Recovery matters: solving the problems of property

13 January 2022 / Insight posted in Article

Property cases can be complex and throw up investigation work – it is often careful planning and working well with others that produce results.  Planning and a logical methodology are key to ensuring a successful outcome.  We are seeing many more complex property-based cases which involve more than just selling a property.  The pandemic will give rise to many landlord/tenant disputes and instances where investors in property will need considerable help from advisers to recover monies.

Moore Kingston Smith’s business recovery and insolvency experts can help to unravel the complex debt webs which can arise in these cases.

Case study – too many bank accounts
The Company was a property management agent which managed approximately 200 blocks of flats and 6,000 individual leaseholders. Part of the Company’s duties were to collect ground rent and service charges, deduct their fees and send the balance to the freeholders of the blocks, while also maintaining a reserve fund for the leaseholders.

The Company was required to operate a ring-fenced client account for each individual block, ensuring that the monies they collected were correctly accounted for and held in Trust. However, it later transpired that the Company had been mismanaging its Trust monies for many years and a significant deficit had arisen.

The Company’s directors decided to place the Company into Creditors’ Voluntary Liquidation and a partner in this firm was appointed Liquidator at a meeting of creditors.

After incurring significant losses and poor quality of service from the Company, the creditors (freeholders) required new management agents to be appointed swiftly and to begin handling their accounts in the proper fashion expected. We recognised this need and designated resources to ensure the Company’s software provider’s data, bank statements, and refunds were supplied to the freeholders and their new management agents as soon as possible.

The Company operated around 400 bank accounts. Some of the Company’s accounts still had Trust monies in them, requiring a significant reconciliation exercise to determine who the Trust monies belonged to. Freeholders were contacted and the money was returned. Over 90% of the money owed has been repaid to date.

Predictions 2021/2022 

So how did I do in 2021? – another impossible year to predict

  • I think the Euros may go ahead but not in all the countries initially envisaged, so will need quite a restructure, and unfortunately it may take place without spectators.  This was mainly right, as The Euros didn’t take place in three venues and they were watched by varying numbers of spectators.  Regrettably there were large numbers watching England lose in the final!
  • Trump will abscond under cover of darkness into exile in fear for his life.  Well, has anyone actually seen him?
  • Spurs will win the Premier League (and only because I have a small wager on that).  So I put a jinx on that!
  • The Budget will bring future hikes in tax rates, particularly company tax and capital gains tax, but also possible increases in VAT although the current 5% rate for hospitality may continue for some time.  So far, only limited changes to capital gains but there may well be further changes down the line – it will be interesting to see how the government balances the economic calculations with maintaining political goodwill.  VAT rates remain low in the hospitality sector and more support is being offered to those struggling businesses.

And so for 2022:

  • Unfortunately, we will see some large failures amongst big brands in the leisure and hospitality sector.  I’m sure there will be some large hotel and restaurant chain failures, with substantial re-alignments in the sector (see below).
  • There will be an increase in the emergence of large “leisure venues” where you eat, play, drink, etc, utilising big empty spaces to promote a whole day’s activity – this may be fuelled by tax breaks to commercial rates in the leisure sector.
  • Talking of fuel, it may be necessary for some energy businesses to move back into public ownership to ensure continued supply.
  • Brexit will raise its head again, as the Irish border issue can’t be resolved.
  • Boris will struggle to hang onto power as his increased unpopularity gives others in the party an opportunity to step into his role – but who would really want that job, I ask?