Mortgage Express appoint LPA Recievers Walker Singleton to scare tenants off!

[Ed999]

Chillinlong has a buy to let mortgage which fell into arrears. Mortgage Express appointed a receiver under the Land Property Act to take over management of the property, but they've failed to let it out, failed to collect rent etc so the arrears are much worse. I think Dryden's are the solicitors being used to evict the tenants who chillin put into his property so he could get rent to pay the mortgage. Although he owns the property he had no right to give them a tenancy so the tenants are being evicted for trespass. I believe it's a residential property

 

 

Chillinlong, you need to consult a Solicitor immediately.

 

Where a mortgagee takes possession of mortgaged premises, under the provisions of the Law of Property Act 1925, in a case of mortgage arrears, the mortgagee continues to have certain legal obligations to the borrower, as mortgagee in possession.

 

In this case it is possible that the mortgagee is in breach of its statutory obligations, implied into the mortgage by the 1925 Act, if it has failed to take any - or any proper - steps to mitigate its loss by either selling or letting the premises. However, if it intends to sell the premises it will need vacant possession in order to do so.

 

 

Would you please clarify whether the mortgagee's solicitors have obtained a court order for possession; or whether you have voluntarily allowed the mortgagee into possession.

 

If the mortage payments on a dwelling are more than two months in arrears, the mortgagee normally has a statutory right to apply to the court for possession.

 

Or if the mortgage contains a condition that the mortgagee must consent to any letting during the mortgage term, then you would be in breach of contract if you let to tenants without the lender's consent, and the lender could normally obtain a court order for possession.

 

 

If you, as borrower, have ceased to have a present right to possession, then you have ceased to have a right to let the premises. In that case, any tenants who you now allow into occupation would be trespassers, and a court order might be granted to the mortgagee by the court to evict them as trespassers.

 

If the mortgagee intends to sell the premises, it has the contractual right to do so even if the sale will not pay off the whole of the mortgage debt; and naturally its first step would be to obtain vacant possession. If the mortgagee has a present intention to sell the premises, in order to repay the loan, it will inevitably need vacant possession in order to do so.

 

If the mortgagee does not have a present intention to sell, but intends to let the premises pending a recovery of house prices, it seems odd that it would seek to evict a tenant who is paying rent, unless it takes the view that the rent is below market rates or that the terms of the letting are disadvantageous to it in some other respect. It is this possibility that particularly needs to be discussed by you with your Solicitor, although you should also discuss with him all the other points I have outlined.

[Ed999]

The recievers solicitors drydens have obtained a court order for possession for trespass against "Unknown persons" ie the tenants.

 

No, I want to know whether the mortgage lender - or anyone on its behalf - has obtained a possession order, from the court, against you? I need to know the basis for your allegation that you are banned from going near the property ("drydens refuse to speak to me telling me to stay away frmo the property").

 

 

Cannot see on the Ts and Cs that Mortgagee has to approve tenancies. it was written for a residential mortgage as it states I must not move out of the property.

 

A condition that you must not move out of the property is the same as a condition that you are not allowed to let it out to tenants. It is evidently NOT a buy-to-let mortgage, then, for those are not burdened with a ban on letting to tenants - obviously!

 

If you have let to a tenant, in breach of the mortgage contract, that breach of contract typically entitles the mortgagee to obtain a possession order against the tenant.

 

 

dont need to sell as such a bad time in the market, but they really want to sell now.

 

But that is not what you said. You said "the[y] failed to collect rent during this whole period", implying that the mortgagee is seeking to let, rather than sell, the property.

 

If they are in fact seeking to sell it, and you are obstructing the sale by letting it to unauthorised tenants, it is no wonder you are in difficulties.

 

But you have yet to explain how their power of sale became exerciseable: have they obtained a possession order against you?

[Ed999]

Good point Ed, there is no possession order against me from the court, however they have informed me it is underway currently but as yet to be seen. Therefore I should be allowed to speak to Drydens about my properties are you saying?

 

You will know, of course, whether the mortgage lender has begun repossession proceedings against you, because if they have you will have received a Court claim for possession from the Court.

