When a property loan is defaulted on, secured lenders will often use what is called Fixed Charge or LPA Receivership to recover their debt.
In this article we’ll explain the rules around LPA receiverships.
What is a ‘Law of Property Act’ (LPA) Receivership?
When a property loan is taken out, most lenders will insist on what is called a ‘fixed charge’, meaning it gives them the right to repossess the property in the event of a default.
Lenders with a fixed charge don’t have to wait for a company to become insolvent before repossession – in most cases a single default gives them the power to take action.
LPA receivership is thereby the term used to denote the process whereby a lender will instruct an LPA receiver to take charge of a property so that a debt can be recovered.
LPA Receivers are usually solicitors or specialist surveyors, but can be any employee of the lender. This differentiates LPA receivers from other types of receivership which require the services of a licensed insolvency practitioner.
Who can Appoint an LPA receiver?
The answer is any lender holding a fixed charge over a property.
This is detailed in Section 109 of the Law of Property Act 1925 which lays out the appointment, powers, remuneration and duties of receiver. Importantly, the points laid out in Section 109 are likely to be expanded upon by the specific conditions of the mortage document.
Can an LPA Receivership be Challenged?
These situations are notoriously difficult to challenge because the original mortgage documents are carefully designed to give the lenders carte blanche to get their money back in the case of default.
Any possibility for a receivership to be challenged will depend upon the particular wording of the contract, and the details of the case.
Can an LPA receiver sell a property?
Yes, they do. They can also collect rent on behalf of the lender. Their primary duty, however, is to recover the lenders money.