MBI and Northern Powerhouse Developments

Zanderman

npd_investor wrote: »

One of the questions that is still on my mind is whether the administrators have the right to put the hotels up for sale without consent from the individual investors in order to pay off the higher ranking creditors with the proceeds from the sale. I do not think that would be possible. Any ideas anyone ? When I asked the sollicitor (Metislaw) about this scenario a few years back this was their response:

"Following Completion you would own the unit itself as an asset in land. You could then sell this, or get together with the other investors who own the hotel rooms and arrange for a management company to run the hotel, for example. The developer’s insolvency would not affect your ownership of this property."

I'm with AnotherJoe on this - you bought/leased a room in a building not, unless explicitly stated, a share of the other functions of the building. In which case even if you got together with other room owners you couldn't run the hotel, you'd only have some rooms.

To which you might not even have physical access as you'd have to pass through the hotel entrance, which you probably don't own any of. Unless the room owners collectively own everything you're probably powerless - in terms of running the hotel.

npd_investor

Thanks AnotherJoe/Zanderman for your replies. I can see your point about not owning the lease on the general areas (reception, restaurant, lobby), etc. in the hotel. On the other hand the investors own the lease on all the rooms in the hotel and the administrators would not be able to sell the hotel without consent from the investors who own the leases on the rooms in the hotel. They cannot just sell the general areas: They are selling the entire hotels including rooms.

I will investigate legal steps against Metis Law..

Malthusian

npd_investor wrote: »

Thanks AnotherJoe/Zanderman for your replies. I can see your point about not owning the lease on the general areas (reception, restaurant, lobby), etc. in the hotel. On the other hand the investors own the lease on all the rooms in the hotel and the administrators would not be able to sell the hotel without consent from the investors who own the leases on the rooms in the hotel. They cannot just sell the general areas: They are selling the entire hotels including rooms.

They can sell the freehold to whoever they like. Just like if I own the freehold of a block of flats, I don't need permission from the flat leaseholders to sell the block (unless the lease says otherwise).

Whether they can find a buyer for the freehold if it comes with an obligation to pay 8% a year of a wildly inflated purchase price to random leaseholders is another matter. It may be that the approval of the leaseholders is required - but what they will be required to approve is the writing off of their "assured rents" to enable the hotel to be sold and some recoveries to be generated.

The above is all speculation and like AnotherJoe, IANAL.

With regard to Metis Law, bear in mind that 50% of lawyers are always wrong. In any legal dispute both sides get a lawyer and only one can be right.

I agree with AnotherJoe that it does seem worth investigating whether you have a complaint against Metis Law if they gave you inaccurate information on which you relied. That said the Legal Ombudsman is not known for being a consumer champion to the same extent as the Financial Ombudsman. Unlike financial advisers, lawyers are not expected to be right 100% of the time (see above).

Metis Law were correct to say that if the freeholder went bust you would still own the lease, but I'm not sure they're correct to say you could band together with the other leaseholders and take the hotel over. It may however depend on the exact terms of the leases.

A more disputable statement is "You could then sell this [the hotel room]". There is no secondary market for hotel rooms. None. Nobody buys a hotel room second-hand from a bagholder when they can get one supposedly offering an 8% fixed yield and buyback option.

Though a lawyer would say that this sentence doesn't guarantee the existence of a secondary market, it just says it's a theoretical possibility.

AnotherJoe

npd_investor wrote: »

Thanks AnotherJoe/Zanderman for your replies. I can see your point about not owning the lease on the general areas (reception, restaurant, lobby), etc. in the hotel. On the other hand the investors own the lease on all the rooms in the hotel and the administrators would not be able to sell the hotel without consent from the investors who own the leases on the rooms in the hotel. They cannot just sell the general areas: They are selling the entire hotels including rooms.

I will investigate legal steps against Metis Law..

Of course they can.
Let me give you a couple of almost direct examples.

• You own the leasehold on your newbuild house. The builder retains the freehold and before you get a chance to buy it from them, flogs it to EvilCorp who then ramp up the price they will sell it to you for.
• You own a leasehold on a flat along with 11 others in the block. The freehold on the block is owned by Mr X and Sold to GreedyCorp who ramp up the ground rent.

Freeholder does not need permission from the leaseholder(s) to sell and can indeed sell despite what the leaseholder might want.

Reaper

npd_investor wrote: »

you would own the unit itself as an asset in land

Unless this is a legal term I am unfamiliar with you most certainly do not own the land your hotel/student room is on. Given there are likely to be rooms directly above and below yours I can't see how any land can possibly be involved.

