio at £15k less than the valuation they gave the property seven years ago! After purchase we installed a new bathroom and kitchen, replacement windows, installation of central heating, vanity units in the bedrooms and ethernet access. In my opinion their current valuation is at least £30-£50,000 below market value. Their re-valuation did not include an inspection of the property.
I was also interested in purchasing a flat using the same mortgage company and paid the fee, but the valuation did not include an inspection of the flat, in that neither the vendor or Estate Agent were contacted. Since then another flat I am interested in purchasing was valued by someone actually going to look at the property!
Surely to value a property it is wise to take into account the condition of said property both inside and out?

Another twist in this case is that the landlord has now been declared bankrupt by court for another debt. I was in the process of buying a property from the LPA receiver and am now concerned about the involvement of the official receiver. Or don't they have access to the portfolio any more because the LPA receiver were appointed prior to bankruptcy?

If the OR is involved I would say ALL bets are off.
The OR is the big cheese in these circumstances.
Therefore avoid any purchase transaction unless the OR is content with the situation.
The OR could undo any transaction if he considers full value wasn't achieved.