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    Categories: Columns

How mediation saved a mortgage transaction

At the time of the partner’s exit, the business was aside the mortgage also indebted to sundry other vendors.

Valentino Buoro

What would you do to a debtor who owes you a huge amount of money and becomes elusive after attempts to make him repay the loan fail? This was the dilemma of a businessman who gave out a whopping N350 million Naira loan to a childhood friend who had approached him for assistance to finance a real estate business.

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According to the story, both creditor and debtor had been friends for well over fifty years. Indeed they grew up in the same locality, attending same school and being members of the same religious denomination. Along the lines of their lives’ trajectory, the younger of the two friends travelled abroad for further education and subsequently lived and worked in the United States where he made a fortune. Fast forward to the year 2010 when both men re-established close ties as they met in Abuja where each is pursuing divergent economic ventures. At the time, the older of the two had retired from the public service and had had a failed attempt to seek an elective position. Whatever he had made out of his over thirty five years in public service had been used up in his quest for a senatorial seat in their home state. It was therefore a frustrated and literarily dying pensioner who met an old friend and sought his assistance for a life line. Having trained as a real estate professional, the retiree was optimistic he could bounce back financially if he got help to establish an estate practice. His hopes were given fillip by his association with a younger real estate practitioner who had spent all of his work life in private sector employment and was more than comfortable working accounting records of the practice.

The two friends negotiated the loan of three hundred and fifty million naira to enable the pensioner buy run down properties, refurbish them and sell for a profit. A clear contract of mortgage was entered into with the involvement of the mortgagor’s lawyers. As business commenced, it appeared clear for all to see that the retiree turned real estate investor had made a good choice, until the unthinkable happened. The young professional who had partnered him suddenly exited the business on the excuse that the pensioner had become too high handed in the running of the business. At the time of the partner’s exit, the business was aside the mortgage also indebted to sundry other vendors.

So soon thereafter the loan was due and mortgaged properties ripe for sale. Despite being friends, the retiree mortgagor had become elusive and avoided all phone and personal contacts. The creditor on his part was in a dilemma. Yes, he had the legal right to auction his friend’s mortgaged property and to go directly after him for any unpaid sums as a result of his personal guarantee of the loan. However having played a key role in resuscitating his older friend’s fortunes, he found it socially inexplicable to be the very cause of his return to ground zero. Consequently he did the unconventional. Rather than brief his lawyers to do the needful, he consulted a mediation advocate who sought out and engaged the loan defaulter in pre-mediation meetings. At a subsequent mediation facilitated by an ad hoc mediator, the parties agreed to introduce an independent firm of business turnaround management experts to take over the running of the debtor’s real estate business until such time when the business must have repaid its debts to the mortgagee and other creditors. The turnaround managers wrote up a workout plan to address all of the debts relating to the real estate business. This documented plan was inclusive of an agreement on the ‘’sit back’’ role of the retiree investor as well as outlining what would be paid in installments and when.

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The company adhered to the written plan and paid off its debts within the estimated time as outlined by the experts. Having successfully taken the real estate firm out of debt, it was a gratified pensioner who now pleaded with the management company to buy into his business in order to stave it off future threats of bankruptcy.

This true life story as told by a friend illustrates the power of mediation even in the most seemly circumstances. It highlights the pre-eminence of human inter relationships over the use of power in circumstances where options can be devised. It was clear that a contract had been breached and that a legal remedy was available to deal with it. However what appeared to have saved the day was the creditor’s concerns over an ongoing relationship and the immediate and remote consequences of wielding the big stick of legal power.

By that master stroke of resorting to mediation, the creditor had not only saved himself the legal hassles of proving his case in court but had also saved the livelihood of a longtime friend as well as a number of others who work in the firm.

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Tokunbo David :Sun News Online team writer and news editor

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