 

If a repossession order has NOT yet been granted against you personally, then whether you are currently entitled to enter the property will depend upon whether your mortgage deed contains any restrictions on your right to enter it. Your Solicitor will have explained any such restrictions to you when you took out the mortgage.

 

Regardless of whether you can lawfully enter the property, you are entitled to contact the mortgage lender's Solicitors if you need to do so. There is usually no point in contacting the lender in any other way.

 

 

It is a BTL mortgage from Mortgage Express, however the terms and condition have been written for a residential mortgage (Most of it anyway).

 

A buy-to-let [bTL] mortgage is ALWAYS a residential mortgage.

 

 

Yes they failed to collect rent for a long time, failed to manage the maintenence and tenants which then caused tenants to leave. They spent huge sums on trying on repair nonsencical issues but did not resolve anything. ...

 

At the beginning they said they will try to let until arrears are clear which they have never done so it is at a position whereas it is justifiable for MX with WS explanations of "the property is losing money therefore we need to sell" ie covers WS back to sell at a huge shortfall whereas the market rent is more than the mortgage payments therefore it does not make sense to sell in these times when the arrears can be cleared via the rents.

 

You need to consult a Solicitor immediately.

 

Where a mortgage lender takes possession of mortgaged premises in a case of mortgage arrears, under the provisions of the Law of Property Act 1925 the mortgage lender has certain legal obligations to the borrower. In this case it is possible that the mortgage lender is in breach of its statutory obligations, implied into the mortgage by the 1925 Act, if it has failed to take any - or any proper - steps to mitigate its loss by either selling or letting the premises.

 

If there is no possession order granted by a court against you personally, it is possible that the mortgage lender's power to manage the property, including its power to let the property to tenants, might not have arisen or might not have become exerciseable. Those types of powers arise if there are mortgage arrears, but usually don't become exerciseable by the mortgage lender except with a court order. It is possible, I suppose, that the mortgage contract between the lender and you might allow the exercise of such powers without a court order; but only a Solicitor could tell, after reading the mortgage deed.

 

If the powers have arisen, and have also become exerciseable, then the mortgage lender could nevertheless be liable to you for any breach of contract by it. The mortgage deed is a contract. The contract might contain an express - or implied - term that the mortgage lender must use a proper degree of care in exercising its management powers; the lender might even owe you a fiduciary duty of care. You could potentially sue it if it caused you loss in consequence of a breach of that duty.

 

 

Now with no tenants I got them tenanted again and repaired damages.

 

They have recently decided to mitigate further losses that they will now be selling and to remove the tenants.

 

You need to consult a Solicitor immediately.

 

If the mortgage lender's power of sale has not yet arisen, or has arisen but has not yet become exerciseable, the mortgage lender would usually not have the power to sell.

 

If its power of sale has arisen, and has become exerciseable, if the mortgage lender intends to sell the premises it has the contractual right to do so, even if you would prefer a different solution, unless, perhaps, its decision is so unreasonable that no lender would take it - a VERY high hurdle for you to surmount if you argue that. If you take advice from a Solicitor he can advise you as to whether it is worthwhile challenging the mortgage lender's decision: ask your Solicitor is the decision Wednesbury unreasonable?

 

It will not necessarily be unreasonable merely because a sale now will not pay off the whole of the mortgage debt, because a sale now will at least stop the continuing mortgage arrears from accruing every month - an important consideration.

 

Naturally, the mortgage lender's first step would be to obtain vacant possession, if it has a present intention to sell the premises, as it will inevitably need vacant possession in order to do so.

Edited April 27, 2011 by Ed999

[Ed999]

From solicitors point of view MX do have the right to appoint LPA if in arrears.

 

I don't know what you mean by 'from [a] solicitors point of view'. Either the mortgage contract gives a lender the right to appoint a receiver, or it does not.

 

 

However they have a duty of care to ensure that it is handled in the best possible way.

 

I disagree. The lender has a much more limited duty than that. It merely has an implied, or a statutory, duty to act reasonably. The case of Wednesbury suggests that a lender must act VERY unreasonably indeed before a court will be willing to admit that the lender has breached its duty. But you must consult a Solicitor: this area of the law is very complex.

