Big Interview: Edward Gee, Partner & Property Receiver, CG&Co
By David Craik -
Edward Gee, Partner & Property Receiver at CG&Co looks back on 2021 and ahead into 2022.
2022 could see a correction in the previously buoyant housing market as interest rates are hiked in the face of rising inflation.
Edward Gee, Partner & Property Receiver at CG&Co, said this, in turn, could see an increase in receivership cases which has the potential to result in the firm being “busier.”
“CG&Co saw an increase in the corporate insolvency market over the last quarter of 2021 as people looked to close their companies as bounce back loans needed to be repaid,” he said. “It appears that the bridging world will find that property defaults will follow.”
Nonetheless, Gee adds that we’re still living through highly unpredictable times which continue to make it hard to predict the future.
“A lot of peculiar things have happened over the last two years with the government pumping huge amounts of money into the economy. I wouldn’t be surprised if they put in place protection measures to stop a floodgate of insolvencies and repossessions happening,” Gee added.
“The government is surely not going to allow all that Coronavirus Business Interruption Business Loan Scheme (CBILS) money to fall away? The one thing I think we can be certain of is that the next few months will be very interesting.”
As have been the last few months.
Gee said that 2021 will be looked back on as the year when it became necessary to adapt to a number of changes in regulations such as The Debt Respite Scheme – better known as the ‘Breathing Space Regulations’ – which came into force in May.
In essence, this provided those experiencing debt problems legal protections against their creditors. The protections, for up to 60 days, include pausing most enforcement action and contact from creditors and freezing most interest and charges on their debts.
There was also Section 82 of the Coronavirus Act 2020 which prevented any forfeiture – whether by proceedings or peaceable re-entry – of the vast majority of commercial leases for non-payment of any sums due under the lease.
This was originally due to run between March 26, 2020, and June 30, 2021. But the government announced on June 16, 2021 – just a fortnight before this was due to expire – that it intended to extend Section 82 until March 25, 2022.
However, on June 1, 2021, the ban on bailiff-led evictions in England was finally lifted after several delays. For the first time in more than 14 months, it became possible once again for bailiffs to evict those who have defaulted on loans linked to residential properties.
“It’s imperative that lenders are on the right page for everything – the law has changed more times in the last 18 months than it has done over the past 15 years,” Gee explained.
“At CG&Co, we’ve maximised every opportunity to engage with borrowers throughout the pandemic’s worst ravages and issued all pre-action correspondence and possession proceedings online.
In short, we’ve consistently taken the most proactive approach possible and have no intention of deviating from this.
We’ve found, on occasions, that borrowers are willing to agree to some kind of commercial settlement – such as agreeing to vacate possession within four months.
When the property is a mix of commercial and residential, then the residential rent can also now be collected, even if there are issues with the commercial aspect.”
Gee added that it’s been resolutely necessary to “think outside of the box” when it comes to property receivership throughout the pandemic.
It has no longer been appropriate to adhere to standard processes – every case needs to be appraised and overseen according to its individual requirements. And it’s essential to return the lenders’ funds to them in the shortest timeframe.
Gee believes that some lenders have become “friendlier and more lenient” throughout the tough times, while some borrowers have actively sought to exploit the legislative changes to their benefit.
He reiterated the need for bridging lenders to maintain as much dialogue as possible with borrowers to understand their circumstances and exit strategy. And, on those occasions when loans do fall into default, Gee advises them to act as early as possible to ensure that they are best placed to protect their position going forward.
“Some lenders don’t react very well to leniency with borrowers,” he explained. “Some are more aware of the potential issues and are acting earlier and looking to introduce third parties when loans are defaulting.
“My advice remains for lenders to protect their own position robustly to ensure that their money is not tied up any longer than it needs to be.
My rationale for this is simple: there are a lot of opportunities in the market at the moment and there are deals available to be done… But lenders need to have the cash in place to proceed.”
Gee has observed that some lenders are “taking a view” about the chances of certain borrowers repaying the balance they owe and accepting that there could be shortfalls and interest write-offs.
“In the broadest terms, some lenders think I have no further avenue where I can recover funds from this property, and I am a lender who does not want the costs or stigma of pursuing people for bankruptcy.
Consequently, they simply plough on doing more deals,” Gee said. “But it’s essential that they do take appropriate action against all borrowers in default because there could be another change to regulations and they could be stuck, once again, with a borrower not paying for another six months, or more.
“These are the reasons why early engagement and consistent monitoring of each situation have never been more essential.”
Gee said whenever “engagement” happens in receivership situations it’s important to retain the human touch.
“These loans are likely to be linked to people’s homes or their businesses. Consequently, it’s a highly personal situation and it’s essential that these borrowers are treated well and in a professional manner.
It’s essential to engage with the borrower appropriately throughout the course of the entire receivership,” he said.
“Property receivership is a very specialised profession, and you have to be exceptionally careful regarding the steps you take.
We continue to support property solicitors ensuring that the right conversations and action points are picked up with the borrowers and tenants.
Separately, we work with chartered surveyors and contractors to ensure we can complete part-built developments to maximise values prior to sale.
They can also answer questions around whether the cost of a lease extension is appropriate or not.”
Gee added that – in the current environment – lenders also need to ask themselves more questions than perhaps they’ve ever done previously.
“Some lenders have a desire to do loans on a monthly basis,” he explained. “They ramp up the volume and the recovery aspect is not factored in.
They might think that because they’ve worked with certain borrowers on several previous occasions that the loan will ultimately come good. But in this post-Covid world we’re all starting to inhabit nothing should be taken for granted.”
Gee added the bridging sector has “other peculiarities.”
He explained: “A lot of bridging loan professionals are very commercial individuals. They are more entrepreneurial than standard bankers. Every lender is different, and this is why this industry is both interesting and unique.”
Gee certainly doesn’t want to put lenders off from taking advantage of what could be a fruitful 2022 for deals.
“As long as they adapt to the changing market it could be a successful year for them. Just don’t let it become a rat-race and compete against each other,” he stressed. “It’s a very forward-thinking industry.”
In 2022, it may well have to be.
David Craik is a freelance journalist writing news, feature articles, blogs and guides for national newspapers and magazines. His main areas of interest include finance, property and investments.