Mortgage Removal

[tpr2]

Do you still want it?

[Davo36]

Yeah I do. I have been looking around and can't find anything better right now.

I reckon I can make some money out of it if I get it. Both in terms of increasing the rent (and keeping the cashflow which comes off of it) - and the potential to give the shops a bit of a makeover and sell them individually. Theyr'e already on separate titles so I could sell them off as smaller investments ($100 to $200k each) and make a some money - all conjecture until I can actually do it I guess.

David

[tpr2]

Have you tried talking to the mortgagors?
Maybe they will do a deal?

[Davo36]

Mortgagors? You mean the vendors right? No I haven't spoken to them directly. I have however asked the agents to ask them what it going on. They won't. Unbelievable eh? The agents (Bayleys) only seem to want to deal with the vendor's solicitors. And they basically aren't saying anything. The agents must be able to contact the vendors, but I think it's quite hard with them being in Cambodia a lot of the time, language difficulties etc.

I might ring the agents tomorrow and see if I can get any sense out of them. They don't seem to really care one way or the other. Which is surprising really.

I did ring the first mortgagees, Trustees Executors Ltd. They wouldn't tell me anything. Which is to be expected really. The second mortgagee Bridging Finance Ltd has already agreed to sell the property and lose all their money.

[MoatMaster]

The problem we have in this country is that the agent's commission is paid by the vendor. That is a system that needs a complete overhall. In any business, we can tout what we like, but unless we have a willing buyer it is worthless.

[tpr2]

Mortgagors? You mean the vendors right? No I haven't spoken to them directly. I have however asked the agents to ask them what it going on. They won't. Unbelievable eh? The agents (Bayleys) only seem to want to deal with the vendor's solicitors. And they basically aren't saying anything. The agents must be able to contact the vendors, but I think it's quite hard with them being in Cambodia a lot of the time, language difficulties etc.

I might ring the agents tomorrow and see if I can get any sense out of them. They don't seem to really care one way or the other. Which is surprising really.

I did ring the first mortgagees, Trustees Executors Ltd. They wouldn't tell me anything. Which is to be expected really. The second mortgagee Bridging Finance Ltd has already agreed to sell the property and lose all their money.

hmmm you would think if second mortgagee was willing to settle then the settlement could go ahead. Surely they don;t have so much debt on it that the price your getting it for would be less than what is owed the first mortgagee.

[MoatMaster]

Depends on the circumstances.
A 2nd tier lender should know how high the priority amount is likely to be for the first lender. In this market, they should also know that circumstances are that they are unlike to recover, given the above & that values have declined.
Knowing that you are very unlikely to recover anything , then would seem far easier to determine that, & write it off your books. I cannot see any possible reason or benefit for them dragging out the inevitable. If client owes first lender, then there is not much chance in this market 2nd lender will get anything other than unnecessary legal costs, that they know they will also not recover.

[Davo36]

Apparently the first mortgagee will be facing a loss also Terry. Not sure how much. Can't get any info from the vendor's solicitors. Quite amazing really. They must have it geared up to the eyeballs.

They bought it for $1.16m in 2006. My contract is in place for $850k. So I guess they could have a mill borrowed on it in total. The first mortgagee might have lent say $900k. Stupid lending by these guys.

David

[tpr2]

$850k out of the $900,000 would be better than nothing though.
Good luck, I hope it all works out.

[Davo36]

OK, things have just gotten really interesting.

I spoke to a couple of the tenants yesterday morning and they said they had been visited by the vendor in the last couple of days and he has said that he is not settling the whole block and did they want to buy their individual shops?

So what he's doing is he's waiting for me to throw the towel in and then sell the shops individually for more.

What a bugger! Hate to seem racist but Asians can be devious buggers in business some times.

I have also spoken to the principal at Bayleys on the Shore. He has been speaking to Trustees Executors - trying to get them to accept the contract as it now stands. Trustees Executors will not do this. Apparently the short fall is only around $15k. Their company policy is that "They will not crystallise losses". This says a lot about the current environment.

So now I have 3 choices. 1) Walk away when the time is up on Tues afternoon. 2) Caveat the titles and threaten to sue or 3) Negotiate with Trustees Executors and perhaps pay the extra $15k to buy the property - it'll cost me that much to sue anyway. But then I may have to pay extra for outstanding rates too. The tenants have been paying but I imagine the vendor hasn't been paying the councils so I would have to front up with that money too.

This guy has defaulted on another property in Birkenhead and another property in Christchurch. So he owes money all over the place. So I'm unlikely to be able to successfully sue him. Not only because he has no money and lives in Cambodia (where he's sure to scuttle off to if he's sued) but because it's hard to quantify my losses. I haven't paid a deposit so my losses amount to my solicitor's costs and my time. I'd be hard pressed to claim any more than say $10k and it's not worth sueing for that.

So I'm thinking I will have to walk away. I went to the shops again yesterday to have another look and think about it. One of the shops has been empty for over a year. Another of the shops apparently has a few roof leaks. One of the tenants who was looking to take more space is still undecided and may move elsewhere. So I think it's going to be pretty hard there. It's such a quiet location that getting tenants could be really hard.

