My Partner's Debts

My Partner went into a Limited business with his brother a couple of years ago. I was concerned when he told me that they were going to take out a large personal loan to expand the business.

They bought some extra land to build a shop/cafe on. At the time, when I expressed my concerns, he told me not to worry, they were not borrowing on our home (which I own 100% jointly with him) and that I would not be liable for the loan in any way shape of form.

They explained that they had put up a couple of barns, which they had owned jointly since they were teenagers as securtity against the loan. The bank were quite excited about their plans and agreed to lend them further money to build the new building with. That, of course, was before the banks were in trouble.

As it stands now my partner and his brother have bought the extra land and the bank are refusing to loan any more money to build the shop/cafe. So, in effect, they own a worthless plot of land with a huge loan.

The bank are now putting them under pressure to repay the loan, but they have no way of repaying it. My partner and I have always done everything by the book. We've both worked so hard and we have cleared our mortgage on our home. However, I have been told that the bank could force us to sell our home to get their money back. We are not married and we have no kids, so it wouldnt be classed as a family home? Is this the case? I'm sick with worry and don't know what to do.

Re: My Parner's Debts

I'm new to the site, but as no one has replied, I guess no one out there knows the answer to my problem? Any ideas on where I might get some help would be appreciated.

Re: My Parner's Debts

Does your partner and his brotehr have any income at all from any job/work/business or otherwise that they can use to pay towards the loan?
Is there a possibility of selling the land?
Is there a possibility of leasing out the land - would it be good as agri land?
What is the amount of the loan and what are the repayments/term of the loan?

Re: My Parner's Debts

Have you made an appointment to speak with your bank manager?

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Is the loan held by the Limited company ?

Did they give any personnel guarantee beyond the barns ?

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Did your partner use the house as security for the loans. You mention limited company but you also say personal loan. What do you mean by a couple of barns as security, are these barns on land owned by them? How much was borrowed, can they repay it? What is the land worth now. Can you give more details so that you can get better replies.

Re: My Parner's Debts

niceoneted said:

Does your partner and his brotehr have any income at all from any job/work/business or otherwise that they can use to pay towards the loan?
Is there a possibility of selling the land?
Is there a possibility of leasing out the land - would it be good as agri land?
What is the amount of the loan and what are the repayments/term of the loan?

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They both have incomes and had been repaying the loan up until recently. The bank met with them in recently and told them they would not be lending them any further funds to complete their plan of building the shop/cafe. Obviously, they expressed their concern (ie without the shop/cafe add on business they would be unable to generate enough the money to repay the loan). The bank agreed (but didnt put it in writing) to give them some time and give them a break on making the monthly payments. I felt they should continue to make the repayments, but they trusted the bank. The bank have called another meeting for next week. The land price has obviously dropped as they bought it a couple of years ago and nobody is buying land at the moment. Its not suitable as agri land. The business is a limited company, but the cost of the business + extra land is somewhere around the total loan is around the 900k. No sure on terms.

Re: My Parner's Debts

Sorry if I wasnt clear. They bought a going concern business and set up a limited company. (They had to take out a personally secured loan to buy the business). They then took out a further loan to buy the extra land so they could add onto the business. They didnt use their homes as security for either loans, but the bank insisted they use something else, so they used a mortgage free property that they jointly owned (the barns & the land they are on). At the time these assets were worth enough to cover the loan if they defaulted. Obviously they are not worth any way near that amount today and the original going concern business, would not be worth what it was either.

Re: My Parner's Debts

They spent 900k on a site ????

Re: My Parner's Debts

jhegarty said:

They spent 900k on a site ????

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Approx 480k on exisiting the business & it's refurbishment, the balance on further land, stamp duty, legal fees, groundwork etc

Please, I'm already cross, but it is what it is. It's done and they cant change it. They know they will have to repay what they borrowed some how (probably for the rest of their lives). My concern is that I will lose everything I have worked so hard for too. You see, when we bought our home I put in 50% of the money and my partner matched it. We had intentions of getting married, but we had no will drawn up at the time, so I made sure that we were down Joint tenants with both our names on the deeds. ie we both own the property outright. There is no 50/50 split of shares. That way if either of us died, the property would automatically go straight to the other. I'm worried that the bank is going to look at our home as a mortgage free asset and force us to sell it to repy a loan that I had no involvement in taking on.

