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Property Receivers

publication date: Apr 9, 2008
author/source: Ian Lerner
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With the property market very nervous about the implications and the possibility of lending restrictions with the resultant repercussions of the banks therefore tightening up on bank loans with borrowers being under severe pressure, the happenings of the 1990’s come back to mind. During that time many banks took the step of appointing Property Receivers to take over situations where borrowers were unable to service their loans.

When a Receiver is appointed they often discover the situation regarding the property is not exactly what the bank originally thought was the security that they were lending them money on. I have been appointed as Receiver for dozens of properties and in almost every case I discovered situations of which the bank were totally unaware.

In one case I was appointed where the borrower as far as the bank was concerned owned a property that was being converted into three flats. Unknown to the bank he decided to build a fourth flat in the roof without planning consent, but it was not only into his roof that he extended but also into the roof of the adjoining property, unbeknown to its occupiers. When I was appointed I discovered the situation and I contacted the adjoining owners and advised them that the developer not only had built into their roof but someone was actually living there. They remarked that they thought it was squirrels, to which I then commented it had to be very large squirrels!

In another instance I took over a property which was a multi let office property with ground floor restaurant where I discovered that the rents had not been paid. The tenants advised me that they had been paying the landlord direct (sometimes in cash). However I found out that the landlord was actually detained at Her Majestys’ pleasure and was likely to be so for the next seven to ten years having committed a rather serious crime. I was somewhat selfish as for personal safety reasons I chose not to pursue the borrower to the place where he was residing to collect the rents.

In another case I was appointed in respect of a property which as far as the bank was concerned was a multi let office/studio building let to various supposedly respectable tenants. Some concern arose when a report appeared in the News Of The World that an individual with the same name as the borrower was accused of bringing ladies from Eastern Europe to appear in somewhat dubious films.

When I carried out my first inspection my suspicions were confirmed when I was greeted by a very attractive Hungarian women at reception and then discovered that the tenants included a film company, two photographers and two escort agencies and several of the studios were equipped with beds. I did offer my services for a small bit part but I was declined!

In another case I dealt with a property on behalf of a bank and we were trying to make contact with the borrower who had absconded to an island in the Mediterranean. The bank regularly wrote to him without any response. I offered to make a trip with my wife to find their borrower: the banks representative felt it was too big a job and felt he should accompany me with his wife. Unfortunately the trip did not take place as the borrower’s solicitors contacted the bank and asked why we were harassing his client, to which the bank responded that if their client had opened the correspondence they would have been aware that the bank were trying to advise him that the Receiver had obtained £40,000 more than the debt and where he would like the money sent!

The lesson for people to learn is that often the borrower does not possess as much expertise in the various aspects of property matters as the Receiver. In my experience in many cases if I had been appointed or even consulted much earlier in the process there is a strong possibility that the situations would not have gone quite so badly and indeed both the bank and the borrower would still have achieved their objectives of having a profitable development or investment. The problem that I often see is that the bank are not aware of how their money is being spent and alarm bells only ring when interest payments are not being paid. Ultimately the Receiver’s job is trying to turn a can of worms into a pot of gold.

Ian Lerner – Registered Law of Property Act Receiver