 

 

The way it works is that because one property is not making a huge profit they want to sell. This is fair enough but this affects the whole portfolio because the shortfall would then be added onto the arrears of the portfolio which would then worsen the whole portfolio and ensure that the portfolio will not go back ito surplus therefore this would make it less justifiable to sell the portfolio altogether.

 

Don't expect the court to be interested in the least by such esoteric arguments. It will only consider your property, and will only want to know whether the mortgage is in arrears, and if so whether the arrears exceed 2 monthly payments.

 

You have shot yourself in the foot by letting to tenants, because you have thereby deprived yourself of the argument that the lender has unreasonably delayed in selling: for it usually CANNOT sell without vacant possession.

 

 

I am not sure whether this is legal hance am waiting for legal opinions to determine is this action allowed but as far as I know however wrong it seems it looks like it is legal for them to do this. But I want to fight this to highlight the fact this is not a fair practice and should be taken individually not affecting all other properties.

 

Have you instructed Solicitors?

 

I cannot believe that any responsible Solicitor would advise that course of action, when you are so clearly in the wrong. YOU are in breach of contract, in letting to tenants without the lender's permission. You therefore have no prospect of gaining the sympathy of the judge, in those circumstances; so asking him to exercise his discretion in your favour is a waste of breath.

[Ed999]

my complaint is the unfairness and the process and the total disregard of basic consideration which would have enabled me to overcome the arrears problem.

 

The law allows a mortgage borrower a great deal of leeway.

 

Unlike the desperate situation of former times, you can no longer be evicted if the mortgage is in arrears. If you live in the United States, where the law remains essentially as it was in Colonial times, the lender can foreclose on you if the mortgage is in arrears - period. If you are one dollar in arrears, you are liable to foreclosure and eviction.

 

In England, under the 1925 Law of Property Act (the LPA) a borrower cannot be repossessed if the mortgage is merely in arrears. That only causes the lender's power of sale to arise. For the power to become exerciseable, an amount equal to at least two monthly payments must be outstanding.

 

Even then, the mortgage lender cannot evict you.

 

A lender who has a power of sale which has both arisen and has become exerciseable must then apply to the court for permission to sell.

 

Even then, the outcome is not a certainty. The court has a discretion to refuse that application, if the borrower appears to the court to be able to repay the arrears within a reasonable time. Where the mortgage is for a term of 25 years, the court is entitled to consider whether the borrower can repay the arrears by monthly installments over the full period of 25 years.

 

Only as a last resort will the court grant an application for repossession.

 

These are complicated matters, and the help of a Solicitor at the possession hearing is advisable.

 

Unfortunately, there has to be a point at which the interests of the Building Society or Bank are also taken into account. That point is, however, only reached where it is clear that the repayment proposals offered by the borrower are unrealistic.

[Ed999]

yes mortgage is with M.EX.

tenants left on their own free will

but have left it in a state.

I believe WS will try and force through a sale

or force a tenant on me I may not approve of!

 

secondary question

If I issue a lease can either WS or M.EX have it annulled if rent is paid to WS

Do I have to rent for market value?

or is it my choice on how much to charge?

 

A normal buy-to-let mortgage usually only requires the lender to approve in advance the tenants who you select. Any failure by you to obtain the lender's written approval, in advance of the letting, will put you in the wrong: it would be a breach of contract by you.

 

But if the property has been repossessed by the mortgage lender under a court order, or if the mortgage contract contains power for the lender alone to let the property (a point which your Solicitor will have explained to you when you took out the loan), then you cannot let it to tenants. If you do so in those circumstances, you will be putting yourself in the wrong: do not expect sympathetic treatment by the court if you choose to do that.

 

From the limited information which you have provided, I am unable to tell whether or not you have a right to let the property to tenants.

 

If you are unclear what your legal rights and duties under the mortgage are, consult a Solicitor for advice before taking any action.

 

If the Solicitor who acted for you when you took out the loan did not properly explain to you your rights and obligations under the mortgage contract, consider suing that Solicitor for negligence if you have suffered financial loss in consequence of his failure.

Edited May 16, 2011 by Ed999

[Ed999]

In case I'm suspected of talking through my hat - or out of the back of my head - I will come clean and admit that, at one time, I was a volunteer adviser at my local Citizens Advice Bureau; and from time to time have appeared on a pro bono basis at repossession hearings.

