What happens when a company goes into administration?

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Insolvency:

In any dealings in
business you want to ensure that you are dealing with businesses that
are basically solvent, whether this is a contractor you have engaged
to do work, a customer you supply goods or services to, or as
landlord or tenant.

It is always prudent to do due diligence checks on the party you intend to enter into a business arrangement with, as well as ongoing checks occasionally while the arrangement continues, for example while a business tenancy is ongoing.

Companies House now supplies free and quite comprehensive information regarding a company’s officers, reporting and accounts, but this information is invariably several months out of date.

Nevertheless, a pattern of behaviour and financial performance can usually be discerned by comparing several years’ worth of the online accounting reports. Alternatively, using one of the specialist credit reference agencies to check-out the company could be very worthwhile.

If the worst should happen and the commercial landlord appoints debt collectors or High Court Enforcement Officers then one remedy open to them is to seize a debtor’s goods. This often stops them trading and usually brings things to a head quickly – speed is usually of the essence and gives creditor first movers an advantage.

When a company goes into administration it has entered a legal process (under the Insolvency Act 1986) which aims to rescue or sell the business as a going concern if at all possible.

After a licensed
insolvency practitioner has been appointed either by the directors, a
creditor or a court the administration process, it puts in place a
statutory moratorium. This gives the company a ‘breathing space’
freeing it from its creditors’ enforcement actions while
restructuring takes place to rescue the company as a going concern
wherever possible.

If the business
cannot be saved, the administrator will seek to minimise creditors’
losses, perhaps by allowing it to continue to trade for a period
while seeking a sale of the business, or its assets piecemeal. For
example: goodwill, trademarks, patents, equipment, the customer
database, software

content or websites
may have value and there may be a ready market, so the proceeds can
be returned to the creditors.

Pre-Pack
Administration

The main value in a
company is often its good name (goodwill) or the company’s brand,
which, when a company enters into administration will quickly
dissolve into thin air, or be highly diminished and reduce the
chances of a sale. The practice of pre-packaged administration has
evolved to combat this.

So, before going
into full administration, and where potential purchasers for a
business and its assets can be found, or where a part of the business
can be sold or closed down, the a sale of all or part of the
company’s business and assets can be negotiated.

Purchasers may be
directors, shareholders, others connected with the insolvent company
or outside purchasers, or it may be possible for the company to
simply be slimmed down and continue to trade on a reduced scale.

Landlords often come
up against administrators when an insolvent tenant company owes them
money, rent arrears, service charges etc.

What to do when
your debtor enters administration

David Asker, Director of The Sheriffs Office writes:

“The starting
point for enforcement is not good for creditors, but the
administrator does not have the power to turn back time. If you have
instructed a High Court Enforcement Officer (HCEO) and are
mid-enforcement, i.e. you have a controlled goods agreement which is
not the subject of fixed charges, then the moratorium acts to protect
you, i.e. the administrator cannot ignore your enforcement.
Similarly, if you have taken control of goods, then you must hold
them pending confirmation from the administration that they may be
disposed of.”

The strength of your
position is very specific to your case writes Mr Asker.

“If the
administrator has a desperate need for the goods you have taken
control of or the debt secured is materially less than the value of
the goods, then the administrator will come up with a strategy to
ensure you are paid.”

More often that not the goods are just not worth anything like as much when sold second hand as they cost originally, particularly when auctioned off. In this scenario, the administrator is likely to either allow the enforcement to continue, leaving you with an unsecured claim in administration in respect of any balance remaining from the sale, or they will value the items and suggest they be sold by the administrator. When the goods are sold, an agreed sum would be paid to the creditor via the HCEO.

“I have always
found it best to consider the law as it relates to Insolvency as
being continually in flux. The certainties of life that we all crave
just cannot exist long-term in an area of the law where so much pain
can be metered out!”, says Mr Asker.

