The personal insolvency bill

krd

Here it is....it's a long read.
http://www.oireachtas.ie/documents/bills28/bills/2012/5812/b58112d.pdf

From my reading of the bill, it would provide for property speculators and people in mansions who can't pay their mortgages, to have a debt repayment plan within their means, that would leave them debt free within a maximum term of 60 months.

In other words, someone on the dole living in a house with a notional value of 650,000, could arrange to pay 200 quid a month off the mortgage, and within 60 months that mortgage would be cleared. They'd get their house for 10,000.

A property speculator with four or five empty properties, could come to some similar arrangement. Then sell a single property and clear the debt repayment plan and have four free properties.

That's my interpretation of what could happen. There is a clause in there targeted at people who may deliberately minimise their means to take maximum advantage of the insolvency act. But how do you enforce something like that.

It's unlikely primary residences will be surrendered as part of these repayment plans - I also have an incredibly strong feeling the debtors will not be forced to surrender their speculative property purchases. Like many other people in the country, I find it difficult to contain my rage at the people who caused all the problems. The builders, the solicitors, the bankers, and the estate agents. If I had my way it would be a liquidation bill, not an insolvency.

ResearchWill

Have you read sections 62 and 63.

62.—(1) Subject to this section, nothing in this Chapter affects the 20 right of a secured creditor of the debtor to enforce or otherwise deal with his or her security.
(2) AsecuredcreditorofthedebtormaynotparticipateinaDebt Settlement Arrangement with respect to a secured debt.
(3) Subsection (2) shall not operate to prevent the debtor or the 25 personal insolvency practitioner from liaising or sharing information (including a copy of the debtor’s Prescribed Financial Statement and information relating to a proposed or existing Debt Settlement Arrangement) with a secured creditor in connection with a proposed
or existing Debt Settlement Arrangement. 30
(4) For the avoidance of doubt, a secured creditor shall not be deemed to participate in or otherwise be bound by a Debt Settlement Arrangement as a result of entering into an agreement with the debtor to vary the terms of the secured debt following contact between the secured creditor and debtor, or as applicable, the per- 35 sonal insolvency practitioner as referred to in subsection (3) (including, without limitation, any variation of the terms of the secured debt that would reduce the amounts payable by the debtor
in respect of the secured debt for the duration of the Debt Settle- ment Arrangement).

63.—(1) In formulating a proposal for a Debt Settlement Arrangement a personal insolvency practitioner shall, insofar as reasonably practicable, and having regard to the matters referred to
in subsection (2), formulate the proposal on terms that will not require the debtor to dispose of an interest in or to cease to occupy 45 his or her principal private residence and the personal insolvency practitioner shall consider any appropriate alternatives to such vacation.
(2) The matters referred to in subsection (1) are—
(a) the costs likely to be incurred by the debtor by remaining 50 in occupation of his or her principal private residence (including rent, mortgage loan repayments, insurance payments, owners’ management company service charges and contributions, taxes or other charges relating to ownership or occupation of the property imposed by or under statute, and necessary maintenance in respect of the principal private residence),
(b) the debtor’s income and other financial circumstances as disclosed in the Prescribed Financial Statement,
(c) the ability of other persons residing with the debtor in the principal private residence to contribute to the costs referred to in paragraph (a), and
(d) the reasonable living accommodation needs of the debtor and his or her dependants and having regard to those needs the cost of alternative accommodation (including the costs which would necessarily be incurred in obtaining such accommodation).
(3) Where—
(a) the debtor confirms in writing to the personal insolvency practitioner that the debtor does not wish to remain in occupation of his or her principal private residence; or
(b) the personal insolvency practitioner, has, having discussed the issue with the debtor, formed the opinion that, taking account of the matters referred to in subsection (2), the costs of continuing to reside in the debtor’s principal private residence are disproportionately large,
the personal insolvency practitioner shall not be required to formu- late the proposal for a Debt Settlement Arrangement on terms that will not require the debtor to cease to occupy his or her principal private residence.
(4) A Debt Settlement Arrangement shall not contain terms pro- viding for a disposal of the debtor’s interest in the principal private residence unless:
(a) the debtor has obtained independent legal advice in relation to such disposal or, having been advised by the personal insolvency practitioner to obtain such legal advice, has declined to do so; and
(b) to the extent that the provisions of the Family Home Protection Act 1976 or the Civil Partnership and Certain Rights and Obligations of Cohabitants Act 2010 apply to the property, that all relevant provisions of those Acts are complied with.

krd

ResearchWill wrote: »

Have you read sections 62 and 63.

Yes, I have. Something like 62.—(4) would seem to cover shenanigans. But there are so many practicalities in reality that may not happen.

