Bankruptcy!

Over the last six months we have seen that the bankruptcy of housing companies, or at least the threat of one, has been getting quite a lot of media coverage.

Until recently, the bankruptcy of housing companies was not even considered a possibility. Until they did. And of course, it is obvious that any limited company can go bankrupt. The reasons for such a situation vary, but it is extremely rare that it comes “out of the woodwork”.

At the moment, housing associations and their finances are being hampered by a number of factors: rising inflation has increased the prices of almost all services, and housing associations have been hit particularly hard by higher energy costs. Inflation has also been the cause of rising interest rates, and there is no end in sight, at least not yet. Electricity prices have also played a part, but at the time of writing, the worst-case scenarios look a little easier.

If the management of the building company has been trying for years to minimise all costs, it is possible that the company has accumulated a repair debt. Building societies that have proceeded on a shoestring budget are also unlikely to have been able to prepare for future unexpected repairs, not to mention overdue renovations.

And when a threat materialises and money is needed, it can easily happen that the bank will no longer grant the loan. Because you consider the collateral values to be insufficient. Then the situation easily becomes self-serving and the result is bleak to say the least.

Amid all the gloom, however, we must remember that bankruptcy does not come on top like a freight train in a tunnel. It sneaks up on you. Therefore, every shareholder should understand the importance of the general meeting. The Annual General Meeting discusses not only the results of the previous financial year, but also the Board’s budget proposal and its justification. It is also in every shareholder’s interest to understand what is being discussed and agreed. And if you don’t understand, you should ask and ask for an iron wire, if nothing else helps. Because these give a picture of the state and direction of the building.

The Annual General Meeting also decides on the discharge of the Board of Directors. This should not be a flash in the pan or taken for granted either, because the government has had, or at least should have had, an understanding of the situation and what is happening as the year has gone by. If, for example, the company has accumulated a large amount of outstanding debts, it is up to the board to react quickly and effectively.

It is often difficult to get anyone to agree to sit on the board of a building society. Which is totally incomprehensible, because you would think everyone would want to be as close to the decision making process as possible when it comes to their own property! Of course, the board is also responsible for the decisions it takes and its members risk personal liability. A director’s personal risk usually means that the directors may make decisions that cause damage to the housing company or to a third party (e.g. a shareholder). Board members may be personally liable for these damages, for example under the Housing Company Act.The most typical damages caused by board members are usually related to, for example. exceeding their powers, failing to act and delaying.

It is very important to monitor the management and finances of a building society if you own shares in that company. And if you only want to own them, you should study them carefully before making a purchase decision. Of course, there are many other things to pay attention to, but these two are definitely at the top of the list. So when the estate agent selling the property you are interested in gives you a big pile of documents, read and understand them carefully! And if you don’t understand, visit our online shop!

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Forced to bang your brains out, ...

…because we have a history of delivering ordered services quickly, often talking about hours. We understand that the pressure to buy once you find the home of your dreams is intense, which is why we promise delivery within 24 hours of your order. At the latest. This way, you don’t have to hold your breath in your shopping pants for an unnecessarily long time.

One report

There are quite a lot of different documents involved in a housing transaction, ranging from a sales brochure to a floor plan to an audit report. All are necessary for the evaluation, but it is still possible to summarise the essentials in plain language in a single report. Good riddance to the legalese and welcome the core facts with one (1) single report!

Trade documents

Even if the deed of sale of a residential property is a free-form deed, it should still contain all the essential information. We will check that this is the case. We will also check all the annexes that go on the side of the deed, i.e. the entire bundle of documents. You can then breathe a little easier as you sign the deed to your new home.

Negotiated bidding

We are here to help you negotiate your offer. We tell you what to look out for, what to ask the seller/agent and how to interpret the answers. And what conclusions can be drawn from the situation

Making a takeover bid

There is more to a takeover bid than just the price offered. We will help you to identify critical issues and check that all the agreed issues are properly recorded in the offer. And only the agreed things. So that you can sign it with confidence.

Sales price

And by that we mean the final price. We also take into account any company debt and the plot share. We compare the price to other comparable realised transaction prices in the area, not to asking prices. Apartments are always individual, and their equipment and condition vary greatly. However, we will find out if the price area is reasonable and acceptable.

Level of care

We estimate the level of the management fee charged by the company compared to other comparable housing companies in the area. We also look at whether the level has been right for the costs and whether there are clear upward pressures.

Zoning of the area

We’ll find out if there are any zoning changes afoot, or if that sea view you bought at great cost is about to disappear behind a new tower block in a year’s time. Or whether there are some less radical things happening around the place you are considering.

Management of the housing company

We look at how the management of the company has performed, including both the management and the board. Has the management been concerned only with making savings at every point or with keeping the company in good shape and maintaining or even increasing its value? 

Future renovation projects

We assess what kind of renovation projects are expected in the near future and the timeframe in which they can be expected to take place.  We might also throw in some guesses as to the expected costs!

Repair history

We look at when and what measures have been taken in the company and mirror them against the technical lifetime of each item. For example, we use the definitions of the Finnish Building Information Foundation RTS and the Central Association of Plumbing and Heating. This allows us to estimate whether the company has a repair debt.

Housing company finances

We carefully read through the company’s balance sheet and annual report, calculate the company’s indebtedness, liquidity and assess the overall financial situation. We compile our findings into a plain-language report that gives you an overview of the company’s situation.