Danske appoint receiver on performing mortgage cos a joint borrower in default on unconnected loan

Discussion in 'Mortgage arrears & negative equity case studies' started by The Partnership, Mar 20, 2016.

  1. The Partnership

    The Partnership Registered User

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    Bank appoints receiver on a commercial buy to let fully performing 10 year old capital and interest mortgage because one of the three partners has defaulted on a unconnected loan.The bank refuse to give the partnership any information on the separate default.The partnership has made a complaint to FSO and we are waiting for acceptance of jurisdiction.I would like comments from anyone with helpful knowledge or experience in similar circumstances.
     
  2. Jim Stafford

    Jim Stafford Frequent Poster

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    Last edited: Mar 21, 2016
    All mortgages have "MAC" clauses, i.e. "Material Adverse Changes", which sets out the bank's definition of what constitutes a loan default, and which would therefore enable the bank to call in a loan and appoint a receiver if the loan is not repaid. Such a MAC clause might be "if a judgment is obtained against any borrower" etc. Another typical MAC clause would be if any of the borrowers defaults on another loan with the same bank.

    Due to the Data Protection Acts and banker confidentiality, Danske would be unable to provide you with any further information on your partner's default.

    The only way to remove the Receiver might be to re-finance the property with another bank, and pay off Danske in full.

    In the circumstances, you should seek specific legal advice as to whether you can challenge the appointment of a Receiver. You might also seek legal advice as to whether you should take any legal action against your defaulting partner for possibly not disclosing whether he/she had financial issues at the time that the partnership loan was taken out.

    Jim Stafford
     
    Last edited: Mar 21, 2016
  3. Brendan Burgess

    Brendan Burgess Founder

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    Jim

    That is amazing. I wonder do people buying property in partnerships know this?

    Although Danske has a right to appoint a Receiver, why would they do it if the loan had been performing fully?

    To get rid of a cheap tracker? To close down its mortgage book in Ireland?

    The loan is fully performing and the other two are jointly and severally liable anyway.

    Brendan
     
  4. Jim Stafford

    Jim Stafford Frequent Poster

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    Although the loan might be fully performing, Danske might have formed the view that the defaulting borrower will have significant residual debt remaining on his defaulting loan, and that the defaulting borrower might need to access the "equity" in his partnership loan to pay off Danske. If the loan was a 10 year Principal & Interest loan, there is likely to be equity in the partnership property at this stage.

    Jim Stafford
     
  5. Brendan Burgess

    Brendan Burgess Founder

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    That makes good sense. It stops him moving assets away from Danske.

    Brendan
     
  6. The Partnership

    The Partnership Registered User

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    The T & C .Structured term loan . To assist with the purchase of commercial and residential property.240 months.interest only 36 months thereafter 204 monthly. Euribor 30 days plus 1.3%.The receiver is trying to sell. Danske demended account and refused to accept any repayments.Two of the three partners who are siblings kept up all repayments until bank demended account .The tenant payed rent without fail to the partnership but when the receiver was appointed they did not pay the receiver. The receiver has been in contact and we put our position to them .
    The first contact from the bank was a phone call and an e mail Jan 2014 informing us Danske was exiting ireland and would we consider a discount and to refinance
    in april 2014 demanded full payment because we failed to make payments
    we sent two letters ,which were ignored
    may 2014 demand letter because an event has occured
    sent 2 more letters asking what event letters ignored
    Sorry this info is a bit sketchy i will spend some time and put the bones of our 2 year experience with Danske and post it at a later date
    Regards.
     
  7. Brendan Burgess

    Brendan Burgess Founder

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    That is very sketchy.

    When did the the bank notify you that there was a default event?
    When did they appoint a Receiver?

    It seems in this case that they were just using that clause to get you off a loan they don't want anymore. A very cheap tracker rate of Euribor +1.3%.

    What did your solicitor say?