Once the debt repayment plan is in place, it could be difficult to change it once circumstances change. For example. Say if I was a plumber, who during the boom time built a mansion for themselves somewhere in rural Wexford. They have a mortgage of 650,000 - which of course they can't pay. To maximise their advantage of the Insolvency Act - they could either make their business go slack or simply stop working.

Once the payment plan is in place - business could pick up again. If the creditor saw this happening, and they tried to renegotiate the settlement. The plumber could make their business go slack again. And it's not just plumbers who could - and would do this.

So, they're would be cat and mouse, where the cat has no real possible chance of catching the mouse. And by the way, there are those in the world of banking who believe this is already happening - that the mice have had a head start.

But the most beautiful clause of all to the impecunious, is 59.-(2)(a).

Read it and weep, as they say.

59.—(2)
(a) the maximum duration of a Debt Settlement Arrangement
shall be 60 months but a Debt Settlement Arrangement
5 may provide that this period may be extended for a
further period of not more than 12 months in such circumstances as are specified in the terms of the Debt
Settlement Arrangement;

60 months is the cut off. So, all debt repayment has to be structured over a period of five years. That means, the arrangement made with the plumber, he's essentially given a five year mortgage. The monthly repayments are limited to within his means. Even if he went out and got a job paying 50k a year - if there was a renegotiation of the repayment plan it would be within the same time limit, and within his means. He will get his mansion for next to nothing.

And. I could give a similar narrative for landlords, where the rents do not cover the mortgage repayments. The repayment plan has to be within 5 years, and limited to the income of the properties and the means of the debtor. Yes, the creditor in theory could force a sale - but with the same foot dragging as the plumber - it could be impractical. With the sheer number of people the Insolvency act will cover, it may only be practical to pursue a handful of out of thousands.

Unfair doesn't even begin to describe it.

ResearchWill

krd wrote: »

Yes, I have. Something like 62.—(4) would seem to cover shenanigans. But there are so many practicalities in reality that may not happen.

Once the debt repayment plan is in place, it could be difficult to change it once circumstances change. For example. Say if I was a plumber, who during the boom time built a mansion for themselves somewhere in rural Wexford. They have a mortgage of 650,000 - which of course they can't pay. To maximise their advantage of the Insolvency Act - they could either make their business go slack or simply stop working.

Once the payment plan is in place - business could pick up again. If the creditor saw this happening, and they tried to renegotiate the settlement. The plumber could make their business go slack again. And it's not just plumbers who could - and would do this.

So, they're would be cat and mouse, where the cat has no real possible chance of catching the mouse. And by the way, there are those in the world of banking who believe this is already happening - that the mice have had a head start.

But the most beautiful clause of all to the impecunious, is 59.-(2)(a).

Read it and weep, as they say.

59.—(2)
(a) the maximum duration of a Debt Settlement Arrangement
shall be 60 months but a Debt Settlement Arrangement
5 may provide that this period may be extended for a
further period of not more than 12 months in such circumstances as are specified in the terms of the Debt
Settlement Arrangement;

60 months is the cut off. So, all debt repayment has to be structured over a period of five years. That means, the arrangement made with the plumber, he's essentially given a five year mortgage. The monthly repayments are limited to within his means. Even if he went out and got a job paying 50k a year - if there was a renegotiation of the repayment plan it would be within the same time limit, and within his means. He will get his mansion for next to nothing.

And. I could give a similar narrative for landlords, where the rents do not cover the mortgage repayments. The repayment plan has to be within 5 years, and limited to the income of the properties and the means of the debtor. Yes, the creditor in theory could force a sale - but with the same foot dragging as the plumber - it could be impractical. With the sheer number of people the Insolvency act will cover, it may only be practical to pursue a handful of out of thousands.

Unfair doesn't even begin to describe it.

But it is only unsecured credit that is part of the PIA, say a person has 500k in debt of which 200k is unsecured. Then an arrangment say to pay 10 a year over 5 years. At the end of that the unsecured debt is cleared. But the secured debt still exists. It is only to deal with unsecured debt.

Take a second example 2m in debt of which 500k is ppr, 1m is 4 investment properties and 500k is unsecured. Then say guy sells investment properties for 750k leaving 750k unsecured debt pays 20k a year for 5 years then unsecured debt gone, but the only property he has left is ppr with a 500k debt less payments that have been made.

krd

ResearchWill wrote: »

But it is only unsecured credit that is part of the PIA, say a person has 500k in debt of which 200k is unsecured. Then an arrangment say to pay 10 a year over 5 years. At the end of that the unsecured debt is cleared. But the secured debt still exists. It is only to deal with unsecured debt.

I see it now, 94-(2) (c). It's a long bill. They are not discharged from their secured debts - or the security is not discharged over the assets.

