Emmet Oliver at the Irish Independent today reports on a document which that newspaper has seen which sets out how NAMA is approaching the thorny issue of trophy developer homes which are co-owned by the NAMA developer and his wife. It seems that NAMA is requiring the wife (and it seems to always be “the wife”) to agree to surrender her legal rights to the usual one half share in the family home. In return the developer and his wife get two things – (1) co-operation from NAMA and (2) the first €500,000 from any future sale. So how does the deal supposedly work?
Sean Dunne’s home, “Walford” (video tour with the Irish Times environment correspondent Frank McDonald here) on Shrewsbury Roadwas bought for €58m in 2005 and although that might represent an extreme, during the boom it wasn’t unusual at all for developers to live in homes worth €5-10m. These homes might be worth a fraction of the peak prices today, we have seen 60-70%+ declines at the top end of the market, but the homes may still be worth substantial sums and not be subject to a mortgage.
So a developer owns a home jointly with his wife which is worth €2m today. The NAMA deal requires the wife to agree to her half, worth €1m, to be brought into the pot which the developer will use to pay down his loan or develop his projects. This may require the house to be sold or the wife might have her own unencumbered wealth, a bank account in her own name for example, of €2m (to cover both the husband’s and her shares) which if handed over to NAMA would allow the couple to remain in the house. In addition to helping secure cooperation from NAMA which might see the husband’s debt partly forgiven, the wife will also be entitled to the first €500,000 from any sale. Debt forgiveness NAMA-style.
Of course many ordinary people will still view the deal as generous but given a wife generally has the legal right to one half of the family home, then unless NAMA can show a transaction with the wife was undertaken to deprive creditors, the agency is powerless to confiscate the wife’s share. So NAMA is using its power and influence to force the wife to sign away her rights.
Emmet Oliver also refers to other means employed by NAMA to force cooperation from developers
(1) denial of any new funds to finish off projects
(2) enforcement of personal guarantees
(3) control of the salary that a developer is paid
(4) appointment of outside individuals to sit on the boards of companies
(5) threatening to appoint a receiver or liquidator to the developer’s companies or assets
Interestingly Emmet writes “NAMA has often appointed outside individuals to sit on the boards of companies”. Other than the case of Harry Slowey’s appointment to Glenkerrin, these appointments have not been publicized and a concern exists over the transparency with which NAMA selects these individuals which are foisted upon developers. It has been suggested by some that NAMA is acting like Don Fanucci in the Godfather with these appointments of “nephews” to businesses under duress – it is certainly an under-reported aspect of NAMA’s method of operation.
NAMA declined to provide the Independent with comment on the document which gave rise to the report. Elsewhere in the Independent today, the paper’s legal affairs correspondent Dearbhail McDonald reports on the “arsenal” available to NAMA to get at the wife’s share of the family home, in reality it’s a list of hurdles. You might also be interested in these previous entries on developers wives
Developers’ wives. Is NAMA now taking action?
Prime Time Investigates NAMA developers. But exactly what new information was revealed?
NAMA Wine Lake 
This is a further example of the culture of retribution that characterises NAMA.
Although by the sounds of it one of the borrower’s has been bold and leaked his documents to the press. The lack of comment from NAMA is telling.
I have been saying it many of my posts to date that coercion and intimidation is how they deal with the debtors. It’s outlined clearly in this article. Jewellery and the family homes seem to take precedence over the large-scale refinancing of debts a la David Daly. Which would ensure the greatest return to the taxpayer???
Again I make the point that this singling out of developers is unprecedented and while it might be popular that does not make it right. The ‘Murphia’ is a new term I haven’t heard. But with Frank ‘the money-collector’ and Brendan as the Godfathers, it is a point well made. Coercion and extortion. These people have the power to revitalise the economy and yet they sweat the small stuff.
Family law vs. the NAMA Act, which will take precedence in the Courts?
@Garfunkel, understood what you say, but on a practical level what is the difference between a non-NAMA bank, Ulster for sake of argument, enforcing a loan on an “ordinary” businessman, a restaurant operator for example. Is NAMA’s approach to working out the debt any different to a bank’s approach with a non-developer businessman? (BTW, the gender assignment here isn’t meant to be discriminatory, it’s just practically all developers are men).
