Receivership Update: Looking back on 2023 and forward to 2024

2023 was another busy year for the Receivership team. Our team dealt with a range of property of all sizes and values across the country, mainly high value residential, although we saw more commercial appointments in the last quarter. We had a 38% increase in receivership cases in 2023 compared to 2022.

Our highest value case was a home in Highgate N6 valued at £40m, with our lowest being a residential investment in Lancashire valued at £80,000. Our largest size case was 45 acres in Ascot and our smallest being a studio flat in Lewisham. 

We have had a significantly higher number of high value residential properties, mostly in London, at values of £10m plus in the last year – previously it was very unusual for us to see such assets in receivership.

We have also seen an increase in cases where assets are restrained by Freezing Orders, Proceeds of Crime restraint, or similar actions. We have been accustomed to dealing with these for many years so generally know the right approach to take.

Insurance

We have noticed that the insurance market has become much tighter in recent months, especially in respect of receivership appointments which are perceived as high risk.

While our receivership team has an excellent claims record with only one small building claim since our first case in 1992, our insurers have become very selective, especially for high value lots.

In one case, a palatial home on a private road with 24/7 guarded gated access and full-time security staff in the house, which was newly built, was still refused, only because of the high reinstatement value. In another, a Grade 1 Listed house in Central London proved very hard to cover, simply because of the Grade 1 listing.

Insurers are placing requirements which we find obtuse, in what appears to be an excuse to refuse offering cover.

While we find that lending valuations are often of poor quality both in terms of value and content, insurance reinstatement figures are sometimes simply omitted.

Our advice to lenders is to insist that this is always included in the lending valuation and that a reinstatement valuation is obtained on any larger or higher value properties because if there’s a claim, the value of your security could be severely reduced or even disappear, especially if insurers apply averaging to reduce the pay-out.

Land Registry

We are still experiencing lengthy delays with the Land Registry and have had instances this year where we instruct a lawyer having agreed a sale, and title issues come to light which we were not previously aware of.

We now suggest that either we, or the lenders, instruct their lawyers to prepare a full legal pack for a sale at the time of our appointment so that all problems are addressed well before a buyer is identified.

Fraud

As usual, we have had cases involving fraud and other crime and more cases than usual where there have been Freezing Orders or Confiscation Proceedings.

We are reminded of a quote by the wonderful author O. Henry in The Octopus Marooned (1908): "It was beautiful and simple, as all the great swindles are."

Retrospective Warranties and Insurance

We have noticed an increase in appointments over developments where work remains to be completed. In some cases, it is quicker, simpler and produces a better result to simply sell “as is”. In others, especially where work is almost complete, we finish the work. We have experienced issues with partially completed developments where lenders may not receive full, accurate, or genuine information on supervision.

We have had some success in identifying insurers who will provide guarantees with limited information, which has saved a sale and helped maintain value.

We still find lenders who leave too much to the borrowers, especially in cases involving development funding and supervision.

False Information

Borrowers can do this for a variety of reasons – to improve the loan to value ratio, to obtain funding which would otherwise be impossible, or to conceal fraud.

This often only comes to light when we get involved but better due diligence on issuing loans would sometimes have revealed the issues. In one case we are dealing with, what was presented as an Assured Shorthold Tenancy allegedly turned out to be a Life Tenancy issued on a purported equity release scheme.

Looking Forward to 2024

We have had a very busy start to the year with new case appointments or strategy discussions with old and new lenders in the first few weeks of January.

Our impression is that there may be more appointments over commercial assets, possibly because loan periods are longer and thus the impact of higher interest rates is delayed.

We always prefer to discuss potential new cases at an early stage to help us formulate a proper strategy and sometimes advise on how the appointment might be avoided or dealt with in a more effective way.

If you have any questions or want to speak with our team about any current or upcoming instructions, we will look forward to helping.