Behind all the legal shenanigans that make up a typical week at the Grand (pictured below), there is one inescapable fact. Debt…….
“Creditors to right of them, Creditors to left of them, Creditors in front of them Volley’d and thunder’d”
….. and enforcement action by these creditors both in the Insolvency Court in London, and by the repossession of assets.
Just look at the sums involved. The debt owed by Michael and Doris Stainer (pictured) personally for the unpaid service charges on their own flat and the eighteen-holiday lets, now stands at £330,000 and can only be repaid by the forced sale of all of these flats. At present, there are three “hunters” in this process: the Insolvency Practitioners appointed by the Insolvency Service, and two companies acting for mortgage lenders exercising their right to repossess and sell 9 of the flats –including the invisible Grand Suite. Estimates put the total mortgage debt at around £1.9 million.
One debt that the Stainers escape is the £27,000 they were ordered to pay because of their “unreasonable” behaviour during the Tribunal hearing in January 2018 that found them liable for unpaid service charges. That is now a direct hit on the much battered service charge fund from which this action was funded.
The freeholder, Hallam Estates Ltd has four major debts, two to the service charge fund of the Grand, one to AORG, the residents’ association and the last, yet more Court costs due to the Managing Agent after a failed injunction. The first service charge debt is unrelated to any prior Court action, is what is known as the Landlord’s shortfall. This is the difference between the residents’ cumulative service charge contributions and the 100% that should be collected. This difference used to be around 19% but clever rejiggling of leases saw this salami-sliced by Stainer to around 3.5%. Tribunal records show that this amount has never been paid and we estimate the figure to be around £80,000.
The second debt came about when the Property Tribunal in July 2018 made the Landlord liable for 25% of the service charges. This was to reflect the 25% of the Grand occupied rent free by the various commercial enterprises. After numerous failed appeals, this figure is estimated to be around £130,000. The other two debts are reported to total around £16,000
Hallam’s exposed position should trouble anyone concerned with the trading prospects of the commercial enterprises still alive and their employees, especially the twenty new apprentices announced last week. The only source of revenue for Hallam to meet its obligations, once the holiday flat business ceases, will be by charging a commercial rent to these enterprises. We wonder how Mr Richardson (pictured) will cope with a rent bill of say £50,000 per annum?
Let’s look at these companies who have just filed their accounts up to the end of March 2019. Firstly, we have Folkestone Victuallers Ltd. established in September 2016.
The third company, Eastons Management Ltd deals with the holiday flat rentals and was established 30th November 1995, just as Hallam Estates was being set up to “rescue” the Grand from an open sale after repossession by Barclays Bank.
The last company is the newly formed Seaside Hosts, set up in September 2018, so no accounts have been filed.
So now look at Hallam Estates Ltd accounts, and check out the fixed assets, which are of course the Grand itself.
It is estimated that £4 million needs to be spent over the next five years to restore the building to the same condition as its neighbour, the Metropole. This means that each flat owner will need to find, on average, £75,000 on top of standard service charges. This is the price of years of historic neglect and the repeated refusal of the Stainers to act as responsible landlords and decent neighbours. On that basis, what real value does the building have?