I imagine you own the lease to a small area of the hotel and probably a restrictive one at that limiting the uses it can be put to. For example you probably can't turn it into a shop for hotel guests or install a hot tub for all hotel guests to pay to use, but by all means read the lease and see.

In the end the only likely buyer for the room is the owner of the hotel it sits in (if it is operating), and being the only buyer they aren't likely to offer more than a token sum.

eskbanker

Reaper wrote: »

npd_investor wrote: »

you would own the unit itself as an asset in land

Unless this is a legal term I am unfamiliar with you most certainly do not own the land your hotel/student room is on. Given there are likely to be rooms directly above and below yours I can't see how any land can possibly be involved.

Must have been a typo, it was probably meant to say "you would own the unit itself as an asset in England"

bowlhead99

Reaper wrote: »

Unless this is a legal term I am unfamiliar with you most certainly do not own the land your hotel/student room is on. Given there are likely to be rooms directly above and below yours I can't see how any land can possibly be involved.

eskbanker wrote: »

Must have been a typo, it was probably meant to say "you would own the unit itself as an asset in England"

You have probably seen on the LISA and HTB ISA threads in which you participate, every so often someone wants to know if the property they are going to buy or have owned before will qualify them or disqualify them for the scheme. Reference is made on those threads to the rules and definitions which refer to an 'eligible interest in land'.

I have a nice long lease on my flat. It's not on the ground floor and I don't own the foundations, and I couldn't touch the land on which it stands without digging down somewhat. My long leasehold interest is still an 'eligible interest in land' according to the guidance that you see in those other threads on this board, capable of registration at the Land Registry; and various other types of property could be an interest in land even if not eligible for the particular scheme - I only mention as an example as I know you've seen those threads.

So, if someone says that post completion you will own an asset which is an interest in land, it doesn't mean that if you don't own the grass outside your window they must be meaning the Eng or Scot or Ire or Zea type of Land.

IANAL etc.

eskbanker

bowlhead99 wrote: »

You have probably seen on the LISA and HTB ISA threads in which you participate, every so often someone wants to know if the property they are going to buy or have owned before will qualify them or disqualify them for the scheme. Reference is made on those threads to the rules and definitions which refer to an 'eligible interest in land'.

It's true that the government FTB schemes refer to an 'interest in land', although it's often pointed out that when the relevant clauses are assembled together, the more complete reference is to an "interest in land which comprises a building that is used or suitable for use as a dwelling, or is in the process of being constructed or adapted for such use". Perhaps this is similar to what the above lawyers meant by owning 'an asset in land' but like Reaper I'm not familiar with that specific phrase.

Anyway, like others before me, IANAL, but I am not ANAL enough to continue any further with this!

npd_investor

Just to clarify: Selling the freehold still does not enable the owner of the freehold to operate the hotel. In order to operate the hotel and rent out the rooms they will need consent from the lease holders of the individual rooms.

AnotherJoe

npd_investor wrote: »

Just to clarify: Selling the freehold still does not enable the owner of the freehold to operate the hotel. In order to operate the hotel and rent out the rooms they will need consent from the lease holders of the individual rooms.

Is that a question or a statement? Seriously.


First of all, you've put two different thinsg together. Running the hotel, letting rooms out. Different things.
The former can be done without the latter, or certainly without all the rooms.

They can hold functions (bar, restaurant, weddings, corporate events etc) and perhaps some owners will agree to their rooms being let out, enough rooms to make it viable to run as a hotel with rooms even if not all can be used. After all few hotels run at anywhere near 100% occupancy, and if this one did it would likely not have got into financial difficulty.

My view (again, to reiterate, IANAL) is that the freeholder could operate the hotel and let rooms out, including yours without your agreement, and if they did let your room out they would be due to pay you whatever % or other amount as is described in your lease if that lease binds future owners. Does it?

If, as I suspect, no % is described in your lease, but instead your lease says that NPD Ltd (or whatever their name was) will pay you 8% per year, but Acme Corp takes over the hotel, then it may be you are up a famous creek with no paddles because Acme Corp have no contract with you and thus your lease is worthless.


I somehow suspect the lease will not have a clause stating you can refuse to let your room out because how would that help NPD? And they wrote the lease, not you.
If you DO have a clause saying that in the event of a new owner they are bound to pay you a specified % or amount then if i was the new owner, I'd simply not let your room out until you sold me the lease back, probably at a pittance.

You really need to get legal advice on what your lease covers in the absence of NPD.

I suspect its worth less than the paper its printed on even if you used cheap paper.