markdirac
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Post by markdirac on Oct 3, 2016 14:30:41 GMT
Given we're posting cases from FC, here's one that involves the asset transfer move: "11 Aug 2016 The loan guarantor who owned property proposed a full and final settlement which would see less than 40% of the loan repaid. This was rejected on the basis that we do not accept debt write off on behalf of loan investors. We reiterated to the loan guarantor that we require a repayment plan that will see the debt repaid in full over a period of time and informed him that a lump sum payment could be accepted if proposed together with a repayment plan to settle the residual balance in monthly instalments and a charge over his jointly owned property if payments were less than 50% of the contractual monthly amount in value. We provided the loan guarantor until 17 June to revert on this proposal. The loan guarantor failed to respond and, given the matter has stalled on numerous occasions, we applied to court for judgment in default against him on 21 June 2016 to enable us to obtain a legal charge over his property by way of court order. Judgment was obtained on 7 July 2016, however we received contact from the loan guarantor in late June to advise that his property had been sold, his spouse had taken possession of the proceeds and they were now living separately. His spouse has purchased a new property with the equity generated from the joint property sale and the loan guarantor is currently in rental accommodation. At no point during negotiations did the guarantor advise that his jointly owned property was advertised for sale or that a buyer had been found. The guarantor claims that he held no financial interest in the property and his wife held a claim to the equity in its entirety as a result of her settling a number of business loans/expenses for which he was liable. However, at the Land Registry, both the guarantor and his wife are registered as the joint (i.e. 50/50) proprietors of the property. We have therefore informed the guarantor that the payment of the full balance of the equity from the sale of the legally jointly owned property to his spouse constitutes either a preference payment or transaction at an undervalue as it has put funds (i.e. 50% of the sale proceeds) which he is legally entitled to out of the reach of his creditors. We advised that, unless he is in a position to settle the debt in full, we will be petitioning for his bankruptcy in order that a Trustee in Bankruptcy can be appointed to investigate his actions and also to potentially challenge the transaction to secure funds for distribution to his creditors. We have issued a statutory demand on the guarantor as a legal prerequisite to bankruptcy proceedings and have not yet received a response, although the guarantor does have until the end of this month to make payment in full or respond with a suitable and agreeable payment plan. If we do not hear from him by the end of the month, we will be in a position to issue a bankruptcy petition for service on the loan guarantor. We have also recently issued a petition on the co-guarantor and await confirmation of the date of the bankruptcy hearing from the court." In other words, nice try but no cigar for the borrower. Thanks quidco. This anecdote is illustrative (to me) 'cos it doesn't make any mention of a business. It describes action against an individual (not a business), irrespective of how the money came to be due. And it is a Trustee in Bankruptcy who is appointed to do the chasing.
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markdirac
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Post by markdirac on Oct 3, 2016 8:37:23 GMT
Transferring an asset to escape a potential PG is fraud. The liquidator will always look for such activities, but proving it (especially if done some time before the loan goes bad) is difficult and it may not be worth pursuing. Directors will often be disqualified in such circumstances from being a Director again, although some use relatives to front other ventures to get around this.
If the house is occupied, it may also be difficult to enforce the guarantee even in the Directors name, often the best you can do is get a share of the proceeds when they sell. Charges over residences are thus less useful than over business premises or let properties.
In my experience, many Owner/Directors try really hard to raise cash to trade out of their problems. Part of this may well be giving an actual charge over the property to some other lender or extending their mortgage before the loans are defaulted leaving few assets to reclaim under the PG. Remember, more businesses collapse as a result of liquidity than profitability. So an owner will see the profits to be made while ignoring that they can't meet their liabilities in the time before they make this profit! When they are forced into a fire sale to meet liabilities, it is the discounts they have to give and costs of the sales that make the business insolvent.
- PM Thanks propman. Very clear. "Transferring an asset to escape a potential PG is fraud." ... is it necessary to draw a distinction between the business being made bankrupt, and the guarantor being made bankrupt? business bankruptWould the liquidator enforce payment of the guarantee, assuming that the directors face limited liability? Or is a PG effectively waiving Ltd liability? guarantor bankruptIt is commonly not necessary for bankruptcy to enforce a PG - it is only necessary for the loan agreement to be breached. In this case, with the business's activities and the guarantor's activities being separated, I could imagine that transferring assets would not be fraud? Particularly in the case of a third-party (non-director) guarantor?
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markdirac
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Post by markdirac on Oct 1, 2016 10:00:09 GMT
If a borrower could foresee the eventuality of his personal guarantee being called in, how long would it take for him to squirrel away his house into the legal possession of a friend or relative? In particular, would it be possible to instruct his solicitor to waive searches, which always tends to take a long time? Is there any reason why the conveyancing could not be achieved in a day? Thanks, Mark.
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markdirac
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Post by markdirac on Sept 26, 2016 17:26:26 GMT
I am concerned that, two months ago, SS reported in their "recent updates" tab regarding loans PBLs 077-080, "Land has been re-zoned. Potential valuation of over £75,000,000. Waiting on new valuation, will update when received." One of our number discovered that this was incorrect, and that the land had in fact not been rezoned. There was much discussion in this forum, but I do not believe that SS ever reported back with an explanation of how they had made such a huge mistake. All they commented on was that the security was sound. And the misinformation on the "recent updates" tab was never corrected. Am I correct?
p2pindependentforum.com/post/133690/thread
p2pindependentforum.com/post/134955/thread
If I am correct, then I am unsettled as to how/why SS would make such a mistake. Until I have an understanding as to how/why, then for me there is an unsettling unknown about this loan.
