Question re: bankrupt developers. Were they really broke?

NIMAN

I do wonder how bust they really were?
Funny how quite a few of them are back in business, with a huge number of unpaid debts behind them.

I see one local set of brothers up here in the nw, who are building hundreds of houses again. And they had gone to the wall.

So when these folk go bust, do they really or have they millions stashed away?

dubrov

They went broke but their wives were still loaded

feargale

Did you see any of them sitting on O'Connell Bridge holding out a hat?

Victor

NIMAN wrote: »

I do wonder how bust they really were?

Many were in the position where they owed lots of money, owned lots of land, but as there was no demand for houses, the land only had agricultural value. There was a case, I think in Naas, where a farmer sold land to a developer for €20m and bought it back for less than €1m.

I see one local set of brothers up here in the nw, who are building hundreds if houses again. And they had gone to the wall.

Their company or them?

There is a saying in the drugs trade "don't use your own product". The problem is that many competent house builders also got into land speculation.

listermint

Victor wrote: »

Many were in the position where they owed lots of money, owned lots of land, but as there was no demand for houses, the land only had agricultural value. There was a case, I think in Naas, where a farmer sold land to a developer for €20m and bought it back for less than €1m.

Their company or them?

There is a saying in the drugs trade "don't use your own product". The problem is that many competent house builders also got into land speculation.

Not sure what any of that has to do with this. If you had land and went bust the land went to Nama or the banks.


Quite simply these lads played the poor mouth but syphoned off money all over the place . Abroad, their kids , their wives and so forth.

Creative accounting, and these lads are back with a bang smiling in the faces of contractors they put out of business when they bump into them around town

Conservatory

If the cartel kills everyone that owes them money they will never get the money back.

These people create employment at the end of the day. If your finances are in order bid against them then get planning then build some houses. If you can do it without going bust in the next crash you will probably be one of the only established crowds in town when the next boom happens.

Or you could, ye know, complain about it.

listermint

Conservatory wrote: »

If the cartel kills everyone that owes them money they will never get the money back.

These people create employment at the end of the day. If your finances are in order bid against them then get planning then build some houses. If you can do it without going bust in the next crash you will probably be one of the only established crowds in town when the next boom happens.

Or you could, ye know, complain about it.

I don't think that's the point. If the average Joe went bust on his mortgage or debts that would be it. No ability to Syphon money anywhere.

There is truth in the old adage the more you owe the less you owe.

JeffKenna

Nope...they turned their accounts into crap in order to hide/make things difficult for auditors. By this I mean moving them to Excel files in order to create confusion and throw their assets around right, left and centre.

NIMAN

listermint wrote: »

I don't think that's the point. If the average Joe went bust on his mortgage or debts that would be it. No ability to Syphon money anywhere.

There is truth in the old adage the more you owe the less you owe.

Thank you for understanding what I was trying to say. I wasn't saying I should be building houses.

My point is, these guys claimed they were broke. Penniless. Yet how does a businessman who had no money now find themselves building hundreds of houses again?

Surely there has to be someone in government circles who needs to ask these guys where they got the money to start buying land again and start building? If they had money hidden away, surely that fraud?

Heebie

I think they just moved tons of cash "offshore." but... of course, on paper... of course they went broke.

NIMAN

Heebie wrote: »

I think they just moved tons of cash "offshore." but... of course, on paper... of course they went broke.

Then how come no-one in a position of authority, or even a good investigative journo, isnt saying " hey hold on a minute fellas, where'd you get all that money".

utmbuilder

Made everyone better at hiding assets for next time around

Conservatory

listermint wrote: »

I don't think that's the point. If the average Joe went bust on his mortgage or debts that would be it. No ability to Syphon money anywhere.

There is truth in the old adage the more you owe the less you owe.

Bankruptcy laws don’t work like average joe laws.
Also if you stopped paying the mortgage you’d probably still be in the house in 8 years.

Lumen

Conservatory wrote: »

These people create employment at the end of the day.

Demand creates employment.

davo10

This has nothing to do with them siphoning or hiding money, it is about their knowledge and expertise in large scale house building. Most developers who went bankrupt lost pretty much everything they could legally lose, that is what bankruptcy means. Most went to the UK and discharged their bankruptcy there in a process which is much shorter than here.

There was an article in the Business Post about this very point a couple of weeks ago, the reason many big developers are back in business is because the banks need them and society needs them, there is big demand for houses, development land is there,, they know how to build on a huge scale so the banks/VC companies are willing to loan them the finance. Also, the lenders are pretty certain to make money in this market so it makes business sense.

lawred2

NIMAN wrote: »

I do wonder how bust they really were?
Funny how quite a few of them are back in business, with a huge number of unpaid debts behind them.

