Lundin Links Hotel: £850,000 Scottish Government COVID help to owners now in liquidation
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Kapital Developments received the six-figure payment in 2020 and had until July 2022 to pay back any sums still owed.
That month it started the process to go into liquidation.
Now the Scottish Government has contacted the liquidator for an update on the state of the business.
The news comes as firefighters remained at the scene of the fire which gutted the centuries old landmark hotel on Thursday night.
The building had fallen into a derelict state, and had been the target of vandals and firebugs.
The original £850,000 loan to Kapital Residential Ltd was secured against the Fife hotel and Greenfield House, a 19th century B-Listed building in Alloa.
Both properties had lain in an essentially derelict state for a considerable time without construction work taking place.
A previous Freedom of Information (FOI) request submitted to the Scottish Government revealed the loan was now only secured against the Lundin Links Hotel following a repayment on August 23, 2021 and a valuation.
The loan was made under the Scottish Government’s SME liquidity fund to support smaller house builders during the pandemic when all non-essential construction work had to be halted.
By August 2021, some £150,000 had been repaid.
All repayments were due to be made by the last business day in July 2022 - the same month the company applied for a winding-up order which effectively began the liquidation process.
A Scottish Government spokesman confirmed the £850,000 loan, adding: “Our SME liquidity fund was brought in to provide urgent support to smaller house builders during the pandemic when all non-essential construction work had to be halted.
“It supported 38 housebuilders, helping to ensure homes could continue to be delivered despite the intense difficulties for the sector caused by the pandemic.
"As with all applicants, thorough due diligence checks were conducted on Kapital Residential Limited before their application was approved.
“We have contacted the Provisional Liquidator and await their assessment of the company."
Kapital Residential had permission to convert the former hotel, which closed in 2014, into 35 flats, but work was never started - and it was criticised for not engaging with the community as the site became a target of vandals and firebugs.
This was the third and most damaging fire, at the hotel.
Peter Peter Aitken, chairman of Largo Area Community Council, which covers Lower Largo, Lundin Links, New Gilston and Woodside, Upper Largo, said: “We’ve been expecting this to happen for years. We’ve been warning this would happen.
“We’ve had two minor fires before. The alert was raised in time to save the building on both occasions.
“But we knew that one day the alert wouldn’t be raised in time, and that’s what happened last night. It’s completely destroyed.”
Wendy Chamberlain, MP for North East Fife branded the site a”fire hazard.”
She hit out: “The serious fire was a major escalation. Since the building fell into disrepair, local people had been warning that it was a fire hazard. It was immensely frustrating that the owners took no steps to make it safe and Fife Council had to go to court in order to secure the building.
“These fears have unfortunately proved entirely accurate”