Just to give you a better background. Lakhi Singh The property fixer. I’ve been in the industry now for about 30 years and during my time, actually the last crash, we’ve seen a lot of companies, individuals that have had problems with receivers or losing their assets. So we’ve become somewhat specialist in helping those types of individuals.
Those organizations with property problems find a way to deal with receivers. And just to give you a bit more of linking about what LPA receivers are, what they do, I’m going to give you a quick basic understanding. There’s something called the Law of Property Act 1925, which is an act that’s actually not been carried out to this day.
It’s got very little precedence, but it gives a lot of powers over to surveyors, estate agents and insolvency practitioners as well and law firms to carry out the collection of rent or taking over the controls of the property if the property has gone into arrears or the borrower has actually broken the terms and conditions of the contract that they’ve signed with the bank when taking on a mortgage.
We help a lot of people with this type of situation. It’s not the only thing we do, but it is quite a substantial part of. One of the services that we provide is that we specialize in the Law Property Act 1925, and we help in complex situations where people are in this particular predicament question is going to be how is it that you get out of this problem and what are the actual powers that the receivers have and how are LPA receivers instructed?
What tends to happen is a typical landlord has gone out, bought a few properties. They may for ever reason have lost their job or can’t maintain the property in the way that they were used to. They’ve managed to somehow break the contract that they’ve got with the lender bank and the typical conditions that are typically broken by a borrower are they’ve gone into arrears, then on to default and the bank will then contact the borrower to request for the repayment of the arrears.
If you’re not able to pay the arrears, they will send you a couple of notice letters. If it’s a BTL property – this is where it gets bit technical it’s very important that you realize the difference, the BTL property. The banks don’t have to go to court. They can literally send you a letter.
So you’ve broken the conditions of the contract, and then they can literally go in and change locks and also collect rent and they will also have the power of sale off the property.
A lot of landlords and commercial property owners are not aware actually or what the property this act can actually do for the bank and how much of a high risk situation they’re actually in and they may be in a false sense of security thinking everything’s going to be fine. But the reality is very different.
How do the LPA receivers once appointed decide whether they’re going to rent it or sell the property?
So a lot of it all depends on the policy of the bank itself. A lot of banks actually prefer to sell the properties, try to get them for sale as soon as possible. Certain banks like to hold on to the assets and collect the rent and then send it in their own time. So it all depends on the particular bank and its policy in terms of I think they have a particular policy based upon the asset profile.
So there’s not a clear structure as to when the bank would want to sell it and want to keep it. But my guess is that if it’s a larger asset, the bank doesn’t really like to keep hold of those. They like to sell them quite quickly to get their money back into the organization. So on the whole; it’s a much unknown process. When it comes to what they’ve taken control, they could sell it, they could actually collect the rent. So that’s pretty much what they do.
And when it comes to selling it, the receivers have to go through a process of actually showing that they’re following certain protocols, and they are actually being very transparent and allowing for the whole process to be done in a way that’s very objective and that they have put it into the open market. But nine times out of ten, a lot of properties that are sold under this act, they’re sold way below the sale price because the bank is actually the actual value of the property, because the bank itself is only interested in getting their debts back out.
They’re not really interested in your profit. So this is where it can actually become quite problematic if you’re letting go of your property because of arrears and you sort of think, okay, well, the banks taking it over now, everything will be fine because I’ll get my profit. Then please be in no doubt that the bank is not there to look after you. They’re there to look after themselves and make sure that they meet their objective, which is to get rid of the debt and get their money back.
So I think that’s quite a comprehensive understanding of really what LPA receivers do and how they work.?