Commercial loan sold to vulture fund

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Fionawhyte

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We have a commercial mortgage on our business, a pub. The pub is valued at 175,000, the loan is now at 250,000 because we have not been able to lease the pub for a year now. It was at one point down to 210,000 and we made an offer of 130,000 to the bank at that time which they refused. We have engaged consistently with the bank in an effort to get them to tell us what they will settle for but they have not responded except to keep putting us off. Our loan has now been sold to a vulture fund and we are wondering if they will be more amenable to reaching an agreement. We could probable come up with 180,000 at a push but cant get to 250,000. Any advice would be gratefully received.
 
The loan is to you and is not limited to the value of the pub.

So if you have other assets, they will want those assets to be sold so that you can repay the loan.

But the VF will probably be more efficient than the bank.

If your only other asset is the family home, then you should contact an insolvency practitioner for advice.

Brendan
 
Brendan Burgess said:
The loan is to you and is not limited to the value of the pub.

So if you have other assets, they will want those assets to be sold so that you can repay the loan.

But the VF will probably be more efficient than the bank.

If your only other asset is the family home, then you should contact an insolvency practitioner for advice.

Brendan
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The loan is to a partnership, my husband and his brother. They sold two properties, the proceeds of one has been paid against the mortgage and the proceeds of the second 130,000 is what they were using to try to close the loan. This is still available to use. Our PPR is in my name and my husbands but I have nothing to do with the commercial loan.
 
The legal position is that the partnership is fully liable for the loan, irrespective of the value of the proceeds.

Your husband's assets would be in the mix - so half of your PPR.

Your half of the PPR would not be available.

Brendan
 
Brendan Burgess said:
The legal position is that the partnership is fully liable for the loan, irrespective of the value of the proceeds.

Your husband's assets would be in the mix - so half of your PPR.

Your half of the PPR would not be available.

Brendan
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Can we be forced to sell our PPR then? Do you think the VF nowadays is open to negotiating a settlement or will they go hardline and go after the full amount with no negotiation?
 
Fionawhyte said:
Can we be forced to sell our PPR then? Do you think the VF nowadays is open to negotiating a settlement or will they go hardline and go after the full amount with no negotiation?
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Much will depend on the VFs view on the value of your home. If you have a particularly valuable home, with significant equity in it, expect them to try and push you to downsize. A more modest home will not be as attractive to them.

Regardless, any attempt to to force the sale of your home, can be defended, and the odds are very much in your favour, if it ends up in a court room.

Keep the cash that's available "ring fenced", and wait for the VF to contact you. They'll be in touch, in due course. Don't agree to use part of it, to make regular payments, as this will disadvantage you.

In the meantime, explore other possible options, in terms of the pub, and potential sources of income.

You mentioned that the pub hasn't be leased for a year - why can't you and your husband run it, or your husband and his brother?

If neither your husband or his brother are working there, and can't, or won't, what are they doing for regular income?

Does the lender also have a charge over the licence, or just the freehold property?

Is there any potential to develop the property, maybe increase capacity, add an additional facility (restaurant, shop, off licence, take-away, or even residential - subject to planning permission etc.) ?

If the pub is no longer viable, then explore the possibility of a complete change in use (subject to planning permission, and potential to either increase value, or generate a regular income from it).

Speak to a local architect, and seperately a local estate agent, to get their opinions on what options there are for the commercial property.
 
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My husband works as it is, we are in our 60's and unable to take on additional work. He has medical issues also. His brother lives in the US. We live in a small village with a pop of less than 1000 and we also have 11 other pubs! We had it leased to a young couple up to Sept 2022 but they couldn't make it work for them, hence not a viable option to operate as a pub. We have it with an auctioneer since Sept 2022 to lease for any type of business but no takers.The bank recently had the building valued a secong tome telling us it was to inform them of what they would expect from us as a settlement, previously valued at 175000 witjout the licence. They dont have a call on the licence. Then out of the blue we received the letter saying theyhad sold the loan. Is there a way of finding out what the value was and is there a way of finding out what the VF paid for the loan. Will the VF be aware of our offer of 130000?
 
Fionawhyte said:
. Is there a way of finding out what the value was and is there a way of finding out what the VF paid for the loan.
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No they won’t tell you and in any case cannot even be calculated for your loan as almost certainly a whole bunch of loans was sold including yours.
 
We made an offer previously of 130,000 which was rejected. We have not made any offer yet to the VF, we are just wondering if they are generally open to negotiating or not. We personally do not have 11 other pubs, the town has 11 other pubs making it very difficult both to run or sell a pub.
 
MrEarl said:
Much will depend on the VFs view on the value of your home. If you have a particularly valuable home, with significant equity in it, expect them to try and push you to downsize. A more modest home will not be as attractive to them.

