Business Sale

[john.readman]

I sold my business in an agreement to be paid by monthly payments over 4 years with no interest payable I retained a charge over the property until balance paid. The property is for sale and the payments are in arrears.Ihave been offered a price far below what is owed and I have been told this is for early settlement. Am I legally obliged to give a discount or can I demand Full payment to release my charge on the property

[Loosehead]

You can of course demand full payment. You must however weigh up your chances of actually getting it or indeed anything. It is common practise for banks etc to accept part payment of, say, a loan, in "full and final settlement" if they are convinced they would otherwise get nothing. You must weigh up the situation and determine whether holding out for the full amount will in fact result in you getting nothing. Are you the first charge? How many in fron t of you? would there be equity left to pay you? The offer is being made on the basis that something is better that nothing. If you hold out for the full amount, your charge will be honored and if there is still money outstanding after all the equity is exhausted you can still pursue the debtor privately.

[Oneeyedvic]

If you have a charge over the property (properly registered) DO NOT accept a lower price.

An early settlement discount (typically calculated using the rule of 78s) is only where interest has been charged. Since it was interest free, there is no rebate of interest to go back!

Is yours a first or second charge, and what is the money outstanding and what it is currently worth?

A solicitor will not be able to pass on title to the land without first clearing all charges (unless there is a negative equity situation).

If yo uneed any further advice, please answer the aforementiond questions and I will come back to you.

[Oneeyedtic]

Once you have released the Charge that will be the end of the matter, you will not be allowed to later harrass individuals for further money as the first answer above suggests. No doubt when you placed the Charge upon the Register you irritated your opponents, and they have now repaid by placing you between a rock and a very hard place. If you have an absolutely unarguable Claim then by all means sit it out until you get the lot. But if, as I suspect, you have a Claim which has been compiled and valued by you alone and is not agreed by your opponents then you are in a serious difficulty. Your opponents can go to Court for a Statement (Order) that upon payment by them to you of �X you must release the Charge. If you contest this the Court will require the �X to be calculated by Expert Witnesses. If you think that in fact the amount that Expert Witnesses would arrive at is the amount now on offer or less then you will lose and be liable for both your own and your opponents costs. On top of the legals your opponents will also add the costs of a lost sale, maintenance of empty premises, depreciation, etc., and altogether it could come to a mighty sum. So, if I am right, the problem you have is simply what figure would Expert Witnesses value your Claim at ? And, if you think it would be more than the amount now offered, can you really afford to take the risks of a Court case if your opponents so decide, or is it best to take what you can now have and then forget it ?

[erimus1]

You state that your busines was sold in agreement - What you should also remember is that this is a legaly binding contract. Fairly straightforward this by making use of the maxim of proprietory estopel - Basically, you cannot add or ammend the covenants after acceptance. I take it that the charge that you lodged was 'class 'G' monetary interest?. If you listen to your own words in simple form "am I legally abliged to give a discount"...thus backing out of the original contract.

Someone mentioned a reduced payment "in full and final settlement" - in effect, what this does is to disolve the original contract and create an additional one for lower sum, therefore enabling the circumvention of the estopel problem.
Good luck

[Oneeyedvic]

First of all, please note that the third poster above is dofferent from this (and the second) poster - note vic and not tic. (Please Ed sort this out)

Contrary to tics advice, if you made the agreement with an individual or partership (as opposed to a limited company), you will be able to pursue matters further if on releasing your charge there is not sufficient equity in the property to complete your loan.

As an example, if they owe you �50,000, but the property is only worth �30,000, they can see the property, you would get the �30,000, and can then pursue them for �20,000.

Unfortunately, if you agree to a lower settlement, eg, you say I will accept �30,000 in full payment of my debt, then obviously you can't go along later and say by the way, I want �20k.

If you answer my first set of questions, I will be able to advise further.

[Oneeyedtic]

The question reads as if the debt is less than the value of the property in which case my statement is correct. Whatever sum is paid by the debtor to secure release of the charge will be paid "in full and final settlement" and that will be the end of the matter. If the debt is more than the value of the property it is somewhat difficult to see why the owner parted with the title only to place a charge on it. However, if this is the case then it would be most unwise to release the charge until the debt is paid in full, irrespective of the hoops that the debtor may have to jump through to raise the cash.