Conclusions

The appointment of
an administrator is designed to protect the position of creditors and
to stop individual creditors taking matters into their own hands,
thereby destroying value which, if better handled would benefit all
creditors. By its nature, it is a process which is very case specific
and claimants in the midst of enforcement are advised to seek legal
advice before finalising their strategies, says Mr Asker.

©1999 – Present | Parkmatic Publications Ltd. All rights reserved | LandlordZONE® – What happens when a company goes into administration? | LandlordZONE.

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“I’m the landlord, I can do what I want, when I want”

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I recently read the shocking
story about Mr Valentine-Brown who was murdered by his landlady, her
partner and two accomplices when they decided they would take the eviction
process into their own hands.  Although
an extreme case, this story serves to highlight just how quickly problems can
escalate when emotions are running high and landlords take an unlawful route to
eviction.

You would be amazed how many landlords I
have spoken to over the years who do not understand why they cannot simply turn
up and take back possession of their property when a tenant falls into arrears.
There is often an attitude of “I’m the landlord, it’s my property, I can do
what I want.” Wrong.

A good friend of mine is a police officer
and she recently told me that there has been a marked increase in calls, across
the London borough where she operates, relating to landlord and tenant
disputes. However, these are civil matters and police will not intervene unless
there is a breach of peace.

In a recent case, a tenant who had rented a property for five years, but
suddenly fallen into two weeks rent arrears, returned to the property to find
his landlord throwing his belonging out on the street with no warning or any
prior discussion about terminating the tenancy.

It amazes me that in this day and age some landlords are still unaware of their legal responsibilities in letting out a property. Regardless of whether a tenant has fallen into arrears, no landlord has the right to unlawfully enter an occupied property and remove a tenant’s belongings or change the locks.

An illegal eviction can be punishable with a fine of up to £20,000 and possible jail time, too. If a landlord wishes to evict a tenant, they should never, under any circumstances, take matters into their own hands. Always wait for the judgement of the courts.

So, what should a landlord do?

MAKE CONTACT – If you have a reason to evict your tenant, such as rent arrears, always try to make contact first to see if you can reach a resolution. Sometimes tenants default through no fault of their own and communication can help to solve the problem before it is taken any further.

COMMUNICATION
TRAIL – Always
keep a record of communication between you and your tenant, and if you have a
phone call to discuss any issues, such as late payments or anti-social
behaviour, follow this up in writing via letter or email. This could be used as
evidence at court.

AVOID
‘LANDLORD RAGE’ – Never be tempted to harass the tenant in an attempt to resolve the
matter. The penalties for harassment are severe and can result in heavy fines,
so always seek professional advice and stick to the correct procedures.

INSTRUCT LEGAL PROFESSIONALS – Landlords or letting agents can draw up and serve the notice themselves but if this is not something you have done before, it is advised to instruct legal professionals who specialise in eviction and who are regulated by the Solicitors Regulation Authority. Even the slightest error in the details of the notice can cause a court to throw a case out, meaning the whole process would have to start again which is costly both in time and financially. If you are unsure about your rights, landlords can call Landlord Action’s free advice line for help on

Landlord Action

©1999 – Present | Parkmatic Publications Ltd. All rights reserved | LandlordZONE® – “I’m the landlord, I can do what I want, when I want” | LandlordZONE.

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Today in politics: Floods, Local Housing Allowance and the ageing PRS population

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We look at government discussions on Flood Re – and affordable insurance scheme for people in areas at high risk of flooding, the approval of plans to increase LHA by the rate of inflation and the ageing PRS population. MPs quiz government on Flood Re The Secretary of State for the Environment, Food and Rural Affairs, […]

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SHOCKING: landlord seeks help when losing £70,000 when council housing rental goes wrong

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Story of landlord couple Joy and Frederick Bibb reveals risks for landlords who rent to council tenants through a ‘bond’ scheme.

A landlord couple with
a rental property in Suffolk are deciding whether to exit the market altogether
after experiencing one of the worst cases of ‘dirty tenant’ behaviour ever seen
by LandlordZONE.

