Nfld. & Labrador

Unsecured creditors 'unlikely' to see cash from Exit Realty on the Rock receivership

There is more information on how much cash the receivers for Exit Realty on the Rock expect to gather for distribution to creditors of the troubled firm — and who will likely not get paid.
Exit Realty on the Rock had its licence suspended on Feb. 4, 2016, and was sent into receivership the next day. (CBC)

There is more information on how much cash the receivers for Exit Realty on the Rock expect to gather for distribution to creditors of the troubled firm — and who will likely not get paid.

The Bank of Montreal appointed a private receiver for the company on Feb. 5, a day after the provincial government pulled its real estate licence.

On Wednesday at Newfoundland and Labrador Supreme Court, the bank asked a judge to appoint a court-ordered receiver — a move that will share costs among more creditors.

Justice Robert Stack approved the request, with some conditions aimed at providing extra protection to home buyers who have made deposits that remain tangled up in real estate deals yet to close.

Up to $600K in commissions to be collected

The receiver, PricewaterhouseCoopers, has been working to recover outstanding receivables.

The vast majority of that cash is related to commissions on pending deals that began before Exit Realty on the Rock plunged into insolvency last month.

The court heard that PwC hopes to recover up to $600,000 from such commissions. It has taken in half of that amount to date.

There is another $124,000 held in a trust account.

That would provide a total of around $724,000 in assets to be divided up among creditors, minus any fees paid to the receivers for their work.

Unsecured creditors 'unlikely' to get cash

At the bottom of the priority list are dozens of unsecured creditors of Exit Realty on the Rock.

It's certainly at this stage looking unlikely that the various unsecured creditors will receive much, if anything from this estate.- Geoffrey Spencer, BMO lawyer

Geoffrey Spencer, the lawyer representing Bank of Montreal, acknowledged they may be out of luck.

"Those unsecured creditors really stand behind all of the secured claims, and the various trust claims that may be asserted," Spencer told reporters after the court hearing.

"So while it's premature to prejudge, it's certainly at this stage looking unlikely that the various unsecured creditors will receive much, if anything from this estate."

Trust claims get top priority

The top priority will go to proven trust claims.

Among the list of those asserting trust claims are real-estate agents throughout the industry, owed commissions by Exit Realty on the Rock.

But they aren't the only ones.

There are up to a half dozen potential trust claims pending.

The court will have to decide which of them are valid.

"It's likely to be a competition between the trusts," Paul Burgess, the lawyer representing the Newfoundland and Labrador Association of Realtors, told the court.

None of the money will flow unless a judge approves it.

'General public is well protected here'

Bill Stirling, CEO of the Newfoundland and Labrador Association of Realtors, stressed that clients are not affected by the ongoing drama.

"I think the general public is well protected here, and certainly the judge made reference to that several times, about securing the integrity of the deposit trusts," Stirling told reporters.

So the general public here, as far as I can see, is at very, very little risk.- Bill Stirling, NL Assoc. Realtors

"So the general public here, as far as I can see, is at very, very little risk."

Stirling says it's too early to say how much real estate agents will receive of the total amount owed to them.

"We obviously believe that our members are due their commissions, and we will be making that claim as part of the claims process," he said.

"But that will ultimately be determined by the court."

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