Recovery and LPA receivership
When someone borrows money against a property, he (he, she or it, actually, but say “he” for short) enters into a mortgage deed, which governs the whole of his legal relations with the lender in respect of that property.
Most mortgage deeds provide that, if the terms of the mortgage deed are not complied with and there is a demand for repayment which is not met, then the borrower gives irrevocable authority to the lender to appoint a Receiver to take over the property. The Receiver acts as the agent for the borrower, but effectively at the direction of the lender.
This kind of Receivership is usually known as fixed charge receivership or, more often, LPA Receivership. This is a reference to the Law of Property Act 1925. Although the idea of receivership started long before, the LPA consolidated the rules.
The old meaning of “Receiver” was “receiver of rents”. That does still apply where the property is an investment, including a buy-to-let flat or house, but generally speaking the job of the Receiver is to: sell the property; recover the costs of the receivership; repay the lender; and, if there is anything left over, remit it to the borrower. If you were the borrower, the Receiver would be acting in your name and as your agent, but his only real obligation to you would be to proceed in good faith. The Receiver’s overriding objective is to maximise recovery for the lender, having regard to time. Where a property is let, the central consideration will be whether to continue collecting rents or whether to dispose of the interest as let or (where possible) with vacant possession.
Charges are often accepted over income-producing property interests. The Receiver must understand the landlord and tenant relationship in order to manage the property properly and receive the rents. We specialise in this work, particularly in London and the Home Counties.