Archive for August 7th, 2012

You know that NAMA has touched a national nerve when it is making headlines in “The Sun” newspaper, and the Agency will not be best-pleased to see itself being accused today of selling a “posh” home to one of its own employees beneath a cloud which suggests chicanery and shenanigans.

This present controversy, which has the potential to turn into a full-blown scandal, is not the first or second time where NAMA has been found to have sold property off-market. The main way for NAMA to avoid these accusations in future, is for the Agency to ensure all property for sale by it, its developers and its receivers comes onto the open-market, where “the market” can decide the price.

Where NAMA has repossessed property – and it presently has €7m of the stuff on its balance sheet – and where it has had receivers appointed, NAMA can easily ensure this property is offered for sale on the open market, and many would appreciate if there was a single point of reference for all of these offerings. Where property is sold by developers themselves, then the Agency can ensure the property appears on a recognised property sales portal for a specified period of time to allow potential buyers to examine the property and make an offer.

NAMA also needs to publish the price obtained for the property securing its loans, in cases where the developer has failed to repay his loan which means that the State – you and me! – are picking up the shortfall with the bank bailout. Where the developer has 100% repaid his loan, then it’s really none of our business.

The flaky Kerry senator – he’s “flaky” because he has turned up on the Pat Kenny radio show and elsewhere accusing NAMA of all sorts of shenanigans but when challenged to disclose details under privilege in the Seanad, the shouty Mark goes quiet – Mark Daly introduced a Bill in the Seanad this year aimed at forcing NAMA to publish sale prices and to make all of its property for sale publicly available. The Bill was recently debated and defeated. No surprise there, because the drafting of the Bill was legally naïve, but the shame is the Government wasn’t prepared to offer amendments. This Bill, or something similar needs to be passed into law as a matter of urgency. But there are four obstacles.

(1) The NAMA Act
Sections 99 and 202 of the NAMA Act are frequently referred to by NAMA as the principal reasons for not providing details of individual transactions, and you might think that there were some draconian, special and new provisions in the NAMA Act to force NAMA to keep schtumm, but in reality these sections just boil down to NAMA respecting the confidentiality of developers in the same way as the original bank. And in fact, section 202 of the NAMA Act actually provides exceptions to NAMA’s duty towards confidentiality, for example, when the Agency is answering questions before an Oireachtas committee. It really isn’t the NAMA Act which stops NAMA disclosing information about debtors, even if it wanted to. What stops NAMA is (2) Contracts

(2) Contracts,
Yes pesky contracts. We still live in a State where we try to uphold the rights of parties in contracts. And if you, yourself go into Bank of Ireland today and borrow €10,000 for an extension, you would feel mightily aggrieved if next week, Bank of Ireland decided to broadcast the details of your loan to the world. You have a right to confidentiality, just like the developers whose loans have now transferred to NAMA. However, NAMA also has rights and its main right is to obtain full repayment of the outstanding loan. And if the developer fails in delivering on their side of the bargain in this respect, then that must surely place NAMA in a different position with respect to the other rights – such as confidentiality – provided for by the contract.

Where NAMA gets full repayment on its loans, I don’t think there is a public interest served by revealing details of the transactions which led to 100% repayment, but where there is a shortfall which the public is paying for, through the bank bailout, then surely we can find a way to publish details of transactions which led to the shortfall.

(3) The undermining of NAMA’s commercial remit
NAMA says that if it reveals details of its sales, then it will undermine its commercial ability. And in Ireland where we don’t have publicly available property sales data, that reasoning might be accepted – after all, we’ve never had transparency before. But in the UK – scene of the vast majority of NAMA’s sales – they do have transparency in that sales prices are registered with their Land Registry and indeed sales contracts can be accessed. That doesn’t undermine commerce in the UK. Why would it here, if NAMA were to provide the same type of detail? And if NAMA made all of the property it, and its receivers had available to sell on a single online portal, how would that undermine the commercial remit of the Agency? And if developers were forced to advertise their property for a minimum period of time on a recognised sales portal, so for example if Sundaywell had been advertised by Thomas Dowd on DAFT.ie for say two months? NAMA has never given answers.

(4) NAMA itself
Despite all of NAMA’s protestations about being neutral on transparency, the accumulated experience on here for the past couple of years is that there is resistance at NAMA to transparency in its loan dealings, a resistance that goes beyond anything to do with the NAMA Act, or contracts or NAMA’s commercial remit. The Agency is nervous about revealing the detail of its transactions, and the assessment on here is that this nervousness is grounded in the belief that transparency will mean every Tom, Dick and Harry will use the information to take bites out of NAMA, or that the Agency will be overwhelmed with defending individual transactions, or that where mistakes inevitably occur the Agency and its management will be exposed to adverse consequences. And these concerns can’t be waved away, so anyone demanding transparency at NAMA needs to appreciate the cost and risks of what they’re demanding. But the view on here is that the costs and risks are outweighed by the public having confidence in what is a public body spending colossal sums of OUR money.

A transparent sales process and sales prices won’t eliminate the risk of insider dealing entirely, of course, it will just make it more difficult. We still don’t have details of NAMA’s policy for employees, their families and associates dealing in NAMA property, and there may be a need to strengthen such procedures, but if a property is transparently marketed with full disclosure of relevant facts, then at least we might have confidence that the best price has been achieved, even if it was ultimately paid by an NAMA employee.


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