But the secured creditors are part of the process. And I can't see where their resolution comes in. If they take properties, in negative equity, and sell them, as I understand it, the outstanding debt is unsecured (unless it's been also secured against the primary residence or other properties.) I find it hard to see a position where the terms of the secured debt do not change. I don't know how the banks are going to handle it. Since the debtor will be under protection - new unsecured debt relating to the period before the term of the protection, I imagine would be void.

I'm not sure what banks can do. Can they sit on a secured debt for 6 years - and then reactivate the mortgage. Or do they have to write down the debt and renegotiate the mortgage.

ResearchWill

krd wrote: »

I see it now, 94-(2) (c). It's a long bill. They are not discharged from their secured debts - or the security is not discharged over the assets.

But the secured creditors are part of the process. And I can't see where their resolution comes in. If they take properties, in negative equity, and sell them, as I understand it, the outstanding debt is unsecured (unless it's been also secured against the primary residence or other properties.) I find it hard to see a position where the terms of the secured debt do not change. I don't know how the banks are going to handle it. Since the debtor will be under protection - new unsecured debt relating to the period before the term of the protection, I imagine would be void.

I'm not sure what banks can do. Can they sit on a secured debt for 6 years - and then reactivate the mortgage. Or do they have to write down the debt and renegotiate the mortgage.

A person or business holding a secured debt can not be forced to take part in a PIA, as per section 62 I'll set it out again "62.—(1) Subject to this section, nothing in this Chapter affects the right of a secured creditor of the debtor to enforce or otherwise deal with his or her security.
(2) A secured creditor of the debtor may not participate in a Debt Settlement Arrangement with respect to a secured debt."

So if you don't pay your mortgage then tough, you may lose your property. if a bank gives info and works with the practitioner, that can not imply they have entered into an arrangment.

subsection 2 allows a bank if it wishes to enter in to an arrangment but they can not be forced to do so if they don't want to, no bank is going to let a person get a 250000euro house for50000 euro, if the house is worth 150000 euro.
Sup section 4

(4) For the avoidance of doubt, a secured creditor shall not be deemed to participate in or otherwise be bound by a Debt Settlement Arrangement as a result of entering into an agreement with the debtor to vary the terms of the secured debt following contact between the secured creditor and debtor, or as applicable, the personal insolvency practitioner as referred to in subsection (3) (including, without limitation, any variation of the terms of the secured debt that would reduce the amounts payable by the debtor in respect of the secured debt for the duration of the Debt Settle- ment Arrangement).

This section allows a bank to reduce monthly payments for the 5 years to allow the clearing of unsecured debt, but there will be no benifit to the debtor.

krd

ResearchWill wrote: »

So if you don't pay your mortgage then tough, you may lose your property.

Yes, but if the property is in negative equity - and the balance outstanding after the sale is unsecured - then it could be highly favourable for the debtor let the bank seize the properties.

There are quite a few reasons why it would be in the banks interest to drastically reduce the mortgage on a property than have the property seized. I can tell you as absolute fact, that there are at least a few I know, and possibly many, property speculators who have no other income than the rent from tenants in their speculative purchases. They're not paying the mortgages.

As the fella said, you owe the bank 10,000, you have a problem. Owe them a million and you have a partner.

if a bank gives info and works with the practitioner, that can not imply they have entered into an arrangment.

If they don't. Then it can be implied they're being uncooperative.

subsection 2 allows a bank if it wishes to enter in to an arrangment but they can not be forced to do so if they don't want to, no bank is going to let a person get a 250000euro house for50000 euro, if the house is worth 150000 euro.

Why?....Because you think that would just be a little too mad.

People in Ireland went through a period thinking all these nought, nought, nought, nought, nought, nought, property prices were reality. It was all fantasy. In the early 90s, just before the madness really kicked in, my mother was approached to buy a very nice townhouse, with a massive back garden (backgarden is an understatement - size that would have dollars signs spinning in peoples eyes) The offer was first 16,000. Then 10,000.....And then 8,000.......My mother still turned it down (her reason..you would nearly die to hear it) ....I thought it was madness, but I was too broke to step in.....The people who bought the house, by the late 90s they had it on the market for 850,000.........Did they get rich?....No, the house is still on the market, they've dropped the price by 50k...but it never sold. .....Of course my mother did eventually get caught up in the madness and bought some "luxury" apartments - (concrete cattle sheds in the sky).

I'm watching the property market - I've seen houses fall from 650,000 to 250,000.....People lived in a fairy world - where their 30,000 euro house was worth half a million.

This section allows a bank to reduce monthly payments for the 5 years to allow the clearing of unsecured debt, but there will be no benifit to the debtor.

