Insolvency—fixed charge receivership
Insolvency—fixed charge receivership

The following Property guidance note provides comprehensive and up to date legal information covering:

  • Insolvency—fixed charge receivership
  • Effect of appointment
  • Receiver as agent
  • Insolvency practitioners
  • Contract for sale drafting considerations
  • Excluding liability
  • Execution of transfer
  • Title guarantee
  • General drafting considerations

Effect of appointment

A fixed charge receiver is appointed under a legal charge or mortgage and only has power to deal with and dispose of the charged property.

Although often referred to as LPA receivers most fixed charge receivers are now appointed under less restrictive contractual powers contained in the charge, as permitted by section 101(3) of the Law of Property Act 1925 (LPA 1925), rather than under the statutory powers.

LPA 1925, s 109 only gives fixed charge receivers limited powers:

  1. to receive rents and income, and

  2. to insure the charged property at the mortgagee’s direction

Consequently, fixed charge receivers’ powers are usually supplemented by contractual powers in the charge (the most important being a power of sale), in practice giving fixed charge receivers virtually the same rights as a mortgagee in possession.

A fixed charge receiver must adopt the same standards in selling the charged property as a mortgagee exercising a power of sale. This includes an equitable duty to the mortgagor to take reasonable care to obtain the best price, but does not require the receiver to take additional actions such as pursuing a planning application or completing the grant of a lease in order to increase the sale price.

An administrative receiver also has a secondary equitable duty to the borrower and anyone else interested in the equity of redemption,