Joy Bibb, 69, and her
husband Frederick, 74, have properties in the North West and South West of
England but have been so traumatised by their experiences in Great Yarmouth
that they are considering pulling out of the market altogether.

The couple have
owned the house in central area of the Norfolk seaside resort since 2002 and by
2011 were ready to sell the property as they approached retirement.

But the local
council’s Housing Options team persuaded Joy to include the property in its
housing list and a two council tenants subsequently move in – a disabled woman
and her carer son.

“They told us that they
could put a nice family in there, and they would manage the property for us,
our rent would be paid direct every four weeks, and they would liaise with the
tenant and do regular checks on the property,” claims Joy.

“This was great because we had moved to Cornwall
many miles from Great Yarmouth and therefore would not have to worry, or deal
with problems, and Housing Options told me it was a ‘win, win’ situation.

But the reality of the situation soon began to unravel.
Joy alleges that Housing Options did not properly manage the tenancy or the
property and both tenants began exhibiting extreme hoarding and ‘dirty living’
habits including using many parts of the property as a toilet and the rest of
it as a rubbish dump.

“It was worse than anything you ever see on TV and we were left with the job of cleaning the property up – eventually we had to sell it for £60,000 under market value because it was such a mess,” says Joy.

She claims Housing Options weren’t interested
once the horror of its interior was revealed.

“Also, the ‘guaranteed’ rental payments stopped
before the tenants left, totalling £1,000 and we had problems getting payment off
Housing Options,” she says.

It also transpired that the mother and son kept
several dogs and nine cats, despite Joy being reassured that they didn’t have
pets.

Joy says she has approached local council CEO
Sheila Oxby, as well as several former and current housing ministers including
Heather Wheeler and Esther McVey for help without success.

“We’ve lost nearly £70,000 in total which is a
lot of money to lose at our age,” says Joy.

In a statement, Great
Yarmouth Borough Council told LandlordZONE:

“This property is
privately-owned and was not (and is not) managed by Great Yarmouth Borough
Council.

“The council has a number of
schemes to help those in housing need to access housing in the private sector.

“One of them is a bond scheme
which allows the landlord, if required, to claim up to the bond limit at the
end of the tenancy towards eligible costs. In this case, the landlord claimed
and was paid up to the bond limit.”

©1999 – Present | Parkmatic Publications Ltd. All rights reserved | LandlordZONE® – SHOCKING: landlord seeks help when losing £70,000 when council housing rental goes wrong | LandlordZONE.

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Mortgage on ex-LA going at auction?

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I’m looking to buy an ex-local authority flat on the first floor of a 10-storey block in Hackney. The building has several lifts and, in general, is in good condition.  There is no deck access – the corridor where you enter the flat is closed to the elements.

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Online Right to Rent checks coming?

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The Immigration Minister, Kevin Foster MP, responded to a written question by Alex Norris MP (Labour, Nottingham North) asking what plans the Home Office has to update the Right to work checks and Right to rent document checks guidance to allow digital forms of identification to be accepted.

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Deposit free renting isn’t the issue, it’s rental sector transparency

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A BBC investigation has suggested that some letting agents are not providing tenants with the full picture when selling deposit alternative schemes, resulting in ‘hidden costs’ later being charged to tenants.

While some tenants have found themselves foul of as much as a month’s rent for not following the guidelines

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Rent control alert! Scotland poised to vote through bill legalising ‘rent cap’ system

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Opponents fear the concept of regulating rents could be exported to England and Wales if it can be made to work north of the border.

Scotland’s rented sector could be in for a big
shake-up if a Private Member’s Bill wins approval as it enters the final few
legs of its progress through the country’s parliament.

After
being introduced in May last year and subsequently winning enough support to proceed
to the scrutiny process, Pauline McNeill MSP’s Proposed Fair Rents
(Scotland) Bill or ‘Mary Barbour Bill’ aims to
radically reform the sector by linking rents to average wages and providing
more information about rent levels.