Yes, but the section does not give the bank a specific framework to give the debtor a repayment holiday. If the debtor refuses to cooperate with the bank there is not much the bank can do. If the bank seizes properties in negative equity - they can't bundle unsecured debt onto the debtor.

The Insolvency protection - from my understanding, allows the debtor to be uncooperative with their secured creditors. If the primary residence is in serious negative equity, they can just walk away from it.

ResearchWill

krd wrote: »

Yes, but if the property is in negative equity - and the balance outstanding after the sale is unsecured - then it could be highly favourable for the debtor let the bank seize the properties.

There are quite a few reasons why it would be in the banks interest to drastically reduce the mortgage on a property than have the property seized. I can tell you as absolute fact, that there are at least a few I know, and possibly many, property speculators who have no other income than the rent from tenants in their speculative purchases. They're not paying the mortgages.

As the fella said, you owe the bank 10,000, you have a problem. Owe them a million and you have a partner.




If they don't. Then it can be implied they're being uncooperative.



Why?....Because you think that would just be a little too mad.

People in Ireland went through a period thinking all these nought, nought, nought, nought, nought, nought, property prices were reality. It was all fantasy. In the early 90s, just before the madness really kicked in, my mother was approached to buy a very nice townhouse, with a massive back garden (backgarden is an understatement - size that would have dollars signs spinning in peoples eyes) The offer was first 16,000. Then 10,000.....And then 8,000.......My mother still turned it down (her reason..you would nearly die to hear it) ....I thought it was madness, but I was too broke to step in.....The people who bought the house, by the late 90s they had it on the market for 850,000.........Did they get rich?....No, the house is still on the market, they've dropped the price by 50k...but it never sold. .....Of course my mother did eventually get caught up in the madness and bought some "luxury" apartments - (concrete cattle sheds in the sky).

I'm watching the property market - I've seen houses fall from 650,000 to 250,000.....People lived in a fairy world - where their 30,000 euro house was worth half a million.



Yes, but the section does not give the bank a specific framework to give the debtor a repayment holiday. If the debtor refuses to cooperate with the bank there is not much the bank can do. If the bank seizes properties in negative equity - they can't bundle unsecured debt onto the debtor.

The Insolvency protection - from my understanding, allows the debtor to be uncooperative with their secured creditors. If the primary residence is in serious negative equity, they can just walk away from it.

Your changing the goal post, your original post said the bill would allow a person with a secured home loan to basically pay a few grand over 5 years and keep the property, I have show how the bill will not allow that to happen, unless the bank wish it to. If the bank was going to agree to such a stupid arrangment they would not need this bill to let it happen.

This bill is to allow people who have some income and large unsecured debt to get back on their feet in 5 years if people who are owed the money agree. If this bill is abused then it's not the laws fault its the lenders, there must be responsibility on them to get the best return they can.

In relation to negative equity, why would a bank who lent 250k on a house worth 100k let the person get out of jail for 10k not only is that stupid, the shareholders may have serious issues with any bank that is giving away 90k for no benifit.

krd

ResearchWill wrote: »

Your changing the goal post, your original post said the bill would allow a person with a secured home loan to basically pay a few grand over 5 years and keep the property, I have show how the bill will not allow that to happen, unless the bank wish it to.

I'm not really changing the goal posts. In my original reading of the bill, I made assumptions about the position of creditors with securities on assets. At the same time, although the bill is explicit, I cannot seem them engaging with the process, without putting themselves in a position of surrendering a portion of their security. And if they do not cooperate, to me it seems the bill makes it impractical for them to pursue the debtor.

If the bank was going to agree to such a stupid arrangment they would not need this bill to let it happen.

Banks do lots of stupid things. I think in Anglo they had a sign on the wall "You don't have to be stupid to work here, but it helps"....Come on, banks prided themselves on employing the intellectual dregs of society - good solid stupid Irish people. You could set your watch by their ignorance and conservatism.

But it's not particularly stupid. If a property speculator has five houses, all occupied by tenants, but the income is only half of what the mortgage repayment should be. It's more feasible for the bank to write off half the mortgage than it is to seize the properties. Even if there was some magical property management company they could flog the houses to, they'd still only get firesale prices.

This bill is to allow people who have some income and large unsecured debt to get back on their feet in 5 years if people who are owed the money agree. If this bill is abused then it's not the laws fault its the lenders, there must be responsibility on them to get the best return they can.

The term "abuse" is subjective.

In relation to negative equity, why would a bank who lent 250k on a house worth 100k let the person get out of jail for 10k not only is that stupid, the shareholders may have serious issues with any bank that is giving away 90k for no benifit.

If they thought, they'd get less than 10k....or have costs in dealing with a derelict building. Then it would make sense to accept 10k.

