Often in loan agreements, a property is listed as collateral or security and if the loan is breached, the Law of Property Act 1925 sets out the rights and responsibilities of lenders and borrowers in enforcing the terms of the loan agreement. One of these options is to appoint an LPC Receiver to administer the sale and management of the property to recover any debts owed.
What is an LPA Receiver?
When a company or individual is in default of the terms of a loan agreement e.g. by failing to make mortgage repayments, the fixed charge holder or mortgagee can enforce their security and recover funds by appointing a receiver under section 109 of the Law of Property Act (“LPA”) to take control of the property. The process of LPA Receivership gives an LPA Receiver powers to either manage or sell the property to repay the lender.
Anyone can be appointed as an LPA Receivers however they are are often licensed insolvency practitioners and surveyors.
What does an LPA receiver do?
An LPA Receiver will take control of the secured asset on behalf of the lender and essentially become the medium between the parties Steps taken by a receiver to recover debts may include:
- Securing and insuring the property
- Taking possession of the property
- Managing the property i.e. rent payments
- Diverting rental income and minimising any losses
- Arranging the sale of the property
- Distribution of proceeds of sale to the relevant parties
When can i appoint an LPA Receiver?
An appointment of a Receiver under section 101 of the Law of Property Act (LPA) may only take place if the mortgage money has become due and the power of sale is exercisable. This will be for the lender to show in the loan documents.
How do I appoint an LPA Receiver?
An LPA receiver can however be appointed fairly quickly and notice must be given to Companies House of the the appointment of an administrative receiver. The knowledge and experience of and the relationship with the Receiver is important to ensure a smooth and efficient process of enforcement. It is therefore sensible to consider the appointment of a receiver carefully and seek legal advice in doing so. We repeatedly work with a range of LPA Receivers and we can assist you in selecting a suitable LPA Receiver for your case.
What is a validity review?
The registrar needs to be satisfied that the power of sale, and hence power to appoint an LPA receiver has arisen (even if the power has not become exercisable). Any challenge to the validity of the mortgage or debenture (which will affect the power to appoint) that is within the actual knowledge of the Law of Property Act receiver or the applicant must be disclosed to the registrar.
When appointing an LPA Receiver, a review of the various loan documents must be carried out to ensure the appointment of the receiver is valid. This validity review should be carried out by solicitors with the necessary experience, particularly given their knowledge and experience in analysing the relevant complex legal documents.
Instruct specialist insolvency solicitors
Our specialist insolvency team can advise you on your case and the appointment of a receiver if suitable including preparing deeds of appointment and validity reviews.
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