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  • Mortgages & Finance

    In a real mess with RBS

    Hi

    I am after some advice if possible

    I am in a real mess with RBS regarding a personal guarantee and second charge on my home.

    I (along with a former business partner who is now bankrupt) built an apartment development in 2008.The property crash happened and the flats won't sell. They rent out very easily though.

    The bank debt is £950k and RBS want their money back. There is a Joint and several guarantee for £275k.

    The development has been down-valued and is at present is worth less than the debt.

    The bank has been quite relaxed up until now, as the rents cover the interest on the debt and there is a healthy surplus which all goes to the bank debt.

    I don't care if I never see any return on the hard work I put in - I just want to leave the whole problem behind, but there appears to be no way out.

    I need to know what RBS will do if it goes to their recoveries dept? I can't get any sense from the relationship manager who just wants me to buy all the flats myself, but I don't have the means.

    If the bank sell the properties at auction there will be a massive shortfall on the debt, and even if they force a sale on my home there will still be a massive shortfall.

    If it went this far would the bank try to evict me and my family from my home?

    I can remortgage to pay them some back, but nowhere near enough, given my house has also been drastically down valued and there's only around £150k of equity even if someone were to buy it at FMV. I am wondering whether it's time to start looking for rented accomodation and walking away from my home.

    Any advice or suggestions would be most welcome.

     

     

     

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    Ubder a PG the bank has the right to call the guarantee and if having sold your assets there is a shortfall may make you bankrupt

     

    Bengt

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    Luke,

     

    I am no expert.

     

    As far as the bank is concerned as long as you keep paying them and obey the to terms of their contract - you and your partner signed then they can't cancel the loan agreement. The problem I can see is a) because your partner went bankrupt are they still happy to accept your money just from you? As long as they are still being paid in accordance with the loan contact they should be. B) The length of loan term is too short - this will cause the problem to re-finance.

    Bankruptcy should be the last resort, not an easy route to give up.

    There is no point in remortaging if it doesnt satify the banks. The banks will hound you even after bankruptcy - repossession is little understood in so far as the implications.

    In this country it goes down to contract law - as long as you meet the terms - banks have no right to force the sale. The problem you have is the contract is probably jointly or severly - Which means its all down to you. 

    Is the title under a limited Company? What are the terms of the remainder of the loan?

    Sorry you are in this situation

     

     

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    It makes no sense for the bank to repossess - they will lose more. So whilst they are likely to squeeze your pips to pay more, they are very unlikely to call in the loan due to breach to LTV covenant.

     

    Keep on paying the contract as per the terms agreed.

     

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    I'm guessing this is a short term development loan and as such RBS have every right to demand it back. I've spoken to loads of developers in a similar boat, mostly RBS and always 2-3 year loan agreements.
    Sadly if that's the case they can indeed repossess and go after the PGs, with Luke's home having that level of equity it is very vulnerable. 
    I'd like to say RBS don't want to repossess and make a loss but unfortunately I've seen enough portfolios and blocks of recently built flats selling at serious discounts to know that they are repoing even if they make a loss. It's easier for them to write off the financial losses against profits elsewhere than to carry dead weights (the property not the developer!)
    My advice Luke would be to have an informal chat with an Insolvency Practitioner. It is not unusual for peope to retain their home in these situations even with equity in it so your best bet is to know exactly where you stand. Even if it's bad news you will know and can deal with it. It's still better than being afraid of an unknown.
    Wishing you the best, stay positive, you'll come through this no matter what, Lisa
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    Lisa All comments are for education and information purposes only and do not construe as advice or a financial promotion. No liability is accepted for comments made. If you wish to receive information in an advisory capacity then please contact me about becoming a client. www.keys-mortgages.com

    Hi

    I have until 11th Feb when the business manager reports to the underwriters as to the status of the debt and the possibility of repayment.

    A couple of years ago when newly built, it was worth around £1.1m, just as the market crashed. Now it's worth around £800-£850k at full value. If the bank repossessed them and sold them at auction, I bet it would fetch around £600k.

    When fully rented, the development brings in around £4500 pcm, and the interest is around £3k, hence the bank has been quite relaxed.

    However I am in the situation where the bank says it isn't willing to refinance due to the LTV.

    I would be willing to give all the apartment up for nothing, as long as I got released from the guarantee.

    The way I see it, the bank will never recover it's £950k, even if they repossessed my house, If they tried to sell it in this market, the £150k equity would be wiped out if they tried to auction it.

    What makes it worse is that my wife is also a guarantor, so she is in a right mess also.

    I just feel that if I walked away and started again it might be less of a worry than the current situation.

    Would it be of interest to an investor to take the apartments for nothing, as long as they were prepared to take on a £275k guarantee, and then they could refinance or do something to get RBS out of the way, which I don't have the means or knowledge to do?

    The bank won't give any indication of their settlement figure until it goes to recoveries, which it hasn't yet.

