Voluntary Surrender on Commercial Property

[lisathecat]

We have a commercial property that was used for our retail business that has gone into liquidation. We haven't been able to rent it or sell it and it is in huge negative equity.
To be fair the bank (PTSB) have been very understanding and we have gone from interest only to part payments to a nominal sum. They asked if we would agree to a voluntary sale and we would deal with the shortfall after (if possible).
As there are fixed costs even with an empty property (insurance, electricity, mortgage insurance etc) we cannot now even afford these and have asked to voluntary surrender the property instead. This would stop these costs for us.
My question is- does it matter if we voluntarily surrender it rather than agree to the voluntary sale? We will help the bank in anyway as regards helping the sale.
Our final position will not be any different as we cannot afford to settle the balance .
Income details
Net monthly (i.e. after tax) Income self: nature of income e.g. self-employed/public servant etc

€2500 private sector
Net monthly income partner/spouse: nature of income

JSA only qualify for €22.40 per week.
Income history:
Amount of child benefit received (Should be €130 per child) €260
Amount of Mortgage Interest Supplement received (MIS is the social welfare payment to unemployed people, don't confuse with TRS)

Personal circumstances so we can calculate your reasonable living expenses
.
One adult family or two adult family 2 adults
Do you need a car for work or do you use public transport? 2 cars
Number of children 0- 2 years old:
Number of 3 years old children:
Number of 4 - 11 years old:
Number of 12 - 18 years old: 3
Monthly childcare costs:
Montly spend on special circumstances: e.g. exceptional healthcare costs



Home loan
Lender: PTSB
Amount outstanding: 135000
Value of home: 200000
Interest rate: specify whether tracker or SVR or fixed rate TRACKER
Monthly repayment 1117
Amount in arrears NIL



Investment property - Delete if not applicable
Lender: PTSB
Amount outstanding: 367000
Value of home: 90000
Interest rate: 6.39
Monthly repayment 100
Amount in arrears 12000
Monthly rent received NIL

Credit Union
Amount of shares 2500
Amount of loan outstanding 9000
Monthly repayment NIL
Term left 5 yrs


Other loans and creditors - delete those which don't apply to you
Credit Card - 12000
Credit Card monthly payment- 50

Family loan - 25000
Family loan repayment - nil

Other savings and investments

Do you expect any lump sums in the medium term future?
no


How important is retaining the family home to you?
I want to keep the family home. All our effort is put towards keeping up all payments on this.


Any other relevant information

What is your preferred realistic outcome?
We have engaged all the time with the bank but would like to put it all behind us and move on . Unless my partner gets a job there it is unlikely we will be able to ever settle such a huge debt. Obviously we hope the bank don't chase us for the shortfall but would be prepared to help in any way we can. We are in our fifties so we don't have many years left to earn.

 

[Brendan Burgess]

It seems to me that you are totally insolvent and that you are candidates for bankruptcy?

Is the investment property in both your names?

You have €65k of equity in your family home. You might be able to do a PIA with your creditors whereby you sell your family home and use the €65k to pay your creditors in full and final settlement.

I think you should try to sell the investment property as quickly as possible, as this converts the mortgage into an unsecured debt. Ptsb will be by far your biggest unsecured creditor and can approve or veto a PIA as they see fit.

They might agree to you keeping your home under a PIA. From their point of view, they should insist on the sale of the family home and then write off the shortfall.

Alternatively you could opt for bankruptcy. The Official Assignee might just sit on your home for years. He would own it, but as long as you are paying your mortgage, he might not get involved. But it's hard to see where this would end up.

 

[lisathecat]

Thanks Brendan.
Yes, it is in both our names. We were advised by the bank many moons ago to take out a personal pension mortgage and rent it to our business, which was a limited company.

The bank have verbally told us that they would not consider our own house in any future negotiation about the shortfall as it is "not linked" However they will not put it in writing or that we agree to the voluntary sale on the understanding that we cannot pay the balance. They said that our financial situation will be reviewed once the sale is complete and an agreement will happen depending on our ability to pay.

Back to my original question- we have agreed to the voluntary sale but have now asked if we can surrender it immediately as we cannot pay the costs of keeping the empty property insured etc. Does it make any difference to our position?

 

[44brendan]

As far as I can see there is no real difference to you with either option. A voluntary surrender will mean that that the Bank will sell the property and apply the loans in reduction of your loan. A voluntary sale will achieve the same result, only you will be selling the property. The bank will not agree to any deal on the shortfall until the property is sold and the amount of the shortfall is crystalised. However, given your financial circumstances they are likely to agree to a w/o of the balance as any alternative option is unlikely to give them any return.