I see one local set of brothers up here in the nw, who are building hundreds of houses again. And they had gone to the wall.

So when these folk go bust, do they really or have they millions stashed away?

Surely it was more in the main cases of limited companies bring liquidated than lads' own wealth being exposed..

I'm sure the latter happened too.. to the more greedy of them.

Wanderer78

Has bailing out bankrupt banks actually worked?

Lumen

davo10 wrote: »

Most developers who went bankrupt lost pretty much everything they could legally lose

But many put assets beyond reach of creditors, through transfers to family members.

Are you denying that this happened?

davo10

Lumen wrote: »

But many put assets beyond reach of creditors, through transfers to family members.

Are you denying that this happened?

Am I on trial? Does it matter if I agree or deny it?

The fact is they are back in business because they have the knowhow to develop large scale projects and as a result of that, they have access to finance again. Without big developers, all these houses we need would never be built.

Lumen

davo10 wrote: »

Am I on trial? Does it matter if I agree or deny it.

No. Yes. It's a reasonable question.

Caliden

Go up and have a drive by of Sean Quinn's house and you'll find your answer.

It's bigger than the hotel it's built beside and yet the lad was 'broke'

Diarmuid

Surely most of these guys would have run their development companies as ltd companies?

Lumen

Diarmuid wrote: »

Surely most of these guys would have run their development companies as ltd companies?

Yes, but the limited liability was typically counteracted by personal guarantees required by the banks.

Some developers managed to win the staring contest with the banks and get loans secured on the assets, but those were exceptions rather than the norm.

Berserker

Their businesses went bust but they didn't. I know a family who are in the business who went bust (Ltd company) during the recession. They just set up a new business with the daughters and sons as owners. The father was the owner of the business that went bust, so he took a minor role in the new business, on paper.

Lumen

Berserker wrote: »

Their businesses went bust but they didn't. I know a family who are in the business who went bust (Ltd company) during the recession. They just set up a new business with the daughters and sons as owners. The father was the owner of the business that went bust, so he took a minor role in the new business, on paper.

It's not exactly that simple.

It's normal for property developers to set up multiple small limited companies, possibly one for each development. I assume this makes it easier to administer and secure loans on the assets under development.

In addition, there may be personal guarantees on some or all of the loans.

So the normal situation is that the ltd company goes bust, the subcontractors join the queue of creditors (i.e. get nothing), the banks go after the directors for any personal guarantees, the directors then either reach an accommodation with the banks (e.g. by threatening bankruptcy) or declare personal bankruptcy to rid themselves of all liabilities and start again.

There's nothing in principle wrong with using ltd company structures to shield directors/shareholders from risk, that's the whole point of limited companies. The practical issue, as I understand it, is that many developers created such a web of cross-liabilities between different companies, their own family members, and banks, that untangling the mess was near impossible, and the banks were too stupid or lazy during the boom to stop this from happening.

Also, joint and several liability of spouses seems to have not really worked out that way.

There was a nice house I was looking at in a posher part of north Dublin in about 2014ish that was owned by a property developer. It was taken off the market, the EA said the creditors couldn't figure out how to untangle it. A couple of years on there were brand new luxury cars parked outside.

jimmycrackcorm

Lumen wrote:

But many put assets beyond reach of creditors, through transfers to family members

Are you denying that this happened?

Do you have definitive proof of this or is it speculation? I know of one developer whose company went bust but he still had some assets that weren't used to guarantee the development loans.

Lumen

jimmycrackcorm wrote: »

Do you have definitive proof of this or is it speculation? I know of one developer whose company went bust but he still had some assets that weren't used to guarantee the development loans.

What's the burden of proof in a discussion forum?

It has been widely reported. I found this in about 5 seconds...

Property wives: who owns what?
https://www.irishtimes.com/news/property-wives-who-owns-what-1.614524

The Billionaire long established construction firm didn't exactly go bankrupt in most cases, Sean Dunne's and the like paid a price, however, a lot small to medium sized builder developers did go absolutely genuinely bankrupt they were caught out by the market.

CrankyHaus

Clearly it's a rigged game.
If the taxpayer took on the debts then the fullest recovery possible should be sought.
If recovery was frustrated by legal loopholes then the government should pass legislation to close the loopholes.
The fact that this isn't even on the agenda tells you everything you need to know.

If these guys are the geniuses that we desperately need to build houses then the taxpayer wouldn't have had to take on their debts in the first place after they helped tank the economy.