The Bill stands a good chance of making it into
law and would cap annual private sector rent increases across Scotland at one
percentage point above inflation. Also, landlords would have to update the nation’s
landlord register to include changes in rental charges, to build up a picture
of market rates.

But it would usher in rent controls across Scotland in everything
but name, opponents have claimed.

The bill would also overhaul rent appeals; when a tenant appeals
the amount, officers and members of the tribunal could either lower or maintain
the rent, depending on their assessment but, unlike the current system, not
raise costs.

The Scottish Labour MSP says private renting should be fairer and
more affordable.

Rent pressure zones

“The relationship between ever increasing rents and poverty is
clear,” says McNeill. “Rent pressure zones have failed. The Scottish
Government have missed an opportunity in this Parliament to tackle high rents –
with this Bill I hope to correct that mistake.”

Her Bill is inspired by Scottish political activist Mary Barbour,
who led a strike over increased rent prices in Glasgow in 1915.

Mike Dailly, a solicitor advocate at Govan Law Centre, helped to draw up
the Bill and says
about 15% of households in Scotland are now in the private rented
sector, which has trebled in size in the last 20 years.

Says Dailly:
“Rents in our biggest cities have been rising at double the rate of inflation
year-on-year with a 40% hike in the last nine years.

“The Scottish Government introduced some rent control measures in the 2016 Private Tenancies (Housing) (Scotland) Act. Yet not one local authority in Scotland has ever applied for a rent pressure zone. The legislation isn’t fit for purpose.” The bill has won support from homeless charities and some councils, but groups such as ARLA Propertymark have already come out in opposition.

©1999 – Present | Parkmatic Publications Ltd. All rights reserved | LandlordZONE® – Rent control alert! Scotland poised to vote through bill legalising ‘rent cap’ system | LandlordZONE.

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LATEST: Revolving door at Ministry of Housing tipped to keep on spinning this week

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Political gossips say both Housing Secretary Robert Jenrick and Housing Minister Esther McVey stand a good chance of clearing their desks this week.

Although a Valentine’s Day massacre looks unlikely, Boris Johnson’s cabinet reshuffle on Thursday is
expected to see housing department staff bidding a fond farewell to either Esther
McVey or Robert Jenrick.

If either do get shunted from their posts, the new
minister will be the 19th in 21 years – a churn rate to rival managers in the
Premier League.

This revolving door reflects how housing is still seen as a secondary area of importance, with
ministers having to fight for influence and funding alongside other priorities.

Dominic Raab, with a seven-month tenure, was the shortest
serving minister in recent times.

High-flyer Jenrick, who won his Secretary of State for Housing,
Communities and Local Government post as part of Johnson’s previous cabinet
reshuffle last summer, has been tipped for a promotion – particularly because
of his high-profile role in the election
campaign.

His successor will have their
hands full of housing priorities promised by the Conservatives during the
election campaign, including the ‘top to bottom’ review of dangerous cladding
and shepherding through ‘new deals’ for both renters and first-time buyers.

Housing Minister McVey,
meanwhile, looks set for the chop; a few weeks ago, the two were
reported to be in dispute over the broad direction of government housing
policy. 

Like Jenrick, she won her role last June and although the
former GMTV presenter gets invited to attend Cabinet meetings, she is not a
formal Cabinet member.

McVey is currently
overseeing the proposed reform of the house buying process and proposals to
introduce mandatory qualifications for agents. But for how long?

©1999 – Present | Parkmatic Publications Ltd. All rights reserved | LandlordZONE® – LATEST: Revolving door at Ministry of Housing tipped to keep on spinning this week | LandlordZONE.

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Today in politics: Energy efficiency, fire safety and tax

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We look at calls for changes to fuel poverty legislation, the continuing debate over who should pay for fire safety work on tower blocks, the latest landlord data and a call for new landlords to be subject to tax changes in a bid to boost home ownership. Government to consult on energy efficiency Peers have […]

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