Property Development Gone Wrong

There are several reasons why any property development can go wrong. By its very nature developments are a high-risk, high-reward business.

In today’s ever-changing climate, with the backdrop of Covid-19 and now inflation pressure pushing up the cost of business, it is exceedingly difficult to predict anything with confidence and things can invariably go wrong.

Property Development Gone Wrong: What Are Your Options?

These situations are more complex than normal business debt issues. This is due to the involvement of substantial amounts of finance, multiple sub-contractors, and other factors at play.

There may come a point in a property development project when you need to decide whether it is worth continuing. This can be a difficult decision due to money already invested and, the uncertainty of how much more funding may be required.

If your funding was secured with a charge, the lender may ask for a fixed charge receiver (FCR) to be appointed. This is rarely a good sign, as you will lose control of your development.

What Is Your Liability If Your Property Development Fails?

Whilst property laws and the recovery of associates debt has its own Statute, the usual debt collection methods also come into play. Therefore, it is important to get a bearing of where a case may go, dependent on the route the creditor chooses. For example, do they go all out for a Judgement or do they look at extended litigation?

The options available to a creditor is different depending on circumstances and the type of case.

If there are more than one of the scenarios in place, then the issues can compound. You need to make sure you are ‘fighting the right fight’. For example, some clients vent their fury at say a Fixed Charge Receiver when the final demand will come from the lender, who should be the point of focus from the outset.

Some of the most common types of actions taken by lenders to recover money owed include: