The recession may be over but many property companies are still living through its vapour trail of late payments and bad debts, claims one of the UK’s leading corporate recovery lawyers.
According to Eleanor Temple, a barrister at Kings Chambers in Leeds, an increase in the number of property companies facing insolvency is leading to a marked rise in requests for extensions of administration. “But creditors that can’t wait two years for a payout must take action immediately,” she stresses.
When it comes to the commercial property market, the recession is far from over. “Developers continue to fall into administration and realising their commercial property assets remains hugely challenging,” says Temple. “As a result, the court system is now facing a significant and growing number of applications for extensions of administration of up to two years — a far cry from the more usual six months that does not require a court appearance.
“And for creditors, having to wait for two years or more before seeing any sort of payout can have a significant impact on their business.”
Despite a revival in the commercial property sector creditors must keep abreast with the administration process and maintain pressure on office holders to ensure they get the best possible financial outcome, explained the 30-year-old chancery specialist nicknamed the “smiling assassin” by fellow barristers on the northern circuit.
Featured in The Times “Future Stars of the Regions” survey, Temple has acted in a case between Leeds United and a former director.
“Granting an extension may enable more cash to be realised because it allows more time to successfully sell property assets before the company is placed into liquidation,” she says, “On the other hand, the more time that goes by, the higher the administration costs and the longer the wait for financial settlements to be made.”
Administrators need to make an evidence-backed application to court at least one month before the administration expires and this, Temple suggests, is the point at which creditors should take an active interest. “Creditors are entitled to receive adequate information which will allow them to participate in proceedings in a meaningful way but sometimes that means being proactive.
“Putting pressure on the administrators to get properties sold as quickly as possible can be successful – even if it means lowering the price — and getting paid something at the start might be worth more to a business than the prospect of getting paid a little bit more two years down the line,” she concludes.
