By Steph Johnson

Last updated at 12:07, Wednesday, 26 November 2008

A major Carlisle landlord who specialised in housing migrant workers from Eastern Europe faces debts of more than £4 million as a result of the credit crunch.

James Nicholson

A report into the collapse of Nicholson Properties shows the business failed to attract sufficient tenants.

The business, with a portfolio of 22 properties, mostly in Carlisle, was also hit by unexpected repair costs and the spiralling costs of new safety legislation.

Nicholson Properties (Carlisle) Ltd defaulted on its 22 mortgages with Dunfermline Building Society and administrators KPMG were called in. The outstanding mortgage debt is between £4.2 and £4.3 million. The interest alone is £1,047 a day. A report by KPMG states the business cannot be saved, but has not yet officially been wound up.

The administrators say selling the houses should raise enough to pay off Dunfermline but will not satisfy another £189,000 owed to creditors – including Carlisle United Football Club, owed £1,800.

A downturn in the housing market and a fall in demand for migrant workers in Carlisle have been blamed in part for the failure.

Some of the properties had been converted into shared accommodation and most tenants were casual labourers from eastern Europe.

But when Nicholson Properties went into administration in September only 65 per cent of its accommodation was let. Another financial headache was caused by the tightening of regulations for fire safety, heating and minimum space required for habitation.

The company needed to spend a “significant” amount of money on bringing its houses up to scratch.

The company also had two large houses which needed extensive works. The move proved even more expensive than first thought when dry rot was discovered.

The KPMG report said: “Additional work was commissioned on these properties in reliance on the promise of additional funding from the lender.

“It was agreed that sums could be drawn down to reflect the increased commercial values of the properties once work reached an advanced stage. A change in lending policy brought about by the credit crunch saw the lender refuse the request for previously agreed additional funds.”

Company director James Nicholson had tried to get more money from the bank but was unable to because of the new lending criteria.

Other attempts to keep the business going also failed.

Mr Nicholson believed selling the houses would clear all debts.

But the administrators argue the properties are worth much less, based on valuations and offers received.

KPMG also raised concerns his calculations had not taken into account the interest owed to Dunfermline or the costs of the sales administration process. Mr Nicholson said that of the £189,000 likely to be outstanding, £150,000 will be owed to his own property management company.

He feels he was treated unfairly by the Dunfermline Building Society, which he says forced the company into administration.

First published at 11:25, Wednesday, 26 November 2008
Published by http://www.newsandstar.co.uk