The Lemon Fool

And 14 vacant shops thrown in for good measure.

Quite a bargain - or perhaps not ...

http://www.auction.co.uk/commercial/Lot ... 1106000072

I suppose if you were jolly cunning you could set up an off the shelf company, buy the property for the £1 (plus the pesky £5k solicitor's costs) and then just collect the rent whilst the inevitable litigation was launched against you.

It should be easy enough to spin that out for at least a year or so, and then when you can't fend them off any longer you just declare a mighty dividend, reluctantly announce that the company lacks the resources to continue the litigation and abandon the company to the jaws of its creditors - and open the champagne!

Can someone explain this for the thickie? What joke/trick am I missing? Not that I fancy owning an almost empty shopping centre in Kirkaldy.

I like to think that if someone pulled that trick they would need to have paperwork to prove they made 'best attempts' to run the place if the limited company folds.

Not sure you would make enough from it to fund a 'run away to another country and hide' strategy.

UncleIan wrote:Can someone explain this for the thickie? What joke/trick am I missing? Not that I fancy owning an almost empty shopping centre in Kirkaldy.

If it's the story I read a few days ago, you buy it for £1, but the annual rents receivable are quite a bit less than the outfoings such as rates etc (which I assume the landlord is liable for with the many empty units). So you ignore demands for payments due whilst raking in the rent from the units which are let.

Wrongful trading and laws on preferring creditors would come in here (eg s239 Insolvency Act 1986)

johnhemming wrote:Wrongful trading and laws on preferring creditors would come in here (eg s239 Insolvency Act 1986)

No doubt, but money in the hand is worth more than money owed, other things being equal.

If you gave me 100K in cash and in return I take on your debt to a third party of 200K, I suspect there are some creative ways to make that work.

And my understanding is that you can "prefer" one creditor over another until and unless you enter bankruptcy.

If you prefer creditors and it is obvious you are going bust then you can find that limited liability can disappear for the directors and the directors may have to make payments out of their own funds.

https://www.companyrescue.co.uk/guides- ... 1986-3748/

https://www.33bedfordrow.co.uk/insights ... y-act-1986

johnhemming wrote:If you prefer creditors and it is obvious you are going bust then you can find that limited liability can disappear for the directors and the directors may have to make payments out of their own funds.

https://www.companyrescue.co.uk/guides- ... 1986-3748/

https://www.33bedfordrow.co.uk/insights ... y-act-1986

Maybe so but that would not be relevant for an indivdual buying this deal for a pound.

And if he does eventually enter bankruptcy then there may not be any assets with which to satisfy the creditors. After all that is why people declare bankruptcy. It's rather the point of it, in fact.

Again, it could be a foreign person who takes this deal, who may be harder to chase down. There are ways this could work on a cashflow basis, but it's certainly not for everyone.

johnhemming wrote:Wrongful trading and laws on preferring creditors would come in here (eg s239 Insolvency Act 1986)

Potentially, yes. But someone doing this would simply set up the acquiring company in The Seychelles, Panama, St Vincent and the Grenadines, or any number of other such `sunny places full of shady people', where insolvency law is something of a theoretical concept.

They would also ensure that the shareholders and directors were nominees, so that in practical terms the true shareholders and directors would be untraceable.

And even in the highly unlikely event that they could be traced, good luck trying to get a liquidator who would be willing even to attempt recovery action in one of these jurisdictions!

Not sure you would make enough from it to fund a 'run away to another country and hide' strategy.

Not a problem. Remarkable as it may seem, you wouldn't be doing anything illegal, so there would be no question of having to flee the country. There are many thousands of people living in expensive houses throughout the UK having pulled off scams like this with no fear at all of civil claims, let alone criminal prosecution.

Personally I doubt the purchase price is going to be £1 anyway, far from it.


GS

Clitheroekid wrote:... someone doing this would simply set up the acquiring company in The Seychelles, Panama, St Vincent and the Grenadines, or any number of other such `sunny places full of shady people', where insolvency law is something of a theoretical concept.

To add the gloss of apparently being a UK concern perhaps one could set up an LLP (a great favourite of money launderers). Members are typically offshore companies and some rascals use a Delaware company along the chain somewhere.

Having an onshore entity as the registered owner has the side-effect of the property not being identified as offshore-owned in the Private Eye database/map when next updated (Warning: investigating this link could occupy you for longer than you'd anticipate):
http://www.private-eye.co.uk/tax-havens

The first report I read of this auction included a statement/claim that considerable interest had already been seen (and that was before it was mentioned here). They would say that, wouldn't they?

Cheers!

