Calling time on Belfast hotel scheme
- By James Ferguson
We’ve all heard those investment warnings, like the small print on the radio. But what do they actually mean in real terms? Individual bedroom investors in a hotel scheme recently got their answer at the High Court in Belfast.
Background
The company is the registered owner of the Scottish Mutual Building on Belfast’s Donegall Square, which it acquired to redevelop as the George Best Hotel.
The funding model for the project included individual bedroom investors agreeing to purchase long leasehold interests on a room-by-room basis. Under the contract, a deposit would be used to construct the hotel, with completion by January 2019. Bedroom investors were entitled to rescind the agreement if this date was missed.
The project is unfinished and will require further investment to be completed.
Some of the bedroom investors sought to rescind their contracts. Two of them, Mr & Mrs Foster, even obtained judgment against the company in November 2019 with an order charging land being registered with the Lands Registry. The company was placed into administration in 2020.
The administrator sought the court’s permission to sell the property.
Judgment
Madam Justice McBride identified two issues to be determined:
The options issue
Whether the purpose of the administration is best achieved by sale of the property free from the secured interests or whether it is best achieved in another way
Priorities issue
If the purpose of the administration is best achieved by sale of the property free from the secured interests, the order of the securities affected
The High Court was satisfied on the options issue. On the Priorities issue, the legal charges were ranked in order of registration date. The building is to be sold with the proceeds to go to (a) the costs of the administrators, (b) the fixed charge and, if there is anything left, (c) Mr & Mrs Foster.
Comment
The court obviously had immense sympathy for the bedroom investors who stand to lose their entire investment without any return and it noted that in the case of many of the individual investors the investments made represented their lifetime savings.