     

    Jacob Mirza said:

    Why in earth would you even think about walking away quite yet? You have got 150K equity left in your house.Can you tell us how much is the difference? What is the development worth and have you had a formal letter/demand from RBS to recall their loan or to pay them off?Is the house just under your name or your partner's as well? This can change the equation a bit.The partner that went bankrupt, did he have any ownership right in the development? How is or was the ownership structured? Is it under a limited company, if so was there any impact as a result of his bankruptcy?If you had a formal letter from them, have you seeked advice from a GOOD solicitor to perhaps approach them and try to see if the debt can be written down to a certain extent, as to what their bottom line is?What are the chances of you dabbling in the equity that you have and perhaps try to reinvest that money to make more money, you had the skill set to see the project through regardless of whatever happened to macro conditions of economy.I don't think it is quite over yet. Worse case, you can try to drag them for as long as you can, if you feel that TIME can help you pull you out of this. Honestly, I don't think it is as bad quite YET.
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    Luke,

     

    Who are the lenders to the other part of the loan?  £950k? How are the repayments on the whole lot? How are all the debt? Your income sounds ok at present but it's only a matter of time for interest rates to increase this year and that could make a massive difference - if not this year definately next.

    Where is the development located?

    Please understand - houses repossessed with a shortfall give the bank the next 12?(around this length of time) years to contact you again (on a rolling basis) for payment - irrespective of bankruptcy - You cant rebuild and start a fresh life like you would hope because the bank will track you down and ruin your life again. Banks aren't the helpful organisations they like to think they are - they are what they are - shareholders profit machines!

    Sorry Luke you have this mess on your hands and you are right to find different options in order to avoid what you fear the most.

    The more info you provide this forum, the more members may see a different ways for you to think of.

     

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    Marc,

     

    Please understand - houses repossessed with a shortfall give the bank the next 12?(around this length of time) years to contact you again (on a rolling basis) for payment - irrespective of bankruptcy

     

    Sorry but this statement is not correct. Bankruptcy cancels all debts whether there was a PG in place or not for the individual for whom an order is granted. You have to start afresh and the order will stay on your credit record for 6 years as this is the period in which credit reference agencies search. However, in the future you may be asked to declare if you have EVER been bankrupt which of course you must do legally in the event. 

     

    RobCommercial Management & Property Consultant, Wakefield, West Yorkshirehttps://www.walkerfox.co.ukE: rob@walkerfox.co.uk M: 07960 753550 T: @walkerfox S: Walkerfox

     

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    Hi

    Thanks for your interest.

    Stupidly we never got any legal representation at all !

    The RBS guy came round with the forms to fill in, and we signed them there and then, which I believe to be wrong. (My wife, and my ex partners wife were made directors at the time)

    At the time it seemed like a good idea. I remember there being a box to tick to say we had taken legal advice (or didn't want it), and we ticked it - the craziest thing I have ever done.

    The RBS guy said something like ' don't worry - I have never been involved in having to take someone's house away' and it all seemed perfectly safe.

    My wife is a part time shop assistant and wouldn't know a second charge if it came up and bit her ! 

    My ex partner is bankrupt, but the joint and several guarantee remains in place, even though his asset (his house) was repossessed by his first chargee because he stopped paying his mortgage. At this time he still has his 50% share in the company which I think is wrong, as surely the shares should be taken off him by the official receiver.Jacob Mirza said:

    Did your wife get individual legal counsel representation at the time of signing the guarantee or were all parties represented by the same lawyer?  By the way, what happened to your partner that went bankrupt, if he had any ownership interest in this building, which I assume that he did. How is it that it never got brought into his bankruptcy proceedings?

     

    The reason I ask for the legal representation of the wife is because I am helping a friend right now, where the guy purchased a business with his business partner. The bank wanted second charge on the house and it was granted but the wife never got individual counsel. The same lawyer represented all parties, that included the limited company that took over the business and then he acted for wife.

     

    The repossession of house is being challenged for last two years because of this because wife should have gotten individual counsel. I am not sure if this will attract any investor under current cirucmstances. In my friends case, buying time is giving him an opportunity to pull himself out by doing other things to make money.

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    Hi Marc

    The loan is £950k all to RBS, and the interest is about £3k per month, and the income (when all let) is around £4.5k per month. The flats are in Sheffield.

    I just can't see the sense in RBS auctioning the flats, as they will still lose a fortune even if they take my house and make me bankrupt. I have no other assets, work 9-5 and don't earn megabucks, my credit rating is now rubbish, so they will never get their money.

    I need to know what the bank would accept to allow me to be released from their clutches, but they won't tell me.Marc Smith said:

    Luke,

     

    Who are the lenders to the other part of the loan?  £950k? How are the repayments on the whole lot? How are all the debt? Your income sounds ok at present but it's only a matter of time for interest rates to increase this year and that could make a massive difference - if not this year definately next.

    Where is the development located?

    Please understand - houses repossessed with a shortfall give the bank the next 12?(around this length of time) years to contact you again (on a rolling basis) for payment - irrespective of bankruptcy - You cant rebuild and start a fresh life like you would hope because the bank will track you down and ruin your life again. Banks aren't the helpful organisations they like to think they are - they are what they are - shareholders profit machines!

    Sorry Luke you have this mess on your hands and you are right to find different options in order to avoid what you fear the most.

    The more info you provide this forum, the more members may see a different ways for you to think of.

     

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    Hi Luke

     

    As Marc has already stated , if you can give as much information as possible then someone on this forum may just come up with a solution.

     

    Whats the postcode and how many apartments are there in the development ?.

     

    D H

     

     

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