We generally find relationships between shareholders, or stakeholders can break-down and cause insolvency where property is involved. Individuals may have different views on how a property should be sold, or the value of the property.
In light of breakdowns of relationships of stakeholders, the appointment of a liquidator can be beneficial. In this case, a liquidator acts as an impartial third party with the goal of realising the property (and other assets) of the Company for the general benefit of creditors.
We set out two case studies below involving properties owned by two companies with the insolvency being precipitated by a breakdown in the relationship of the stakeholders and shareholders of the individual companies:
Trustee Company
Here a trustee company owned a property in Auckland. It was a large family home in east Auckland. The property was subject to a relationship property dispute for a relationship that had broken down.
The property had been marketed for sale but had failed to sell after an auction. The shareholder placed the trustee company into liquidation so that we could manage the sale if possible and wind up its affairs.
The property had substantial bank debt and the bank had issued a PLA notice.
Upon our appointment, we contacted the real estate agents, parties and bank and worked out that the first reserve for the sale was just too high. As part of the relationship property dispute, one party had pressed for a reserve that the market would not meet.
We worked with the real estate agents and formed a strategy to sell the property which involved:
- Refocusing efforts to sell the property and contact prospective purchasers in an effort to get offers presented
- Taking steps to lapse a caveat over the property that was stopping sale
- Working with the mortgagee to facilitate a sale of the property
We were ultimately successful in our efforts with the following outcome:
- The caveat over the property was lapsed meaning we could sell the property as liquidators (and a mortgagee sale was not required)
- The property was sold and the mortgagee was paid a substantial distribution, equating to over 95% of their secured debt.
If we had not been successful with our sale, the mortgagee may have been forced to initiate a sale process which would have resulted in additional costs to the secured debt (including costs associated with a mortgagee sale and default interest while the process was undertaken) along with the potential for a reduced price for being sold via a mortgagee process.
This enabled the property to be sold in difficult circumstances and achieved a timely outcome despite the relationship breakdown and acrimony.
Early Child Care Centre Company
The Company traded an early childhood centre in Royal Oak, Auckland and owned the property where it operated in a retail mall.
The ultimate cause of the Company’s insolvency appears to have been a dispute between the shareholders of the Company.
Upon being appointed by the High Court, we assessed the property and determined that it should be sold as part of the liquidation.
We instructed a commercial agent to sell the property via auction. After a sales campaign, the property however was passed in at auction and did not sell.
Working with our agent, we identified an interested party who owned another property in the building, but was unable to attend the auction. Due to the nature of the property, it was determined the best profile for an interested party would be someone who owned other units in the building.
We managed to work through with the buyer and sold it to them after the auction had not been initially successful.
We were able to get a result and timely sale of the property, overcome the unsuccessful auction. Because of our efforts, we were able to pay a full preferential distribution and a partial unsecured distribution to the creditors.