ResearchWill

krd wrote: »

I'm not really changing the goal posts. In my original reading of the bill, I made assumptions about the position of creditors with securities on assets. At the same time, although the bill is explicit, I cannot seem them engaging with the process, without putting themselves in a position of surrendering a portion of their security. And if they do not cooperate, to me it seems the bill makes it impractical for them to pursue the debtor.



Banks do lots of stupid things. I think in Anglo they had a sign on the wall "You don't have to be stupid to work here, but it helps"....Come on, banks prided themselves on employing the intellectual dregs of society - good solid stupid Irish people. You could set your watch by their ignorance and conservatism.

But it's not particularly stupid. If a property speculator has five houses, all occupied by tenants, but the income is only half of what the mortgage repayment should be. It's more feasible for the bank to write off half the mortgage than it is to seize the properties. Even if there was some magical property management company they could flog the houses to, they'd still only get firesale prices.




The term "abuse" is subjective.



If they thought, they'd get less than 10k....or have costs in dealing with a derelict building. Then it would make sense to accept 10k.

In relation to the first part of your post as I have stated and shown the bill says, if the bank engage in the process it does not in any way imply that they are part of any agreement pretty simple that.

Yes banks can and do stupid things, but giving a person full ownership of a property with market value of 100k for 10 is not just stupid it implies a mental illness.

If a property developer has 5 houses with rent covering half the repayments, then those properties have a value, the bank may agree to forgiveness of part of the loan, but it will more than likely say pro, we will just repo and collect the rent ourselves, or sell them on open market.

What has a derelict building to do with it, yes of course any lender will look at real value, if it's only worth 10 but you owe a million then the bank may agree 8k and let you keep it, but they are not going to accept 10k if it is producing 10k a year in rent.

As you said you assumed the bill did things it did not. Now you are assuming a bank will give up security on property for far below market value. In your example of five houses, say the guy owes 2.5 million, but rent is producing 12k each a year, that's 60k, say repayments are twice that 120k. Well the minimum that property is worth going on recent auctions is between 3/4 and 1.25 million depending, well then the bank would be mental to agree to anything less than 3/4 of a million. They may well agree to cut their losses at that, or they may not, but if the guy offers say 100k the bank will just repo, which they are doing.

The reason I mention abuse, is you seem to be implying this bill will be a rogues charter.

Also in relation to you last comment, I clearly said the loan was 250k and the current value was 100k, where did you get 10k. I wish I could pick up a house that sold in the boom for 250k for 10k.

krd

ResearchWill wrote: »

In relation to the first part of your post as I have stated and shown the bill says, if the bank engage in the process it does not in any way imply that they are part of any agreement pretty simple that.

Yes banks can and do stupid things, but giving a person full ownership of a property with market value of 100k for 10 is not just stupid it implies a mental illness.

It would not be atypical for creditors in an insolvency to accept pence in the pound. And they may have no interest in the underlying asset - or assets and will be happy to see them sold at firesale prices. I've seen people pick up goods worth hundreds of thousands, for just a few thousand, in liquidation sales. The bank is not going to send their tellers out to run a clearance shop.

If a property developer has 5 houses with rent covering half the repayments, then those properties have a value, the bank may agree to forgiveness of part of the loan, but it will more than likely say pro, we will just repo and collect the rent ourselves, or sell them on open market.

Banks are not in the business of collecting rents, and managing properties. If banks were to get into the landlord business they would have to set up whole divisions to manage the properties and deal with tenants etc. This is a very unprofitable business to be in. For an individual landlord to fix a running tap, it can cost virtually nothing. When running something like a housing organisation it could sink a months rent. Think about it. You'd need the man in his van, his assistant, the cost of the van, then the cost of his manager, and then the cost of their manager.

Of course the bank could seize the properties to sell on the "open market" - for the "sale" they would need the properties to be vacant. No tenants, no income. And the property could and I say definitely would, languish unsold for years.

The banks do not want a flood of properties on the market - as they do not want to depress prices further.

The best option would be to forgive a very large chunk of the debt. A new mortgage would have to be written up to reflect the income of the property. Many houses around the country are being rented for as little as 400 a month. And there isn't any reason that could not fall further. For 400 a month you're talking about a mortgage for well below 100 grand.

What has a derelict building to do with it, yes of course any lender will look at real value, if it's only worth 10 but you owe a million then the bank may agree 8k and let you keep it, but they are not going to accept 10k if it is producing 10k a year in rent.

If a building is derelict the local authority may fine the owner. They've posted notices on a building near me. I was going to go up and check what the notice says, but the find is over ten grand - it puts the notional value of the property at over a million - notional, indeed.