    Brendan
     
  8. The Partnership

    The Partnership Registered User

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    Hi I will give as near as possible a breakdown of events which proceeded our current predicament.
    A partnership of two brothers and a sister ,lets call them Michael John and Mary . purchased a commercial / investment property in a Cavan town which cost the partnership € 540,00 including stamp duty. .Michael and John had no other investments ,Mary had a number of investments the details of same were not known.
    In Nov 2005 we got a 20 year tracker mortgage with National Irish Bank for € 420,000 @ 1.3% plus Euribor the first three years interest only then 17 of interest and capital
    The term in the offer letter which the bank relied on to call in our loan was "(b) if you shall default in the performance of any other term,condition or covenant contained in this agreement or any other facility or agreement with the bank and such default shall continue unremedied for ten days after written notice thereof shall have been given by the bank to you"
    Sometime in 2010 we lost our main tenant due to the recession and the building remained empty for a few months so we asked the bank to give us 6 months interest only until we changed PP to a restaurant for which we had a client . We were in contact with our account manager at this time and he seemed happy with our progress. At that time we were struggling and we were 2 to 3 weeks late with our payments on 4 or 5 occasions .We had to pay €8000 to local council for change of use to a restaurant.
    In April 2011 we received notice "from today we have stopped your account", a demand letter from Danske for the full 356,000 in 21 days because "we are not satisfied with the manner in which you have conducted your account".Michael was called into a meeting 2 days later and told to forget about the letter and told there was a miscalculation and in fact the partnership had over payed their mortgage by over € 15,000.We were then told instead of interest only for 6 months the bank would use the over payment to cover the following six months. No interest,compensation or apology.
    On January 2014 Michael received a phone call followed by an email from N o C Danske banks credit manager offering a discounted settlement ,if we would refinance with another bank.
    On April 2014 We received a demand letter. You have failed to make payment to the bank on due dates, we give notice we have stopped accounts, and exercise our right of combination and set off .(we were fully paid and up to date)
    Our solicitor asked all the relevant questions in reply. He received no reply to 2 letters.
    On May 2014 We received a demand letter. An event has occurred insofar as demand has issued in respect of other facilities you have with the bank .and account closed ,right of combination and set off.
    On May and April 2014 we sent two more letters asking the bank all the relevant questions and advising them of the stress they were causing ignoring our letters, No reply.
    On June 2014 Receiver appointed to property.
    On January 2015 we received a summary summons
    On January 2015 we entered an appearance
    On July 2015 we complained to the FSO about 4 unanswered complaint letters
    On August 2015 FSO accepts our complaint for dealing.
    On August 2015 we received our first acknowledgement from Danske of the letters we sent in April 2014, and only because the FSO got involved
    We have sent different complaints about wrong addresses on demand letters , overcharging,confidentiality issues and some of the lame excuses Danske made would make you laugh if it was not so serious .
    On October 2015 we had a meeting ,Our solicitor, Michael John Mary and two of the banks reps .from the meeting the bank offered two proposals
    1. Forget this all happened ,€ 5000 for our trouble and start paying our tracker over 10 years
    2.lump sum of € 225,000
    The two options were subject to withdrawal of FSO complaint and further legal action
    So we asked the bank to drop this clause , they refused.
    We are now waiting for the decision from FSO on adjudication before we progress .
    I would be great-full for any comments and if you need any more info i will forward to the best of my ability.
     
  9. Brendan Burgess

    Brendan Burgess Founder

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    They are offering to settle the loan for €225k? How much is outstanding at the moment - around €350k?

    How much is the property worth?

    That seems like a pretty good deal if two of you are solvent.

    The FSO might uphold you complaint, and award you some compensation, but I would not rely on it.

    The most likely outcome is that the bank will sell the property and you will both be personally liable for the shortfall.

    Brendan
     
  10. The Partnership

    The Partnership Registered User

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    The property was valued at approx €120,000 by local auctioneer

    The remaining mortgage is approx € 300,000

    The settlement of € 225,000 is off the table

    We were served a summary summons in January 2015 how long do Danske have before they have to send their grounding affidavit or is there a time limit
    We feel the receiver was appointed mistakenly .
    In a letter dated August 2015 Danske confirmed

    "This debt was not a repayment default but was rather the subject of a cross default"

    In a letter dated January 2016 which was a correspondence between Danske and FSO .The bank states,

    "The said default relates to a facility in the name of one of the parties to this loan facility , held jointly with another party who is not party to this loan facility.For this reason we are not able to release details of the facility which is in default as that other party has not given their permission to release information in relation to their account."

    This letter goes on to quote the clause in the facility letter it is relying on "Events of default"

    (b) "If you shall default in the performance of any other term , condition or covenant contained in this agreement or any other facility or agreement with the bank and such default shall continue unremedied for ten days after written notice thereof shall have been given by the bank to you "

    This would suggest the word "you" relates to the partnership and not a member of the partnership.
    How could the Partnership remedy a default in ten days when it was not given written notice and when Danske were not allowed to let the partnership know what the default was and the name of the defaulter.
    Please let me know your thoughts
    Regards
     
  11. Brendan Burgess

    Brendan Burgess Founder

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    I think you should get someone competent to enter into negotiations with Dankse to resolve this for the benefit of both sides. If you can get that offer back on the table, grab it.