Re: My Parner's Debts

It looks like the land is in their owe name.

Is the Company renting the land from each?

Does company have much of a cashflow.

Could the land be sold to the company?

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I am slightly confused!!
I thought in the first post you said they bought land that they want to develop into a business.
They used already owned land and bars as collateral.
Was this beside the land they already owned?
Now you are saying they bought a going concern business. So was there not some income from this business or was it in development stage or what stage was it at?
Can there not be an income made from this business?
Can some of the land be sold as sites to generate some money?

Re: My Parner's Debts

papervalue said:

It looks like the land is in their owe name.

Is the Company renting the land from each?

Does company have much of a cashflow.

Could the land be sold to the company?

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No the company is not renting land from each.

Company is just ticking over it pays its suppliers, staff & utilities with little v. profit I imagine (I'm guessing here as it was just getting going & I didnt reallly pay too much attention - didnt know I needed to!)

Re: My Parner's Debts

Have they got any advice from their accountant and Solictor of what to do?

I assume the accountants would have all the figures?

Did you get any legal advice in regard to your own position regarding house?

Re: My Parner's Debts

niceoneted said:

I am slightly confused!!
I thought in the first post you said they bought land that they want to develop into a business.
They used already owned land and bars as collateral.
Was this beside the land they already owned?
Now you are saying they bought a going concern business. So was there not some income from this business or was it in development stage or what stage was it at?
Can there not be an income made from this business?
Can some of the land be sold as sites to generate some money?

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They bought the premisis of a business that someone else had previously owned which had been let go for some years into a near derelect state. So they borrowed the money with a personally secured loan to buy the premisis and renovate it and for all the normal costs involved in setting up a business. Then they saw that if they bought the extra land around the property, they would be able to expand and keep adding onto the business. To do that they borrowed more money via a loan, which they personally secured using their assets (the barns) as collateral. They know they are probably going to end up losing the business & their collateral, its the oustanding balance that is causing the stress. My worry is our home.

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I need to get some legal advice I think. Dont know where I stand as we are not married & have no children, so not sure if our house would be treated the same as a family home.

If in the worse case scenario, if they force us to sell our home in this climate, would they let me keep half of the proceeds or will they take whatever is outstanding on his loan? It's making me physically sick at this stage and my partner is just burying his head in the sand.

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You own half the house. Half the house proceeds are yours. No-one else is entitled to them. The bank will have to get a judgment first before they can compel the sale.

If they do get a judgment against your partner, they are entitled to look for payment from him. They are entitled to look for satisfaction from his share of the house - but not yours.

mf

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Was the home given as collateral in obtaining the loan.As a joint tenant did you sign or did your "husband" sign over the house as collateral. I am not a legal person but I would think... that if you did not sign your interest in the house as collateral for the bank loan... then the bank could not chase you for your stake in the house.
However they might be able to go after your boyfriends stake if he signed that as collateral.
Just looked at the above post as I was writing this and he is on the ball.
Hope your relationship with your boyfriend is strong enough to survive this...ahem...little hiccup!

Re: My Parner's Debts

mf1 said:

You own half the house. Half the house proceeds are yours. No-one else is entitled to them. The bank will have to get a judgment first before they can compel the sale.

If they do get a judgment against your partner, they are entitled to look for payment from him. They are entitled to look for satisfaction from his share of the house - but not yours.

mf

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Is that still the case even if we own it under joint tenancy, rather than tenancy in common. We only did it that way because we didnt have a will made out at the time and wanted to ensure that if anything happened to the other before we were married, the house would automatically go to the other, without the worry of 50% going into the estate of the deceased.

Re: My Parner's Debts

Little hiccup! I could strangle him!

He didnt use our home as security intentially. I'm the cautious worry guts of our relationship (the type that has 3 months wages in an emergency account & he's the feckless one the type that a girl would be too worried to marry for fear of financial ruin.)

I never wanted to be one of those women who held the purse strings, but ......