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Is it legal for a lender to purchase distressed properties

Customer Question
Is it legal for a...

Is it legal for a lender to purchase distressed properties at below market value using an investment house ?

Submitted: 4 years ago.Category: Republic of Ireland Law
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Answered in 52 minutes by:
1/15/2013
Solicitor: Ronan, Solicitor replied 4 years ago
Ronan
Ronan, Solicitor
Category: Republic of Ireland Law
Satisfied Customers: 2,256
Experience: B. Corp Law, Ll.B. Dip Comm Prop. In general practice for more then 6 years
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You question is slight unclear. can you give some background?
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Customer reply replied 4 years ago

Hi Ronan


Many thanks for your reply.


I am a letting agent who rents and manages a number of properties in a small complex for a client (the builder).


Originally many of the properties were sold to both owner occupiers and investors however when the down turn in the market came my client was left with several of the units which we have rented on their behalf for several years.


The properties would collectively been worth between 9 and 10.5 million euro at that time.


It may be worth noting at this point that all rents received for these properties have been transferred directly to the lender and the loan secured on these particular units has never been in default however the lender has now chosen to lump the two separate limited companies (??? Investment Ltd and ??? Developments Ltd) together and sell off both the sites and units at knock down prices.


The apartments were advertised in National Newspapers and a number of viewings were held. A number of offers were received which were all way below the asking price.


After all other offers had been received an investment house who had viewed the units at the initial viewing made a marginally higher offer than that of the next highest bidder. The bank expressed their eagerness to accept this offer of 1.5 million for all 15 units which understandably is causing my client a great deal of distress. They have been further distressed by the fact that it has come to light that the investment house in question is one used by their lender to buy up distressed properties on their behalf.


It also may be worth noting that I am not describing a big developer who took enormous chances and borrowed billions. This is a father and son business who like many just got caught off guard with the way the market went. They are decent honest people. The Dad is now of retirement age and this situation is taking a considerable toll on his health.


While I completely appreciate that the market has dropped considerably i feel a drop of between 7.5 and 9 million seems way out of sync.


I am so sorry to have gone on so much however i suppose what I am basically asking is although it is undoubtedly morally wrong what the bank is doing .......Is it legally wrong or is there something that can be done ?


I look forward to your reply.


Karen

Solicitor: Ronan, Solicitor replied 4 years ago
The builder has not defaulted on this loan so he is under no obligation to sell to the bank or their investment house. If he was to default, he still remains under no obligation to sell to them. The bank must then seek an order for possession and sale through the courts. They do, at that point, owe an obligation to the borrower to secure the best possible price. This is usually by way of public auction of the properties.

The bank are perfectly within their rights to make an offer on these properties. He is perfectly within his to refuse it, if he feels it is below market value.
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Category: Republic of Ireland Law
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