Lumen

Lumen wrote: »

What's the burden of proof in a discussion forum?

It has been widely reported. I found this in about 5 seconds...

Property wives: who owns what?
https://www.irishtimes.com/news/property-wives-who-owns-what-1.614524

That article is from 7 years ago, its an interesting moral argument does being married to someone mean you are responsible for their debts.

https://www.independent.ie/business/commercial-property/the-boys-are-back-in-town-the-oldschool-developers-making-a-comeback-36348525.html.

Should they have all been barred from every involvement in property development forever?

Lumen

mariaalice wrote: »

...its an interesting moral argument does being married to someone mean you are responsible for their debts.

I dunno, people tend to deploy moral arguments when they don't like the legal ones, but the law is a social instrument whose purpose is to encode our morality for the purpose of administering justice.

Legally, the issue is what the debts are secured on.

I am not a lawyer, but as I understand it joint and several liability is a clause put into certain debt contracts (particularly those secured on the family home) in order to override the legal protection afforded to that family home. There's no point in securing a loan on a property is the lender has no recourse to that security.

davo10

Lumen wrote: »

I dunno, people tend to deploy moral arguments when they don't like the legal ones, but the law is a social instrument whose purpose is to encode our morality for the purpose of administering justice.

Legally, the issue is what the debts are secured on.

I am not a lawyer, but as I understand it joint and several liability is a clause put into certain debt contracts (particularly those secured on the family home) in order to override the legal protection afforded to that family home. There's no point in securing a loan on a property is the lender has no recourse to that security.

What is your gripe with this?

If lenders or Revenue are entitled to assets of bankrupt developers, it's up to them to use whatever laws apply to recover as much money as possible. If they can't or won't, then there must be a reason for that. It doesn't change the fact that we, as a society, need more available accommodation and like it or not, experienced developers are the only ones who can obtain finance and get the houses built.

Lumen

davo10 wrote: »

What is your gripe with this?

I'm not griping, but the putting of assets beyond reach of creditors matters when those creditors are state-owned bailed out banks.

davo10 wrote: »

If lenders or Revenue are entitled to assets of bankrupt developers, it's up to them to use whatever laws apply to recover as much money as possible. If they can't or won't, then there must be a reason for that.

I'm not sure what point you are attempting to make with those statements.

davo10 wrote: »

It doesn't change the fact that we, as a society, need more available accommodation and like it or not, experienced developers are the only ones who can obtain finance and get the houses built.

Agreed. I have an entirely neutral view of property development as an activity. It's a necessary cog in the machine of a functioning society, much like amoral lawyers.

Time

Lumen wrote: »

I'm not griping, but the putting of assets beyond reach of creditors matters when those creditors are state-owned bailed out banks.

There's nothing inherently wrong about putting assets beyond the reach of creditors. It's a perfectly legitimate thing to do and tbh anyone with real wealth would be well advised to do so via trusts etc...

Lumen

Time wrote: »

There's nothing inherently wrong about putting assets beyond the reach of creditors. It's a perfectly legitimate thing to do and tbh anyone with real wealth would be well advised to do so via trusts etc...

Well, it may be fine or it may be very much not fine. Section 74 fraudulent transfer etc.

Time

Lumen wrote: »

Well, it may be fine or it may be very much not fine. Section 74 fraudulent transfer etc.

Thats why i said its not inherently wrong. Of course it can be used for fraudulent purposes, but lets be real here, do you not think these people all had legal advise before transferring assets beyond the reach of creditors.

Lumen

Time wrote: »

Thats why i said its not inherently wrong. Of course it can be used for fraudulent purposes, but lets be real here, do you not think these people all had legal advise before transferring assets beyond the reach of creditors.

Are you arguing that rich people always act legally because they can afford expensive lawyers to keep them on the right side of the law?

Didn't work out so well for David Drumm.

And I've lost track of where the Dunnes are at defending alleged fraudulent transfer of assets.

davo10

Lumen wrote: »

Well, it may be fine or it may be very much not fine. Section 74 fraudulent transfer etc.

You asked earlier what point I was trying to make with those statements, I thought the point was simple enough, if the developer commits fraud or breaks the law, he/she should be prosecuted. But if they aren't, then either they didn't break the law or th evidence isn't strong enough to support the charge. So why you insist on saying they committed fraud or siphoned off money without anything to back it up is beyond me.

Every business/person is entitled to use the laws available to protect their assets, if they don't break the law, why should we accuse them of fraud?

davo10

Lumen wrote: »

Are you arguing that rich people always act legally because they can afford expensive lawyers to keep them on the right side of the law?

Didn't work out so well for David Drumm.