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markdirac
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Post by markdirac on Sept 19, 2016 18:36:08 GMT
'cos we are given values, by the valuer, for (a) 90 days and (b) "whenever". I reckon that SS would want to sell the security sooner than "whenever", and indeed this is what is happening with the garden centre. I guess that valuers typically offer a 90-day value because that is typically a pragmatic time for selling a property if one wants to get on with it. I was interested in your applying "realistic" to the 90 day value. Of course you can use whatever value you like in your assessment of the loan, but the subtext to saying one is realistic is surely that other valuations are unrealistic. I note that what you call realistic SS calls distressed. On that basis presumably you are bringing into your meaning of "realistic" some assumptions about a fairly widespread and imminent decline in property prices? No, I was not thinking of imminent issues. I always tend to think of "whenever" valuations as not realistic, because of the nature of P2P agencies having lenders snapping at their heels. If one is selling a property oneself, then I reckon the "whenever" valuation is useful to aim for. And if a P2P agency is expediting a sale, then they can use the "whenever" valuation in negotiation. But I would never expect that value to be achieved. It is distracting (for me) that the P2P agencies all use the "whenever" value in their calculations.
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markdirac
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Post by markdirac on Sept 19, 2016 17:35:51 GMT
... why are you using the 90 day market value? What is so special about 90 days and where do you stop - wouldn't it be more "realistic" if we had a (much reduced) value for a sale within 7 days? 'cos we are given values, by the valuer, for (a) 90 days and (b) "whenever". I reckon that SS would want to sell the security sooner than "whenever", and indeed this is what is happening with the garden centre. I guess that valuers typically offer a 90-day value because that is typically a pragmatic time for selling a property if one wants to get on with it.
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markdirac
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Post by markdirac on Sept 19, 2016 16:30:30 GMT
So the realistic value of the security (based upon its condition today if we thought we wanted to sell it within about three months) will be say £5.1M, resulting in an LTV of 80%+. As the development commences I guess the value will dip briefly, because of the cost of reinstating the land should the project fail.
Would anyone care please to take a guess at what the value might dip to, and roughly when?
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markdirac
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Post by markdirac on Sept 19, 2016 15:51:47 GMT
So the realistic value of the security today will be say £5.1M, resulting in an LTV of 80%+. As the development commences I guess the value will dip briefly, because of the cost of reinstating the land should the project fail.
Would anyone care please to take a guess at what the value might dip to, and roughly how far into the project?
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markdirac
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Post by markdirac on Aug 24, 2016 13:23:12 GMT
It is concerning that SS have not responded to the credible claim above by Mr. harryvederci implying that SS have made a mistake in recently assuring us that our security is, er, secure, and has indeed risen greatly in value.
If SS are so confident in the repayment of this loan, then we should be happy to hold it for as long as possible. Why would it be, therefore, that SS, according to their update message, are requesting the borrower to repay a proportion of the loan earlier than the borrower would like?
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markdirac
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Post by markdirac on Aug 1, 2016 18:30:20 GMT
Just noticed this is to let on rightmove at £55k per annum. £55k p.a. / 8% (the valuer's expected rent*) = £690k valuation for our £2.87M security. *page 12, section 5.1 of the valuation report Oops - I am misleading - ilmoro points out above that this £55k is for only a part of the building.
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markdirac
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Post by markdirac on Aug 1, 2016 14:35:51 GMT
Should you inspect title register for your valuable office premises you will see that it was purchased back off a previous lender for 8 or 900k. I notice (now!) that of the comparable properties listed in the valuation, many of them are not on the edge of Highbridge next to the M5, but are in Bristol. And a few are high-value offices in the centre of Bristol. (So not really comparable, at all.)
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markdirac
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Post by markdirac on Jun 17, 2016 19:26:53 GMT
Any thoughts on (e.g. how or why SS has negotiated) the (nominal) LTV of 58%? (Not that 58% (nominal) isn't welcome - I reckon 60% or 65% is more appropriate in the current climate.) Eh ? Why would you want a higher LTV ? Sorry jimbob. Less ambiguous edit: "Not that 58% (nominal) isn't welcome - I reckon 60% or 65% is generally more appropriate than SS's typical 70% in the current climate." I like Liz's suggestion that because of the PF, the risk is primarily SS's, and so perhaps SS "aren't comfortable lending more than 58%". If correct, then why would SS be less comfortable with this loan? Because of Brexit? Or something else?
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markdirac
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Post by markdirac on Jun 17, 2016 16:19:08 GMT
I am puzzled and concerned that (for PBL116 Luton at least),
SS states "The borrower is using the [loan] to purchase the property...",
whereas the valuation states "We note that the applicants purchased the property on 6th April 2016 ...".
The word "applicants" is ambiguous - it cannot refer to SS, so I must assume iy refers to the loan applicants.
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markdirac
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Post by markdirac on Jun 17, 2016 16:01:00 GMT
Any thoughts on (e.g. how or why SS has negotiated) the (nominal) LTV of 58%?
(Not that 58% (nominal) isn't welcome - I reckon 60% or 65% is more appropriate than SS's typical 70% in the current climate.)
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markdirac
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Post by markdirac on Jun 15, 2016 18:01:34 GMT
Oh yeah. Got it. Thanks c_d.
I had not realised that PiP as per 2015 Housing and Planning Bill had been shortened to "in principle" and had become an accepted piece of jargon. I guess we should watch out for situations where we are told that pp has been granted "in principle", but the meaning is not in that sense. For example, "pp has been granted in principle on the assumption that we get around to applying and, further, prove to be successful."
A little ambiguous.
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