Banks handing back worthless sites to avoid maintenance costs
BANKS have begun handing back small numbers of worthless sites to bust developers so that they won't be stuck with the bill for carrying out remedial works on the sites.
Sources confirmed that a small number of receivers had been "stood down" by banks as a reaction to local authorities vigorously enforcing rules compelling sites to be brought up to minimum standards.
There are fears that the phenomenon will increase over the coming months as the Government mulls new rules to ensure local authorities don't end up paying the cost of works on derelict and abandoned sites.
Standing down a receiver means the bank loses control of the assets -- but the bank also has no liability for spending significant sums bringing derelict sites up to scratch.
If the site involved is in a poor area and is at a very early stage in its development, it makes more commercial sense for a bank to give it back to its original owners than to pay for remedial work.
The Department of the Environment, which oversees rules on derelict sites, confirmed that if a bank had taken the "extreme step" of handing back a site then the bank would have no further liability.
Industry sources stressed that receivers being stood down for this reason was a "very rare" occurrence, while the department said it was "not aware of" it as a "general or widespread issue".
Banking sources stressed that the industry was happy to remediate sites where there was a "commercial argument" for advancing more money to finish out an estate or recover value in land.
But others close to the process admitted it was more complex when dealing with sites that were essentially valueless, since the bank would effectively be sinking good money after bad.
The National Asset Management Agency, which oversees the loans for many derelict sites, last night said it would "not tactically appoint or terminate receivers to try and avoid issues like this".
"We are very conscious of our broader social responsibility," a spokesman added.
A spokeswoman for Bank of Scotland (Ireland) said the bank's position in appointing a receiver "remains unchanged and any decision to appoint is made on a case-by-case basis".
Ulster Bank, which also has a significant portfolio of land and development loans, said it had signed up to the department's code of practice for unfinished housing.
The Department of Environment stressed that banks had been engaging positively with the existing rules around ghost estates and derelict sites.
A €5m fund to make estates and sites safe has been created by the department and has not yet been fully drawn down because banks are living up to their responsibilities.
The department is reviewing the laws around derelict sites and dangerous structures with a view to ensuring local authorities aren't left footing the bill for remedial work.
Some banks fear the new rules could impose additional obligations on them.