So I guess I'll leave this guy to his shops and he can do what he wants. The mortgagees may or may not let him sell them individually.

The whole exercise will have cost me say $3k and a lot of time. Lesson learned in some respects, but not sure how one could avoid this sort of thing again. How would you ever know the amount the vendor has accepted is less than the mortgages on the property? And also that the mortgagees won't accept the sale?

The other thing that might happen here is that it might go to mortgagee sale. And I suppose it might go cheaper...

Edit: Just had a call from the principal at Bayleys. He thinks it will go to mortgagee sale. He is hoping to ge to handle the mortgagee sale. So if he does, he'll let me know and I will go along and bid less than I offered! This will end up costing Trustees Executors even more! Fools.

David

[CycleTrader]

Hi David

Just picked up late on this thread but interesting as we have been through similar circumstances in the last year or so with caveats and mortgagee sales.

Having read back through the thread I would have agreed with Dean's initial advice to get the caveat on and use that as leverage in whichever circumstances then arose. The downside though is that a) they could register a new dealing and force you to the expense of having to prove your caveat in the High Court (per Green Fish) or, b) sweep your caveat away in a mortgagee sale process (but only at the end of the process when the new transfer is registered.)

If you now know that they may well go down a mortgagee sale process then an alternative course is to hold off registering your caveat until the last possible moment. To go down the mortgagee process TEL will have had to issue a PLA to the owner and notify the 2nd mortgagee. The PLA would have had a normal 28 day period before TEL could then act. So, once they are in the mortgagee process, the agent has instructions and say an aution or tender program is underway - then lodge your caveat as close to closing date as possible. TEL's solicitors will likely advise them that they need to give you notice of the PLA and thus another 28 days have to elapse. This will frustrate the hell out of them if they are in the closing stages of a campaign and they may well have got good buyer feedback from the agent so they will be better informed to deal with and negotiate with you at that point.

Of course they could still force you to prove the caveat but you have time to do this, hence the need to time your caveat as late as you possibly can.

I'm basing all of this on the fact that you have an unco S&P, entered into before any PLA was issued and that your caveat is a genuine equitable interest in the land - which it seems to be.

Hope that the outcome is in your favour and that the process hasn't worn you down too much!!

Cheers
CT

[ream]

But then I may have to pay extra for outstanding rates too. The tenants have been paying but I imagine the vendor hasn't been paying the councils so I would have to front up with that money too.
David

Isn't this something you can find out by ringing the councils?

[Xav]

Thanks for the update Davo, certainly getting interesting.

I have also spoken to the principal at Bayleys on the Shore. He has been speaking to Trustees Executors - trying to get them to accept the contract as it now stands. Trustees Executors will not do this. Apparently the short fall is only around $15k. Their company policy is that "They will not crystallise losses". This says a lot about the current environment.

Edit: Just had a call from the principal at Bayleys. He thinks it will go to mortgagee sale. He is hoping to ge to handle the mortgagee sale. So if he does, he'll let me know and I will go along and bid less than I offered! This will end up costing Trustees Executors even more! Fools.

This is unbelievably retarded.

Presuming you still want the place and don't want to wait for mortgagee sale, I would have your solicitor write to Trustees Executors and point out:
1. They have an obligation to the mortgagor to acheive the best price possible;
2. Sale price acheived at a forced sale is likely to be significantly lower than the market price;
3. If the property sells at mortgagee sale for less than what you have offered they will almost certainly be liable to the mortgagor for the difference; and
4. If they don't have valuation advice that your offer is below the estimated forced sale price they are on very thin ice.

Would have a lot more weight coming from the vendor's solicitor but it sounds like that is unlikely.

You may be better off waiting for mortgagee sale, although the fact they won't sell for any loss doesn't inspire confidence as to a realistic reserve being set at auction.

So now I have 3 choices. 1) Walk away when the time is up on Tues afternoon. 2) Caveat the titles and threaten to sue or 3) Negotiate with Trustees Executors and perhaps pay the extra $15k to buy the property - it'll cost me that much to sue anyway. But then I may have to pay extra for outstanding rates too. The tenants have been paying but I imagine the vendor hasn't been paying the councils so I would have to front up with that money too.

I would not caveat at this point. You now have a response from the banks.

If mortgagee sale does proceed then the bank will simply have the caveat removed anyway.

TEL's solicitors will likely advise them that they need to give you notice of the PLA and thus another 28 days have to elapse.

They do not have to and I would think it very unlikely that their solicitors would advise them to do so.

Of course they could still force you to prove the caveat but you have time to do this, hence the need to time your caveat as late as you possibly can.

The bank doesn't need to force him to prove the caveat. The bank can simply apply for it to be removed. No subsequent interests, whether legal or equitable (the agreement being the later) are binding on the bank unless they have agreed to them or the mortgage is unenforceable (due to fraud).

[edit] It would slow down settlement while they had the caveat removed but not acheive much else.

[tpr2]

Very nice post CT.

cunning enough to put a tail on it and call it a weasel.

[muppet]

cunning enough to put a tail on it and call it a weasel.

Ahhhh, shadz of the Black Adder.
I wonder if he was wearing a codpiece when he uttered those magnificent words.