Can an LPA Receiver be prevented from selling a Secured Property?

When a borrower falls into arrears, the mortgage lender has a number of enforcement options available. Usually it will make formal demand for repayment of the whole sum secured then, if the arrears are not paid, it will look to bring possession proceedings in its own name against the mortgagor. Particularly, in the buy-to-let market and other commercial assets, however, many mortgagees now opt to appoint an LPA Receiver to enforce the loan rather than bring the possession proceedings itself. By so doing, many of the protections afforded to borrowers under the Administration of Justice Acts and the Consumer Credit Act 1974 are bypassed.

Can the LPA Receiver be prevented from selling the Property?

There is no direct statutory power to stop the LPA Receiver from selling the Property in order to pay off the outstanding debt to the lender. However, where such action would be unfair there are a number of restrictions before the LPA receiver can sell a property. The Council of Mortgage Lender’s guidance on how to deal with buy-to-let arrears and repossessions provides that lenders are expected to act fairly towards borrowers. One of the exceptions is where there is immediate prejudice to either the property or to any occupant at the property, the lender should not seek to realise the security (including the appointment of an LPA receiver) until all other reasonable attempts to resolve the position have failed.

What are an LPA Receiver’s powers when appointed?

Once the power of sale has arisen, the Law of Property Act 1925 gives the lender bank the alternative option of appointing a LPA Receiver or Fixed-Charge receiver to manage the property or even sell (refer to point above). Although the LPA Receiver is appointed by the Lender, section 109 of the Law of Property Act states that the LPA Receiver is deemed to be the agent of the borrower. It is, therefore, the borrower rather than the lender who is liable for the acts and defaults of the LPA Receiver. Under section 109, the LPA Receiver can demand and recover all the income deriving from the mortgaged property in the name of the borrower and apply it to the outstanding mortgage debt. So where the borrower has let the property, the Receiver steps into his shoes, manages the property and collects the rent.

In some instances, this is not the end of the matter. Most mortgage agreements go much further than the statutory powers and confer all sorts of other powers on the LPA Receiver. These include the power to take possession proceedings against the occupiers of the property and even to look to sell the property in the name of the borrower. Don’t Panic! That’s why we at Immediate Bank Claims are the leading experts in dealing with LPA receivers as we have over 30 years’ worth of knowledge and experience in this area.