As you said you assumed the bill did things it did not. Now you are assuming a bank will give up security on property for far below market value.

The "market value" as in the fairy land value estimated by an estate agent or the true market value. If they property cannot be sold then it has no market value.

In your example of five houses, say the guy owes 2.5 million, but rent is producing 12k each a year, that's 60k, say repayments are twice that 120k. Well the minimum that property is worth going on recent auctions is between 3/4 and 1.25 million depending, well then the bank would be mental to agree to anything less than 3/4 of a million. They may well agree to cut their losses at that, or they may not, but if the guy offers say 100k the bank will just repo, which they are doing.

The bank are not in a good position. If they do repo, then they may only get 100k for the five properties - even less if you factor in other costs. If they rewrite the mortgages, then they definitely could not write them for 3/4 - there are lots of reasons for this. And further - I'm not sure how banks write their balance sheets, that if they have to take a loss if properties/assets on their books have lost value. And they may have to rewrite the value of other properties on their books.

Really, the bank is over the barrel and not the debtor. And you have an agency problem - the bank employee isn't really that bothered.

The reason I mention abuse, is you seem to be implying this bill will be a rogues charter.

In more ways than one. It establishes a new government agency - an insolvency agency. Lots of jobs for the boys. Pensions and percs. It will create an insolvency industry.

Also in relation to you last comment, I clearly said the loan was 250k and the current value was 100k, where did you get 10k. I wish I could pick up a house that sold in the boom for 250k for 10k.

I've watched the property market for years - and if house was advertised for sale for 350k, it never really meant it was worth that. I know of properties that were advertised for that price, but you would only get 200 a month in rent if you were lucky. I remember the time before the bubble, there were houses in parts of the country you couldn't give away.

Where I'm from, amazing houses used to go on the market for next to nothing. The locals didn't want to live in big old houses, and would prefer living cheek by jowl in new build estates.

Procrastastudy

krd wrote: »

For an individual landlord to fix a running tap, it can cost virtually nothing. When running something like a housing organisation it could sink a months rent. Think about it. You'd need the man in his van, his assistant, the cost of the van, then the cost of his manager, and then the cost of their manager.

I thought about this and came to the conclusion they'd be rather daft to do this for every tap they needed fixing. Wouldn't they employ the same person to fix lots of taps and perhaps other plumbing issues and maybe other odd jobs thus reducing the unit cost to virtually nothing?

krd

Procrastastudy wrote: »

I thought about this and came to the conclusion they'd be rather daft to do this for every tap they needed fixing. Wouldn't they employ the same person to fix lots of taps and perhaps other plumbing issues and maybe other odd jobs thus reducing the unit cost to virtually nothing?

In theory it may look like economies of scale are there, in reality they are not.

And this is the reason you do not see private companies engaging in large scale residential property management. They'll do commercial - which is a lot easier - fewer tenants, and the tenants tend to look after the places, even pay for their own maintenance.

Take England. Where you have a few large housing associations. Many are private concerns - they were handed free houses by the local council who wanted to get out of managing them. Many of these housing associations stagger along near bankruptcy - there is no pot of gold.

See...If it was a profitable business, companies would be doing it. By and large they are not.

In residential property, the one man who occasionally puts in a few hours or a few days work on the property (and doesn't receive direct payment for their time), is far more efficient, than employing full time staff, or part time - or occasional professionals like plumbers etc.

You have an agency problem. The owner landlord, has an interest in doing the job as inexpensively and efficiently as possible. Your man in his van, and his assistant, their manager, their managers manager, have the absolute opposite interests. It can literally cost a couple hundred quid to change a light bulb. The money is just gobbled up on staff wages, vans, etc. The workmanship and materials used are half assed.

Large scale housing is difficult to manage. Both when it's done publicly and privately. It can be a money sink - and the service can be appalling.

I'll give you another example. In Scotland they're tearing down the old tower blocks, and building low rise housing. The tower blocks would appear to have economies of scale - but in reality for people like Glasgow Housing Association they do not. But funnily, tower blocks in Leith made infamous in Trainspotting, have been sold privately, and it's worked out.

Procrastastudy

krd wrote: »

In theory it may look like economies of scale are there, in reality they are not.

And this is the reason you do not see private companies engaging in large scale residential property management. They'll do commercial - which is a lot easier - fewer tenants, and the tenants tend to look after the places, even pay for their own maintenance.

Take England. Where you have a few large housing associations. Many are private concerns - they were handed free houses by the local council who wanted to get out of managing them. Many of these housing associations stagger along near bankruptcy - there is no pot of gold.

See...If it was a profitable business, companies would be doing it. By and large they are not.

