Cladding Issues - Not Always a Complete Disaster
The latest tip from our Receivership team
Since the Grenfell Tower tragedy in June 2017, we have been appointed as Receivers over many high-rise flats with cladding issues. To our surprise, we have achieved sales in all of our cases, although we have seen a significant reduction in buyer demand and, in turn, reduced prices.
We were recently appointed over the loan on a 3-bedroom high rise flat in Aldgate in the City fringe. Despite being a relatively modern development, the building did not have an External Fire Review Certificate (EWS-1), meaning that mainstream lenders would not provide funding. The only credible buyer, therefore, was a cash purchaser.
As there was local high net worth buyer demand, we wanted to explore the private treaty market with auction as a backstop. We appointed a well-known national estate agent with a local office to advertise to occupiers and investors with cash funding.
A suitable buyer came forward and terms were agreed, with a strict timetable for exchange and completion, meaning that a sale was completed within 10 weeks.
Although on paper the lender saw a loss, the principal loan debt and a large proportion of the interest was recovered from what had initially been an asset but had become a liability.