JonE wrote:

Clitheroekid wrote:... someone doing this would simply set up the acquiring company in The Seychelles, Panama, St Vincent and the Grenadines, or any number of other such `sunny places full of shady people', where insolvency law is something of a theoretical concept.

To add the gloss of apparently being a UK concern perhaps one could set up an LLP (a great favourite of money launderers). Members are typically offshore companies and some rascals use a Delaware company along the chain somewhere.

Having an onshore entity as the registered owner has the side-effect of the property not being identified as offshore-owned in the Private Eye database/map when next updated (Warning: investigating this link could occupy you for longer than you'd anticipate):
http://www.private-eye.co.uk/tax-havens

The first report I read of this auction included a statement/claim that considerable interest had already been seen (and that was before it was mentioned here). They would say that, wouldn't they?

All this talk about offshore companies, opaque partnerships and other overseas entities is interesting. But I think the real issue and opportunity here may be simpler. We know that debt is often sold at a significant discount to its face value even if the debtor is an individual in the UK. This surely reflects the difficulty in collecting debts from people who are devious and motivated to avoid repayment. Or of course they are quite simply judgement-proof, or can appear so, rendering even court judgements mostly moot.

So in this case it might simply be a matter of trying to increase or accelerate the incoming rents, whilst finding 101 ways of frustrating and delaying the outgoings. Or perhaps even the suggestion of such tactics might motivate a creditor to renegotiate the obligation and forgive some of the debt.

The dividend to strip the cash would be an illegal dividend as it was paid without taking into account accrued expenses (rent) The insolvency practitioner appointed would strike it down and seek recovery from party receiving.

However if party receiving is in another country (offshore company sets up UK sub, UK sub buys units and pays dividend offshore) doubt would get very far.

Could also purchase all the let units in one entity and void ones in another, or switch them over- is it freehold or leasehold, I did not check.

I must pop over the Forth tomorrow .

Alternative cunning plan re void units, subject to their RVs being below small business exemption, purchase each single unit in a distinct company.

The unum quid MV is possibly a pound, so one company purchases lot and same day sells each unit to a distinct standalone company, stripping the void rates obligations away from the rental streams.

Alternative, buy whole, write a Deed of Condition and then sell individual units.

Methinks there may be some devil in the titles.

I know a bit about this shopping centre. Currently net income is -190k per annum (yes, that's a minus sign) due to the rates system up here. The full story is being written up by a local journalist. I'll post a link here once it's available.

StepOne wrote:I know a bit about this shopping centre. Currently net income is -190k per annum (yes, that's a minus sign) due to the rates system up here. The full story is being written up by a local journalist. I'll post a link here once it's available.

Then I think it would be entirely appropriate if whomever owns this shopping centre were to declare bankruptcy and the council itself ended up owning the asset. The council could then "forgive" all the rates that are payable and perhaps run it as a going concern.

Socialism Scottish style!

I think it would make sense for the buyer to demolish the centre and redevelop it into something for which there is demand. I should think the seller, Columbia Threadneedle, has that in mind by setting the reserve at £1.

Local Labour MP Lesley Laird is quoted as saying:"There is an urgent need for the Postings to be redeveloped, not only to reinvigorate the site itself, but as a key part of a composite town centre strategy to combat the raft of store closures Kirkcaldy has suffered of late".

brightncheerful wrote:I think it would make sense for the buyer to demolish the centre and redevelop it into something for which there is demand. I should think the seller, Columbia Threadneedle, has that in mind by setting the reserve at £1.

Local Labour MP Lesley Laird is quoted as saying:"There is an urgent need for the Postings to be redeveloped, not only to reinvigorate the site itself, but as a key part of a composite town centre strategy to combat the raft of store closures Kirkcaldy has suffered of late".

But what is this "demand"? Where does it come from? The worst thing to do is throw a lot of good money after bad. And frankly what the local Labour MP thinks is not relevant to outside investors who have other options that are in more affluent areas with a better potential ROI.

I suspect there is no viable use for either this property or this site, unless a home-builder can earn a crust on it, but then would planning consent be given?

I maintain that the only way to make money on this is to accelerate rental income, frustrate the creditors and then declare bankruptcy at the right moment. It's a sinking asset to be milked ruthlessly.

Okay, so which one of you thought it was worth £310,000?...

https://www.bbc.co.uk/news/business-47130516

UncleIan wrote:Okay, so which one of you thought it was worth £310,000?...

https://www.bbc.co.uk/news/business-47130516

Me!

#p196119

GoSeigen wrote:Personally I doubt the purchase price is going to be £1 anyway, far from it.

GS