In residential property, the one man who occasionally puts in a few hours or a few days work on the property (and doesn't receive direct payment for their time), is far more efficient, than employing full time staff, or part time - or occasional professionals like plumbers etc.

You have an agency problem. The owner landlord, has an interest in doing the job as inexpensively and efficiently as possible. Your man in his van, and his assistant, their manager, their managers manager, have the absolute opposite interests. It can literally cost a couple hundred quid to change a light bulb. The money is just gobbled up on staff wages, vans, etc. The workmanship and materials used are half assed.

Large scale housing is difficult to manage. Both when it's done publicly and privately. It can be a money sink - and the service can be appalling.

I'll give you another example. In Scotland they're tearing down the old tower blocks, and building low rise housing. The tower blocks would appear to have economies of scale - but in reality for people like Glasgow Housing Association they do not. But funnily, tower blocks in Leith made infamous in Trainspotting, have been sold privately, and it's worked out.

I actually agree with you I was just being cheeky. Funny you should mention Leith - I used to live near there - amazing the development work that was done. Didn't stop the mile of prossies though

Some of the smaller towns did actually get the high rises to work. Kirkcaldy used them to house pensioners. Was an amazingly simple solution in all honesty - I don't know why it doesn't get more publicity. That said I couldn't see it working in inner-city Glasgow or Edinburgh.

krd

Procrastastudy wrote: »

I actually agree with you I was just being cheeky. Funny you should mention Leith - I used to live near there - amazing the development work that was done. Didn't stop the mile of prossies though

It's the edginess of the place attracted all the yuppies. The prossies are what you'd call local colour.

Some of the smaller towns did actually get the high rises to work. Kirkcaldy used them to house pensioners.

It can work. I wouldn't like the job of making it work. I would say pensioners are easier.....than mad kids.

But there's an interesting story in Sudhir Venkatesh's Gang Leader for a Day. In the tower blocks of Chicago, he was carrying out his anthropological research in, parents would get their children to urinated in the hallways outside their doors deliberately. So as to create such a stench prostitutes and drug dealers wouldn't hang around and find somewhere else to do their business. It's actually a really interesting book. The blocks were managed.

Was an amazingly simple solution in all honesty - I don't know why it doesn't get more publicity.

See, it works really well in some places. English and Irish councillors in the 60s were taken on tours of high rise housing in places like the Netherlands, and Scandinavian, where it works really well. But to put it simply, it's a completely different context.

Our context is more problematic.

That said I couldn't see it working in inner-city Glasgow or Edinburgh.

Yeah, the accent drives me round the bend.

ResearchWill

krd wrote: »

It would not be atypical for creditors in an insolvency to accept pence in the pound. And they may have no interest in the underlying asset - or assets and will be happy to see them sold at firesale prices. I've seen people pick up goods worth hundreds of thousands, for just a few thousand, in liquidation sales. The bank is not going to send their tellers out to run a clearance shop.



Banks are not in the business of collecting rents, and managing properties. If banks were to get into the landlord business they would have to set up whole divisions to manage the properties and deal with tenants etc. This is a very unprofitable business to be in. For an individual landlord to fix a running tap, it can cost virtually nothing. When running something like a housing organisation it could sink a months rent. Think about it. You'd need the man in his van, his assistant, the cost of the van, then the cost of his manager, and then the cost of their manager.

Of course the bank could seize the properties to sell on the "open market" - for the "sale" they would need the properties to be vacant. No tenants, no income. And the property could and I say definitely would, languish unsold for years.

The banks do not want a flood of properties on the market - as they do not want to depress prices further.

The best option would be to forgive a very large chunk of the debt. A new mortgage would have to be written up to reflect the income of the property. Many houses around the country are being rented for as little as 400 a month. And there isn't any reason that could not fall further. For 400 a month you're talking about a mortgage for well below 100 grand.



If a building is derelict the local authority may fine the owner. They've posted notices on a building near me. I was going to go up and check what the notice says, but the find is over ten grand - it puts the notional value of the property at over a million - notional, indeed.



The "market value" as in the fairy land value estimated by an estate agent or the true market value. If they property cannot be sold then it has no market value.




The bank are not in a good position. If they do repo, then they may only get 100k for the five properties - even less if you factor in other costs. If they rewrite the mortgages, then they definitely could not write them for 3/4 - there are lots of reasons for this. And further - I'm not sure how banks write their balance sheets, that if they have to take a loss if properties/assets on their books have lost value. And they may have to rewrite the value of other properties on their books.

Really, the bank is over the barrel and not the debtor. And you have an agency problem - the bank employee isn't really that bothered.



In more ways than one. It establishes a new government agency - an insolvency agency. Lots of jobs for the boys. Pensions and percs. It will create an insolvency industry.



