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The Law of Property Act 1925 (LPA) details the rights and responsibilities of lenders and borrowers who use property as collateral or security for a loan. If terms of the loan are breached, the act sets out options for lenders to take to recover the loan and LPA receivers can be appointed to deal with the case.
Below we have have answered some frequently asked questions about LPA receivership.
The appointment of an LPA receiver is a legal method for a mortgage to be paid without the lender taking possession of the property. The LPA receiver is held, by law, to act on behalf of the lender, i.e. to become his/her agent, with instructions to meet the mortgage payments.
An LPA receiver may be appointed by a finance lender under a clause in the mortgage or fixed charge or under the Law of Property Act 1925. The borrower must be in default with his/her mortgage or there is a breach of a provision of the mortgage deed. An LPA receiver is more accurately described as a fixed charge receiver.
The primary duty of an LPA receiver is to deal with the property under his/her control, which includes collecting rent and other income from the property and may include its sale. All monies collected must be distributed in a strict order. The LPA receiver owes the borrower a duty of reasonable care in carrying on his/her business and/or disposing of the property.
The LPA receiver has the statutory power to recover all income (including rent) from the property.
The act of appointing a receiver enables the lender to exercise a degree of control over a secured asset whilst keeping its distance from the risks and responsibilities associated with it. Such as business rates on unoccupied commercial property, maintenance and repair obligations, licensing and regulatory requirements in relation to the management of houses of multiple occupation. The receiver will become the buffer between the lender and these risks.
If you’re a lender looking to appoint a trusted, experienced and pro-active receiver with a high success rate for debt recovery, then consider these six ways that Kempton Carr Croft’s LPA lead can help you