We Promise...

Property bank debt is back in the headlines again as one of the biggest recession driven legal cases has finally been concluded. A decision by the UK Supreme Court on 11 March 2015, in favour of Mr Derek Carlyle against RBS, is a landmark victory for property developers throughout the UK.

I understand from the release that in 2007 Mr Carlyle sought and was promised funding from RBS to both buy and develop at Gleneagles. It suggests in order to avoid making a loss, he advised RBS it was essential if lending him the money to both buy the land and develop it. RBS confirmed that they understood this and verbally advised him that funding was “all agreed”, however, after drawing down the purchase funding, no development funding was ever provided.

RBS subsequently raised proceedings against Carlyle seeking recovery of the sums loaned by them for the land acquisition and the property developer has defended his case since 2008. The decision by the courts, however, found RBS had indeed given a contractual promise to Mr Carlyle at the time the purchase funding was provided; therefore, they breached a collateral warranty.

In this case, the judges have affirmed the commercial reality property development deals pre-recession were done on a handshake and properly executed paperwork was few and far between. It was common for promises, that were intended to be honoured at the time, were made verbally and in Carlyle we see a rare judicial acknowledgement of this commercial reality.

GDP welcome the decision as this case will be helpful to those seeking to demonstrate how contracts between bank and borrower were made – and broken.

Property developers and SMEs for the last several years have struggled with their legacy debt and working through same with the banks. Many a reasonable case has not been pursued knowing the banks have significantly larger pockets for funding litigation. Even now we see NI banks packaging and selling their loans due to the inherent difficulties within them.

GDP are advocates of “Mediation…Not Litigation” but are delighted for all borrowers that the highest court in the UK has now recognised that a bank can be held to the promises it made to its customers. The fact remains that whatever the problem, debt shortfalls, impaired loans, negative equity etc - the best solutions are obtained when the bank and borrower works amicably together.

Debt is something that has an adverse impact on an individual’s life and I see this first hand every day. The team at GDP cannot promise to fix all of your life problems, but we can promise you will not face them alone. Remember - when you have a debt problem, there is always a solution… we promise.