Q&As

As a trustee in bankruptcy are there any steps which can be taken to prevent a mortgagor from appointing an LPA receiver?

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Produced in partnership with Natalie Brown of Radcliffe Chambers
Published on LexisPSL on 18/05/2016

The following Restructuring & Insolvency Q&A produced in partnership with Natalie Brown of Radcliffe Chambers provides comprehensive and up to date legal information covering:

  • As a trustee in bankruptcy are there any steps which can be taken to prevent a mortgagor from appointing an LPA receiver?

As a trustee in bankruptcy are there any steps which can be taken to prevent a mortgagor from appointing an LPA receiver?

The power to appoint a receiver of specified property is a statutory incident of a charge and is a method of enforcement of the security. Property comprised in a bankrupt's estate is so comprised subject to the rights of any person other than the bankrupt (section 283(5) of the Insolvency Act 1986 (IA 1986)). The court has no power under the IA 1986 to stay the enforcement of his security by a secured creditor of the bankrupt (IA 1986, s 285(4)).

Accordingly, the mortgagor’s right to appoint a receiver takes priority over the trustee in bankruptcy’s (trustee) rights in administering the bankruptcy.

As a trustee you can and should, however, satisfy yourself that:

  1. the security under which the appointment is being made is valid

  2. that the right to appoint the receiver has arisen—under sections 101 and 109(1) of the Law of Property Act 1925 (LPA 1925) this will be the case wherever there is money due under the mortgage (which may be arrears of the monthly payments or an acceleration of the principal liability) and the power of sale has become exercisable (under LPA 1925, s 103 this requires three months default in paying the mortgage monies after notice to pay, interest payable under the

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