NAMA is a disaster for the country trying to delay/obstruct market economics in the property sector in Ireland and adding a whole new level of bureaucracy and costs in the process.
However now that NAMA is in place the government should ensure that it applies all usual legal and financial procedures to actively enforce loan recoveries as would have applied in a receivership/liquidation situation. All this rubbish about incentivising developers to help work out their loans is ridiculous. Treat them like any other defaulting bank creditor. We need to start from todays property values and stop kidding ourselves that the same bankers and developers can get us back to 2007 values and further delay facing reality.
I wouldn’t disagree with the comment that NAMA is unnecessary and has added a layer of bureaucracy to the process of debt recovery without the addition of any percieved value. Perhaps in hindsight it would have been preferable to leve both the loans and the debt collection within the individual banks. However NAMA is now there and it’s primary function is to manage out its asset base in a manner that produces maximum benefit to the taxpayers. While payment of incentives and salaries to developers is not pallitive to those of us who are picking up the cost of their incompetence the main question that should be asked is whether by doing this NAMA is reducing cost and saving money. If so it is an option that should be progressed. We also need to accept that quick sales in a stagnant market are not necessarily giving us the best return. Rationality is not rushing to the market and taking the best price you can get.
The trophy homes issue is a thorny one and I would be interested to know whether the 50% spouse rule is enshrined in law. FHPA legislation does not autmatically grant the spouse 50% of the family home. Also if the developer was insolvent when he put the home in joint names then technically the spouses interest was a gift from him and could be overturned. Deals are a normal part of the debt collection process and if the end result does add some money to the pot I am all in favour of them.
@NWL
I cannot understand this tip-toeing around bust businesses, with carrots and small sticks and people on the boards of companies. This last one, people on boards, is real nonsense. Ask Denis O’Brien.
Just put the businesses into receivership and run them to extract the maximum value for the State. The reason NAMA will not do this is that they have no idea how to run these businesses and no confidence that they would be able to do so. It is a terrible indictment of grossly overpaid bureaucrats. They are unwilling and unable to manage a debt collection agency.
@Joseph, I suppose what NAMA is trying to do is avoid widespread receiverships leading to large amounts of distressed property developments coming onto the market at fire sale prices. Receivers are also expensive, €200+ per hour for a property receiver and €800+ per hour for a share receiver is pretty much the going rate here, according to NAMA. And developers whose “sin” is to have paid too much might still be best placed to extract maximum value from a development because they know its history, its market, its planning and issues.
This sound a lot like the problem of overpaid lawyers. Again the problem here is state policy towards fees for such professions.
If the state simply fixed the rate for receivers at, say €1000 per week, the problem would be solved. There is no law in the land that says the government has to pay through the nose for any service.
And if the Irish receivers won’t work for €1000 “peanuts” or the like, the government can just hire receivers from the UK and elsewhere, and change the law if they need to. Case closed. Well, if anyone wanted to close it that is.
“… know its history, its market, its planning and issues.”
I would have thought that their senior staff and advisers would be better informed on these matters as their bosses were so busy lining up new deals etc. to be concerned with trivia like the market.
Ha! As if acceptance of all your husbands substantial assets, even as he faces bankruptcy, was anything other than an attempt to deprive his creditors of what they’re owed. Letting him continue to run the businesses he just bankrupted (which you own) just gets you deeper in the hole.
Do you think Irish-expats abroad come back to Dublin for a bit of shopping every now and again?
I think that it is high time to put a stop to this nonsense and to the developers who, let’s face it, got us into this mess in the first place.
In Sweden when Securum was finalised over 70% of Swedish developers had been bankrupted. Let’s get it over with, get the job done and bankrupt the lot. Has NAMA no cojones? What’s all this softly softly treatment of borrowers about. There are plenty of unemployed agents of one sort or another out there who would love the job of managing all these properties for the next ten years at half the price NAMA is paying the developers.
WSTT…a change of tack?
Damn, no one to argue with.
Surely, it would be very straighforward for Nama to set up its own management/development company and pay salaries to employees instead of endless fees to advisers, contactors and developers.
Sorry about that, guys, A momentary aberration! I wanted to see what things looked like from the dark side.