What is a Receiver and when to Appoint
Over the last few years there has been a significant increase in the number of LPA (Law of Property Act) and Fixed Charge Receivers being appointed by lenders. This increase has in part been driven by a lender’s loss of right to appoint Administrative Receivers in respect of debentures dated later than 15 September 2003.
So what is the difference between an LPA Receiver and a Fixed Charge Receiver? Quite simply the former is appointed under the powers contained within The Law of Property Act 1925 (“the Act”) and the latter by way of powers contained within a mortgage deed. To confuse matters further Fixed Charge Receivers are often referred to as LPA Receivers but this is incorrect.
The powers of an LPA Receiver are very limited and are set out in s109 of the Act, being the power to demand and recover all of the income, which includes rent, of which he is appointed Receiver. The Act gives the LPA Receiver no automatic power of sale but additional powers may be delegated to him by the lender pursuant to the Act.
Fixed Charge Receivers however derive their powers from a mortgage deed and these powers are likely to be extensive and very importantly contain the power to sell the assets subject to the mortgage deed.
When might you appoint a Receiver? A Receiver is usually appointed to take control of an asset without the need to deal with the rest of the debtor’s affairs, unlike an Administrator, Administrative Receiver or Liquidator. The asset is effectively extracted from the situation and dealt with independently by the Receiver, thereby saving costs.
In theory just about anybody can be a Receiver but our advice is to appoint one who is a member of the Non-Administrative Receivers Association, or nara for short and is regulated by a professional body. For example Tony Mitchell is a Fellow of nara and regulated for this type of work by the Insolvency Practitioners Association.
If you have a client who holds a debenture over assets in the hands of a non-performing debtor, advising them to appoint a Receiver is an effective way of seizing control and realising money owed. Please contact us to find out more about appointing Receivers and the benefits to be gained.
