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Law of Property Act receivers

Published Monday, December 16, 2019

This Commons briefing paper provides an overview of Law of Property Act receivers. In particular, it looks at how LPA receivers are appointed; their powers; and their role.

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A lender (i.e. a bank) may take security over a borrower’s property in return for making a commercial loan. If the borrower fails to comply with the terms of the loan agreement, the debt becomes repayable, and there is a risk that the lender will appoint a Law of Property Act (LPA) receiver.

An LPA receiver is a person appointed by the holder of a fixed charge over property (i.e. the commercial lender) with a view of selling the charged property or collecting rental income from it to repay the debt. Under the Law of Property Act 1925, a lender has the right to appoint such a receiver under section 101(1)(iii), once the debt falls into arrears. The Act confers very limited powers on the receiver. However, the receiver’s powers are typically modified and extended by express provisions in the security document.

It is important to note that LPA receivership is not an insolvency procedure. A receiver can be appointed at any time whenever the loan agreement allows it to, and a borrower does not need to be insolvent for this to occur. An LPA receiver will not necessarily be a licensed insolvency practitioner but will usually be a member of a professional trade body, for example, the receiver might be a surveyor, valuer or accountant.

Law of Property Act (LPA) receivership is a difficult area of law, particularly as regards the nature of receivership and delegation of powers to the receiver. This Commons briefing paper does not provide a definitive statement of the law but a generalised overview. It looks at how LPA receivers are appointed; their powers; and their role.

 

 

 

Commons Briefing papers CBP-7931

Author: Lorraine Conway

Topics: Companies, Insolvency

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