High Court disputes may cost at least €500,000

DEVELOPER RESPONSE: ANALYSIS: Values assigned to each property is likely to be a key issue for all parties involved

DISPUTES ARISING from the National Asset Management Agency (Nama) threaten to run up legal bills of at least €500,000 according to some sources.

The National Treasury Management Agency, which will ultimately take charge of the process, took the first steps down that road this week when it began compiling information from the banks to provide on their loan books, which will include the bad debts that have sprung from the property market’s collapse.

Yesterday, Minister for Finance Brian Lenihan told an Oireachtas committee that some developers are likely to face liquidations and bankruptcies as a result of the process.

At the same hearing, Nama’s interim director, Brendan McDonagh, said many developers had given multiple guarantees to banks, which he said would be pursued, although he added that guarantees could be called on only once.

About €60 billion in loans could be transferred to the agency. Over 1,000 borrowers have debts of more than €10 million.

Most observers agree that a crunch issue for all parties involved – Nama, the State, the banks and the developers – will be the value given to each of the properties involved.

This will be key to protecting the taxpayers’ interests, lenders’ ability to recover losses, or for developers to get a return and avoid liquidation or bankruptcy.

This means that it will be the most likely flashpoint. Lawyers warn that even if the legislation has a dispute settlement mechanism, cases could end up in court, as the constitution safeguards property rights, and the right to litigate where people believe their legal entitlements are threatened.

Any legal row will end up in the commercial division of the High Court, as this deals with business-related cases where the amounts in dispute involve values of €1 million or more.

Legal sources say that while the commercial court works well and comparatively quickly, the costs involved are high, and could run to a minimum of €500,000 for an individual hearing.

While some reports suggested that developers are considering a challenge to the scheme, the Construction Industry Federation, some of whose members will be affected, has already said that it supports Nama.

The organisation has said that whatever approach it takes, it wants the agency to work quickly to repair the damage to the banking system and the economy.

A group of developers recently met in a Dublin hotel to discuss establishing a council to represent their interests in talks with the proposed agency.

It subsequently emerged that they believe Nama may be a good idea, but will not take a final view on it until they know how it will work.