    Brendan
     
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  12. The Partnership

    The Partnership Registered User

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    Thank you for your advice.
    We are waiting for FSO to come back to us before we make any decisions on our next move and we are been advised by our solicitor .
    I would appreciate reply's from anyone with experience with bringing Danske to the high court ,cost,result,and an overview of their experience.
    regards
     
  13. Brendan Burgess

    Brendan Burgess Founder

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    What I am suggesting is that the legal approach is the wrong approach. A lot of people contact their solicitor and initiate expensive and time-consuming legal action.

    Danske has shown themselves open to resolve these matters through a generous offer and that is by the most practical solution.

    I am not sure what you would consider a "win" from the FSO? The withdrawal of the Receiver? You will still owe the €300k.

    If the FSO rejects your complaint, which is the most likely outcome, you cannot take a case on the same issue to the High Court. Of course, you solicitor will have told you that already.

    High Court rules that if the Ombudsman dismisses a case, one can't take legal action
     
  14. The Partnership

    The Partnership Registered User

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    Last edited: Mar 30, 2016
    Thank you for your suggestions we appreciate your feedback but we did not initiate expensive legal action.
    We paid our mortgage in full and up to date for approx 10 years .
    We followed all the terms of our loan agreement.
    Danske Bank closed our account so we were not able to pay our mortgage ,they appointed a receiver ,they issued a summary summons,we went from being a good compliant customer to "The Defendants" because Danske wanted to scrap our tracker leave Ireland with as little baggage as possible.
    We are not going down the legal path lightly, our solicitor pointed out early in this process that we could lose our homes our business our savings and our reputations, and all because Danske want out.
    In hindsight we could have done some things differently but we went with advice from solicitors and friends in banking and our gut feelings.
    So what way should we have handled this process, considering.

    The bank would not answer our solicitors letters.

    They would not agree to meet us until the FSO got involved.

    Danske treated us with complete contempt until the FSO stepped in , so we got our first reply to our solicitors letters sent April 2014 in August 2015, just 16 months later.
    Regards
     
    Last edited: Mar 30, 2016
  15. llgon

    llgon Frequent Poster

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    I like many others had/have an offset mortgage that Danske unilaterally withdrew and were forced to restore to borrowers following complaints to FSO. Like you I think we were treated with contempt by Danske. However in the end I think we got a reasonably fair settlement (I settled with them prior to an FSO outcome).

    I agree with Brendan that even though you have been treated very badly the settlement you were offered sounds like a pretty good deal for you (if it was financially possible for you to avail of it). By rejecting it I think you have taken a huge risk with the prospect of very little if any improvement in the event you are successful with your complaint to the FSO. I too would try to get that offer back on the table.

    You do need to look at what outcome you ideally hope to achieve and the chances that this will happen. Have you received advice from your solicitor regarding this specifically?
     
  16. Bizzy

    Bizzy Registered User

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    An offer to settle for €225K would be a write down of €75k and that seems a very good deal. Do you have €225K? Given the account is deemed in Default ha this affected your credit rating? Have you approached another bank to see if you Three can raise €225K? If so will they issue you Three, or is it One Partnership, a loan. What would the payments be for the next 10 years? How would this compare with your €300K on tracker rate over 10 years? Did your tenants make payments to you, the receiver or the bank. Do you still have the tenants?
     
  17. The Partnership

    The Partnership Registered User

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    Hi i will answer some of your points
    We do not have € 225K
    The partner Mary, who is in default on another unconnected account will not give up her share in this partnership.
    Any banks we approached about refinancing would not consider lending without removing Mary from the partnership.
    Our tenant has not paid rent to anyone since the receiver was appointed.
    Regarding the tenant, they have been in the premises for the last two years rent free ,so are they tenants !
    Regards
     
  18. Brendan Burgess

    Brendan Burgess Founder

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    What a mess. I will remember this thread whenever anyone asks for advice about buying a property with others.

    Brendan
     
  19. llgon

    llgon Frequent Poster

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    Mary has been offered the opportunity to get out of a mortgage of 300k on a property worth 120k and all the mess along with it and has refused. Am I missing something?
     
  20. Banjaxed

    Banjaxed Registered User

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    'Mary' is a nightmare ! She might be your sister but someone needs to go bring her to her senses ! She has the opportunity to make things right (she should have informed you guys before this partnership that she was with otherwise partnered) .
    She has nothing to lose by backing out of partnership now ?? How can she live with her herself .. Especially if your family homes are brought under the equation by her not doing the right thing ??