I've watched the property market for years - and if house was advertised for sale for 350k, it never really meant it was worth that. I know of properties that were advertised for that price, but you would only get 200 a month in rent if you were lucky. I remember the time before the bubble, there were houses in parts of the country you couldn't give away.

Where I'm from, amazing houses used to go on the market for next to nothing. The locals didn't want to live in big old houses, and would prefer living cheek by jowl in new build estates.

You started this thread making a clear statement about the bill, I showed how that statement was incorrect.

You have now moved onto talking about the property market in general, making general statements without any back up.

An example

"The bank are not in a good position. If they do repo, then they may only get 100k for the five properties - even less if you factor in other costs. If they rewrite the mortgages, then they definitely could not write them for 3/4 - there are lots of reasons for this. And further - I'm not sure how banks write their balance sheets, that if they have to take a loss if properties/assets on their books have lost value. And they may have to rewrite the value of other properties on their books.

Really, the bank is over the barrel and not the debtor. And you have an agency problem - the bank employee isn't really that bothered. "

I had given an example where the five properties are producing €60000 a year in rent. If you can tell me where I can buy five properties producing €60000 a year in rent for €100000, I will beg borrow or steal the money to buy them, and I promise to give you 50% of the rental income for two years, that's €60k by the way.

I am not going to deal with the ups and downs of the property market, because that in not what this thread is about. You said a person using the bill could be left with a property worth a lot of money by paying very little, I showed how the bill was drafted to stop that. You then show how a bank can give a person a property for very little if they want, I say that has nothing to do with the bill.

If you want to del with the bill fine, of you want to deal with the madness of the property bubble, that has been done to death.

krd

ResearchWill wrote: »

You started this thread making a clear statement about the bill, I showed how that statement was incorrect.

You have now moved onto talking about the property market in general, making general statements without any back up.

No, the property market in general is not irrelevant. Because ultimately this is what the insolvencies relate to.

Yes, I know the bill is explicit in regard to secured creditors. In real terms I believe it is completely impractical to consider the secured and unsecured separately.

I had given an example where the five properties are producing €60000 a year in rent. If you can tell me where I can buy five properties producing €60000 a year in rent for €100000, I will beg borrow or steal the money to buy them, and I promise to give you 50% of the rental income for two years, that's €60k by the way.

I have a friend who lives in the US. Over the course of several years, he picked up repo'd houses at rock bottom prices - and he's getting good rent yields on them - usually in less than 3 years, he'd cover the purchase price. But before you think you can run down to the bank and borrow for these properties - you can't the banks are superstitious about repo'd stock and often they will not lend. The same thing is going to happen here - unless it's already happening. But they're are far more houses, than they are tenants.

If you have cash to spare - make some phone calls, you might be surprised - but don't think you'll magic up tenants, that may require more luck.

I am not going to deal with the ups and downs of the property market, because that in not what this thread is about. You said a person using the bill could be left with a property worth a lot of money by paying very little, I showed how the bill was drafted to stop that.

Yes, well. I believe those clauses are wishful thinking. And the secured creditor - the bank, will have no other choice but to engage in the process. And or, engage in a parallel process.

Tell me one thing. If the bank seizes the property, in negative equity - and sells it - the difference in the sale price and the mortgage will then become unsecured debt - and if since the debtor is under protection, that debt will be completely void. The bank will have to crystallise a greater loss, than accepting a massive write down in the mortgage. Okay, 10k is extreme - but writing a 250k down to a 60k may not be, or what could be more likely would be writing down a 250k mortgage to 100k - 150k if there are tenants paying rent.

But in certain instances, it may be more advantageous for the debtor to not cooperate in anyway whatsoever with the secured creditor. I believe this is already happening with as many as 50% of all buyToLet mortgages.

You then show how a bank can give a person a property for very little if they want, I say that has nothing to do with the bill.

I believe it does. Even though the secured creditors are given what you could call "protection". In reality, they only have a call on the asset. And if they seize the asset, the debtor is protected from further action on their part. The secured creditor can neither bankrupt them nor pursue them for unsecured debt.

The bill, effectively, makes all investment mortgages non-recourse.

If you want to del with the bill fine, of you want to deal with the madness of the property bubble, that has been done to death.

Unfortunately, the madness is not over.

But three points. In direct relation to the bill.

1. Even though, there is explicit protection to secured creditors in the bill, in reality, do they have any - and they have no other choice but to engage in the process, under unfavourable terms.

2. Is this non-recourse by the back door?

3. The process should include secured creditors. The time limit should not be 5 or 6 years, but much longer, allowing for fair write downs and repayment. I don't see why this can't be staggered like a sub-prime mortgage. A 5 year arm, and then into a 30 year.