Regardless, any attempt to to force the sale of your home, can be defended, and the odds are very much in your favour, if it ends up in a court room.

Keep the cash that's available "ring fenced", and wait for the VF to contact you. They'll be in touch, in due course. Don't agree to use part of it, to make regular payments, as this will disadvantage you.

In the meantime, explore other possible options, in terms of the pub, and potential sources of income.

You mentioned that the pub hasn't be leased for a year - why can't you and your husband run it, or your husband and his brother?

If neither your husband or his brother are working there, and can't, or won't, what are they doing for regular income?

Does the lender also have a charge over the licence, or just the freehold property?

Is there any potential to develop the property, maybe increase capacity, add an additional facility (restaurant, shop, off licence, take-away, or even residential - subject to planning permission etc.) ?

If the pub is no longer viable, then explore the possibility of a complete change in use (subject to planning permission, and potential to either increase value, or generate a regular income from it).

Speak to a local architect, and seperately a local estate agent, to get their opinions on what options there are for the commercial property.
Click to expand...
MrEarl said:
Much will depend on the VFs view on the value of your home. If you have a particularly valuable home, with significant equity in it, expect them to try and push you to downsize. A more modest home will not be as attractive to them.

Regardless, any attempt to to force the sale of your home, can be defended, and the odds are very much in your favour, if it ends up in a court room.

Keep the cash that's available "ring fenced", and wait for the VF to contact you. They'll be in touch, in due course. Don't agree to use part of it, to make regular payments, as this will disadvantage you.

In the meantime, explore other possible options, in terms of the pub, and potential sources of income.

You mentioned that the pub hasn't be leased for a year - why can't you and your husband run it, or your husband and his brother?

If neither your husband or his brother are working there, and can't, or won't, what are they doing for regular income?

Does the lender also have a charge over the licence, or just the freehold property?

Is there any potential to develop the property, maybe increase capacity, add an additional facility (restaurant, shop, off licence, take-away, or even residential - subject to planning permission etc.) ?

If the pub is no longer viable, then explore the possibility of a complete change in use (subject to planning permission, and potential to either increase value, or generate a regular income from it).

Speak to a local architect, and seperately a local estate agent, to get their opinions on what options there are for the commercial property.
Click to expand...
My husband works as it is, we are in our 60's and unable to take on additional work. He has medical issues also. His brother lives in the US. We live in a small village with a pop of less than 1000 and we also have 11 other pubs! We had it leased to a young couple up to Sept 2022 but they couldn't make it work for them, hence not a viable option to operate as a pub. We have it with an auctioneer since Sept 2022 to lease for any type of business but no takers.The bank recently had the building valued a secong tome telling us it was to inform them of what they would expect from us as a settlement, previously valued at 175000 witjout the licence. They dont have a call on the licence. Then out of the blue we received the letter saying theyhad sold the loan. Is there a way of finding out what the value was and is there a way of finding out what the VF paid for the loan. Will the VF be aware of our offer of 130000?
 
Hello,

Firstly, forget about the price that the Bank sold the loan to the Fund at - you will never be told, and even if you were told, it's irrelevant, as you weren't part of the deal, and you won't get a deal at the same price. The Fund will be seeking to maximise its profit, so will press for the full debt, if it thinks it can secure it.

You are now dealing with the Fund, who will probably be more engaging, but will also press for the maximum payment that they can get from you.

The fact that there's personal recourse against both your husband, and your brother in law, gives the Fund scope to look at more than just the value of the (former) pub. They'll look at all assets, and income sources, and if you've got 11 pubs, then expect them to look at all of them, and any other assets held in your husband's name (be they part or fully owned, by him). They'll also press for infornation from your brother in law, who may or may not cooperate. If he doesn't, that'll have little impact on the approach that the Fund will take with your husband.

The bottom line here is very simple, your husband and his brother need to either repay the full debt, or to do a deal, and the only way to do a deal, is through proper engagement with the Fund. That will include the Fund wanting full disclosure of all assets and all income sources - so don't waste your time thinking otherwise.

I'd recommend that your husband and his brother get a professional involved to represent them, and help put a little distance between the Borrowers and the Fund. Your accountant may be able to help, or alternatively perhaps engage a Personal Insolvency Practioner (a "PIP"), who will have plenty of relevant experience, when it comes to dealing with these Funds (regardless of whether it's directly in relation to Insolvency, or not).
 
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Fionawhyte said:
we also have 11 other pubs!
Click to expand...

Fionawhyte said:
We personally do not have 11 other pubs, the town has 11 other pubs making it very difficult both to run or sell a pub.
Click to expand...

Fiona has clarified that the village has 11 other pubs, not them personally.

But I agree that they should resolve the situation as quick as possible if they can.
If for no other reason than trying to avoid having a bad credit rating, in case they need to borrow in the future.
 
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