Buyer Beware!

Any lingering doubts about the survival of Michel Stainer’s Grand empire disappeared on Saturday afternoon. For two hours, process servers acting for the administrators of Hallam Estates Ltd, who now own the entire freehold, trudged up and down the staircases, hand delivering envelopes to every flat.

These envelopes contained a formal notice to all leaseholders that the Grand would be auctioned on June 22nd by London auctioneers, Barnard Marcus.

This is the same auction house that tried to sell two repossessed flats belonging to Doris Stainer, the wife of Michel Stainer. This is the same auction house, that at the second attempt in

October, succeeded in selling them……… back to Michael Stainer. Problem was, he hadn’t got the cash to complete, despite scurrying around Folkestone with his begging bowl. End result, lost deposit, probably funded by the COVID-19 grants doled out to him by his chums at FHDC – now subject to complaints and an internal review. Oh, and where is Doris? She’s now returned to Germany with her large yellow pantechnicon, stuffed full of who-knows-what.

So now, the battered and beleaguered residents of the Grand, whose maintenance fund is owed £600,000 by the Stainers and Hallam Estates, face the uncertainty of who their new landlord might be.

Mind you, any new landlord will be in for an even bigger surprise when he collects the keys.

That’s the fun of auctions – you never know quite what you are buying. So, after a careful re-read of our past articles and the associated court cases, let’s spell it out.

At the front of the Grand is the crumbing wreck of what is called the Palm Court, or as it’s nicknamed, the Money House. Here’s what it looked like as described in Martin Easdown’s recent book Fashionable Folkestone.

So, first thing in the new owner’s in-tray will be to save the Palm Court. They will then discover that the cost of this cannot be recovered from leaseholders, by order of the First Tier Property Tribunal and the High Court.

That same order will see them hit by a bill, on day one, for 25% of the annual service charge budget for this year of 25% of £511,000. This percentage will continue year after year, plus contributions to major works over the next few years, at a figure estimated at anywhere between £2.5 million and £4 million. So that’s between £625,000 and £1 million to be found.

So, the new owners of the Grand will be bleeding cash at an alarming rate. But don’t panic, just look at the income flow they will enjoy as they rake in the ground rents — £4000 per annum in total. But we hear you say, what about the profit they will make out of the commercial areas?

We have written before in an article entitled “A Grand Failure and a Grand Fantasist” about the mismanagement and loss-making skills of Michael Stainer over many years, leading to multiple insolvencies and trail of unpaid bills. This is not to say a new owner couldn’t turn it around in normal times, but these are not normal times and the hospitality and leisure industry is on its knees according to data collected by the Office for National Statistics (ONS).

So where does this leave the residents of the Grand? In what must be regarded as the poison chalice of all poison chalices, they have a legal right, if the Grand is sold, under the amended 1987 Landlord and Tenant Act and subject to a few conditions, to take over any sales contract and purchase the freehold at the same price. In other words, as the auctioneer’s hammer falls in favour of Joe Bloggs Property Ltd, the residents’ rights cut in and poor old (or lucky old Jo?) kisses goodbye to the Grand.

In. fact, according to an article written by Gary Murphy, a partner at Allsop, in 2016, 68% of property investors won’t bid where residents have exercised their rights. He goes on to say that that the difference in the valuation of a building where these rights have been exercised is as much as 46% higher where residents have stood aside, as compared with where they have exercised these rights.

But would this be what the residents want? All the problems we mentioned earlier will still apply if they acquire the freehold, but at least they will be free from the dead hand of the Stainers.

So let’s wait until June 22nd and see what happens.

The Shepway Vox Team

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