Regulation of receivers is necessary to introduce greater transparency in how they operate and to ensure a proper flow of information to both the debtor and creditors, according to Fianna Fáil Spokesperson on Finance Michael McGrath.
Deputy McGrath commented, “At the moment, it would seem that receivers are not accountable to anyone other than the creditors (typically a bank) that appoint them.
“I regularly deal with people who have had receivers appointed by banks over their properties, in particular buy-to-let homes. These receivers often act without any transparency, keeping borrowers completely in the dark. Many properties have been sold in a rush at low prices, leaving borrowers liable for huge residual debts. Massive fees are sometimes built up by receivers and this can ultimately result in a greater legacy debt owing to creditors. We need to make changes to how receivers operate, in the interests of both the debtor and creditors.
“This is a significant issue, as 30,000 buy-to-let mortgage accounts are currently in arrears, 22% of the total, with €1.7 billion of arrears built up by property owners. Rent receivers have been appointed in 6,000 cases. Receivers were also appointed to 462 companies in 2014, many of which would have been businesses outside of the buy-to-let sector.
“Receivers should be subject to strict Central Bank regulation just like other financial service providers. They should be obliged to act in a fair and transparent way towards borrowers, but also tenants, employees, sub-contractors and concession holders.
“I believe that a number of regulatory changes should take place:
– Receivers appointed by banks should be subject to Central Bank regulation, just like credit servicing firms. They should have to operate within a strict Central Bank statutory code of conduct, which requires them to act transparently.
– Receivers should be required to provide a detailed estimate at the outset of the engagement of an estimate of their professional fees to cover the receivership and regular updates should be provided thereafter to the debtor and the creditors.
– Banks should not be able to appoint a receiver with almost no notice to the borrower. Borrowers should get sufficient notice that a receiver is to be appointed and, where a loan is called in, the borrower should be given a reasonable period of time to attempt to re-finance or re-structure the loan.
– Every receiver should be obliged to provide timely updates to borrowers, keeping them up-to-date as to whether a property is to be sold and for what price.
– Where a receiver proposes to sell a property, the borrower should have an opportunity to have that decision reviewed by an independent third party if they feel the receiver is selling the property at too low a price.
– Where a bank appoints a receiver over a rented property, the bank should be required to take on all of the responsibilities of a landlord, including the obligation to return a tenant’s deposit in full.
– Finally, it should not be possible to appoint a receiver over money set aside for the payment of salaries, sub-contractors, suppliers, concession holders, the Revenue Commissioners or employees’ pensions.
“These significant issues should be dealt with immediately to protect borrowers, but also tenants and employees.
“The government undertook a consolidation of company law in 2014, but they completely failed to deal with the lack of accountability of receivers. In May 2015, the Seanad was told that Minister Frances Fitzgerald was undertaking an analysis of whether further regulations should be introduced to govern the conduct of receivers. Once again, nothing has been delivered.”