And I've lost track of where the Dunnes are at defending alleged fraudulent transfer of assets.

David Drumm was convicted, as far as I'm aware the Dunne's have not been. But I don't think David Dunne is a property developer and I'm pretty certain he is not back in business here.

Heebie

NIMAN wrote:

Then how come no-one in a position of authority, or even a good investigative journo, isnt saying " hey hold on a minute fellas, where'd you get all that money".

An offshore bank that's any good doesn't let anything leak about their clientele. They wouldn't stay in business long if they did.

Lumen

davo10 wrote: »

You asked earlier what point I was trying to make with those statements, I thought the point was simple enough, if the developer commits fraud or breaks the law, he/she should be prosecuted. But if they aren't, then either they didn't break the law or the evidence isn't strong enough to support the charge.

There's a third option, which is that the matters are not properly investigated, perhaps because the State deliberately under-resources the agencies with the statutory duty to investigate.

https://www.irishtimes.com/news/crime-and-law/white-collar-crime-reports-going-unread-amid-endemic-lack-of-resources-1.1817109

davo10 wrote: »

So why you insist on saying they committed fraud or siphoned off money without anything to back it up is beyond me.

I haven't accused anyone of fraud, and you still haven't offered an opinion on whether it happened (I can't even be bothered to restate the question again).

Anyway, Ireland has a terrible/incredible international reputation for investigation and prosecution of white collar crime (depending on which side you're on).

I can't believe after all that's happened in the last 15 years that this is even a discussion point.

Eric Cartman

The reality is a bunch of limited companies went bust, mostly due to them not being paid and new work drying up, if there was no mismanagement then the directors of that company (the developers / builders) would not be at fault. So their personal house, savings, investments etc.. would have been safe.

At the time it would not be uncommon to take a directors loan from your company to purchase some land in your name and then have the company buy it off you after it was rezoned etc.. when the work dried up and demand fell, many property development companies were liquidated with massive debts unpaid etc.... while the directors of that company had their own homes paid off and sitting on lots of land that was now zoned residential or had planning on it, now thats worth a lot of money so a bank would gladly loan to a new company with a clean financial history that magically has a load of residential land worth millions on the balance sheet.

ted1

NIMAN wrote: »

listermint wrote: »

I don't think that's the point. If the average Joe went bust on his mortgage or debts that would be it. No ability to Syphon money anywhere.

There is truth in the old adage the more you owe the less you owe.

Thank you for understanding what I was trying to say. I wasn't saying I should be building houses.

My point is, these guys claimed they were broke. Penniless. Yet how does a businessman who had no money now find themselves building hundreds of houses again?

Surely there has to be someone in government circles who needs to ask these guys where they got the money to start buying land again and start building? If they had money hidden away, surely that fraud?

Some of them are experienced developers who are well able to make a good profit as such they get external funding from private sources or direct from Nama.

Takes cairn homes. , https://www.google.ie/amp/s/www.irishtimes.com/business/construction/cairn-homes-secures-50m-loan-for-montrose-site-purchase-1.3144013?mode=amp

And in this you see the money is for the state https://www.google.ie/amp/s/amp.independent.ie/business/commercial-property/how-taxpayerbacked-fund-gave-50m-loan-to-buyer-of-rt-site-35900685.html

Time

Lumen wrote: »

Are you arguing that rich people always act legally because they can afford expensive lawyers to keep them on the right side of the law?

Didn't work out so well for David Drumm.

And I've lost track of where the Dunnes are at defending alleged fraudulent transfer of assets.

No I’m saying that just because you put your assets beyond the reach of creditors, it does not mean you any inherently doing anything wrong and It is financial prudent to do so in many scenarios where there would be absolutely no question of it being fraudulent

riclad

House prices went down by 50-60 per cent in 2007,
so many builders owed the bank more than the houses were worth .
So they went bankrupt or else were taken over by nama.
if someone was scammed it was the taxpayer who has to pay for the banks to be rescued anmd we are still paying off the debt for all this.
Meanwhile many civil servants and bankers retired with large pensions
and the bankers still kept the bonus,s they recieved in the boom for their
reckless lending .
AS usual the public and the tax payers pay for the reckless folly
of foolish bankers and mediocre civil servants.
Society needs builders ,the system of bankruptcy is there to allow
people to start over when theres a crash or people make mistakes.
Its a shame so many people had to go to the uk to do it in a time less than 7 years.

jimmycrackcorm

People don't see the connection between the hatred of developers and the fact that we have a housing crisis.

And everyone who bought an overpriced house doesn't think they played a somewhat minor part in it.