Distressed Property

Distressed Property

Individuals who have to deal with probate, distressed property and any accompanying assets are often under duress due to personal bereavement or changing circumstances during pursuit of commercial ventures. This can be overwhelming, especially when trying to sort out all the legal burdens, logistics and finances with third parties.

Types of Distress

Distressed commercial properties are typically linked to businesses facing insolvency or financial difficulties. Key types of distress include:

• Insolvency and Administration: When a company goes into insolvency or administration, its assets, including commercial real estate, may be sold to repay debts. Administrators, often insolvency practitioners, are appointed to manage the process and ensure that creditors are paid.

• Receivership: If a business defaults on its commercial property loan, a lender may appoint a receiver to take control of the asset, with the goal of selling it for a profit.

• Corporate Liquidation: In some cases, a business may be liquidated entirely, and its commercial properties sold as part of the winding-up process.

In contrast, distressed residential properties can arise from a range of personal and financial situations:

• Probate Properties: When a homeowner passes away, their property may be sold as part of the estate’s probate process. In these cases, the property might need to be sold quickly to settle debts or distribute assets to heirs.

• Repossessed Properties: When a homeowner defaults on their mortgage, the lender may repossess the property and sell it to recover the loan.

• Short Lease Properties: Properties with a short lease (typically less than 80 years) may experience financial distress because of the cost to extend the lease or its lower value on the open market.

• Divorce or Separation: In some cases, properties may be sold under duress as part of a divorce or financial settlement.

Legal Processes

The legal processes governing distressed commercial and residential properties are markedly different due to the nature of their ownership and transaction methods.

• Insolvency Practitioners: In the case of distressed commercial properties, insolvency practitioners play a central role. These professionals are appointed to manage the liquidation or administration process and ensure that the business’s debts are handled appropriately. They are often responsible for managing the sale of commercial property assets.

• Probate Solicitors: In contrast, residential property transactions involving distress typically require probate solicitors when dealing with properties in estates. They handle the legalities of the probate process, ensuring the property is transferred to heirs or sold for the benefit of the estate.

• Repossession and Court Orders: For repossessed residential properties, lenders may initiate legal proceedings to gain possession and sell the property. This process is governed by strict court protocols to ensure fairness to the borrower and lender.

Whether you're buying or selling, it’s essential to have the right legal professionals and advisors on board. Sellers should ensure they are following the correct legal procedures, while buyers should do their due diligence to fully understand what type of asset is being bought and the potential risks or rewards it may offer

Hunter Morgan has a dedicated team to servicing sellers and buyers.