Limiting the damage
Our client purchased an exciting project of 2 houses split into 6 flats illegally many years ago. The plan here was to get certificate of lawful use, refurbish them, split the titles and refinance pulling all the money out. The client used 110% bridging to purchase using second charge security over an expensive central London house.
The project was going slowly forward but she was having delays with refurbishment, had to replace the builder and generally the project was costing her more than originally expected. Adding to that she had a personal situation that made her unable to carry out the project – so one of her trusted friends took over.
This was already at a late stage, 3 months before the expiry of the bridging loan with costs about to increase from an already high £11k per month to £22k! This is where we were asked for help. The new person did not know much about the project or possess the drive to go through all the problems.
We used our 4 steps process to identify the most important aspects of the project for the client and it was clear that speed and effectiveness of clearing the debt was the priority over getting the top price for the property due to escalating costs. Waiting one month to get a better price, would be wiped with the bridging costs.
We advised to go with the auction and avoid the costs of having the property repossessed. It was a stressful situation for the client because she knew they would not make money on the project but their Central London property was in danger of being repossessed if they did not repay the bridging. The new person responsible for the project was travelling a lot for work reasons, so they were unable to attend to all these matters and needed someone capable of handling it.
The most important aspect of the transaction was the sale progression – getting all the required information for the legal packs, ensuring the property is positioned correctly, handling the matters with the bridging company and ensuring they were cooperative with releasing charges over the property. The client was confident she could trust me to handle this process for her.
We decided to go through suggested auction and in the end we sold both properties. Both sold and we were able to clear 98% of accumulated debt at the time and have the lender release charges over the properties.
The client was clearly disappointed with the failure of the original project but the sale meant she could focus on moving forward without the burden of repossession and losing her most valuable assets. This meant she could sleep well at night and take time to fully focus on personal circumstances.