When a receiver is appointed things move at a startling pace.  All the pre-appointment checks, legalities of the appointment and all the investigations that are needed, in relation to the asset over which the lender has a charge, are undertaken. However, one of the first real actions that a receiver has to take is to secure control of the asset in question, whether it’s a vacant or part vacant premises.

Securing control of the premises is key to being able to ensure that the asset is protected and that the receiver can fulfil his or her duties. Of course control also relates to dealing with the borrower, tenants, suppliers and employees for properties that are let and held as an investment.

The risks that a vacant property presents include squatters, contamination, criminal activity, enforcement notices from various local authorities, loss of licences, all of which impact on the ability to deal with the premises whether that is to let or to sell them.

Squatting - Commercial premises still at risk!

As of the 1st of September 2012 squatting in homes and residential buildings became a criminal offence. This change in the law will make securing possession of residential premises much easier and will bring to an end the cost, time and frustration caused when residential premises have been squatted - not to mention the clean-up costs and any repairs that are needed after the squatters leave!

However, lenders and receivers should note that this change in law only relates to residential premises and NOT commercial premises, which are still subject to the previous rules. It is interesting to note that websites designed to advise squatters and would be squatters have now changed their emphasis directly to commercial buildings - see www.squatter.org.uk: "squatting is still legal in non-residential properties".

Security

When appointing a receiver lenders must make sure that action is taken to secure control of the premises at an early stage. Control at the very least should be a change of locks and securing all windows and doors. Hoardings and squatter proof guards can be installed but this is often expensive and merely alerts the world to a vacant building. Alternatives include regular inspections, alarms, or having a security presence on site. Security is costly and 24/7 security will cost in the region of £75,000 to £80,000 plus VAT per annum. Employing a firm of guardians is far more cost effective and very flexible.

Cost and time

The risks of squatting are clear and of course the costs and time in securing possession are significant. We have had to deal with inherited cases where squatters have dumped medical waste and household waste leaving not only a significant clean-up cost but attracting the attention of the environmental authorities with the potential for criminal prosecution. In one case we dealt with an ingenious group of squatters who took control of a 40,000 sq ft office building and proceeded to take tyres from garages around London, being paid in the process, and dumping them in the premises. We were left with a clean-up bill of over £50,000 to include the tyres and the hypodermic syringes following the party that the squatters had just before we secured possession.

More recently, we have been able to prevent squatters from trading in vacant commercial premises on Oxford Street by instructing a firm of security guards to take immediate possession and then letting the premises to a temporary trader at a very low rent in order to ensure an on-site presence whilst we decided whether to let the premises or to dispose of them. 

As with most matters, control is critical and early and decisive action saves cost and time in the long run which is even more critical in receivership situations where interest is often accruing, sometimes at a default rate. 

Simon Tilsiter is a Registered Fixed Charge Receiver at Strettons. For more information contact: Simon on 0208 509 4430 or email [email protected].