 

I'm familiar with the procedures, and the pitfalls, of these hearings.

 

One can pick up a great deal of useful info by chatting to the Barristers who typically appear on behalf of the mortgage lender at these hearings, and from observing them in action. It quickly falls into a familiar pattern. And there is also some sharing of experiences among colleagues at the CAB who have done these hearings in other cases.

[Ed999]

i do see your argument but also see the possibility of being able to go to court and ask for a judge to administer a stay in any future actions against all other properties and have the properties returned forthwith and to be put back into a position you would have been in before the Receiver was appointed , the failure to mediate your financial circumstances and come to a agreement that would be beneficial to both parties ,the receiver did his job on the one property and has now begun to disseminate the mortgagee's portfolio an create more problems with the mortgagee's properties , f which had no mortgage arrears but because the terms and conditions have not been laid before the mortgagees of what duties the receiver was lawfully employed to do , this results in an unfair contract or contracts since they are now linked which should not be the case

 

 

Unfortunately, I'm not aware of any statutory provision or court decision that supports your opinion.

 

And any application, by the original poster on this thread, for a stay in any future actions against all properties managed by this LPA receiver would be bound to fail, since the o/p is mortgagor of only one of the affected properties, so has no locus standi to make an application affecting any other property.

[Ed999]

What gets to me is the LPA is exercisable when the properties become two months arrears but what about when it goes into 3 months surplus? It is still exercisable I presume as it has been breached because it once went into arrears.

 

 

My understanding is that the mortgage would have to be in arrears on the date of the court hearing, by an amount greater than the equivalent of 2 mortgage instalments, for the power of sale to be exerciseable by the lender.

 

At all the hearings I attended, the Court's decision was dependent upon the arrears exceeding that amount. And the borrower, if he was represented, was generally quizzed at length by the defending Solicitor or Barrister over his ability to bring the arrears down to below that amount, and of course his ability to meet future payments as they fell due.

 

My understanding is that in practice the Court would only make an order for repossession if the arrears were still above that trigger amount on the hearing date. Obviously, the lender had only begun the court proceedings once the arrears had reached that level, there being no prospect of obtaining an order prior to that, but reaching that level of arrears was NOT a guarantee of the outcome - otherwise there would have been no point in holding a hearing at all, if merely exceeding the amount was all the lender had to show.

 

I came across cases in which there had been arrears, but no longer were. In that situation, the power of sale was no longer exerciseable. I don't know whether, technically, it had arisen and therefore always continued to exist; but it was no longer exerciseable.

Edited May 24, 2011 by Ed999

[Ed999]

Ed for info, a number of posters have more than one property with MEx, and they have indeed rolled up mortgages/arrears/shortfalls from a number of properties in BTL portfolios, which has had the effect of putting their other properties into arrears, ripe for them to repossess and sell. From memory I'm not sure if this applies to chillin.

 

 

Thanks for this clarification.

 

Fundamentally, this is a matter of contract law: the key question is whether the mortgage contract allows the lender to appoint a receiver under the Law of Property Act 1925, and, if so, what powers the mortgage contract gives to the receiver.

 

A lot of the law will apply in every case, because it is contained in the 1925 Act. But a good deal of the detail will be contained in the individual mortgage deeds. For example, under section 93 of the Act, it is a matter for agreement in the mortgage deed as to the extent of a mortgage lender's power to consolidate two or more mortgages granted by the borrower:

 

Section 93. Restriction on consolidation of mortgages.

 

 

It might be worthwhile approaching a Barrister, by letter, and paying for a written professional opinion on the legal effect of one of the mortgage contracts with Mortgage Express, if the expense was shared between half-a-dozen posters.

 

It is possible to instruct a Barrister, even if there are no on-going court proceedings, under the Bar Council's Public Access Rules, without having to also incur the expense of instructing a Solicitor. And a written opinion [i.e. any form of written advice] is always much cheaper than representatiion at a hearing.

 

 

 

Further information: Law of Property Act 1925

 

Mortgage provisions in 1925 Act - Part III, Sections 85 to 120, Mortgages

 

S.109, 1925 Act - Appointment, powers, remuneration and duties of receiver

 

 

 

Bar Council's Public Access Rules: www.barcouncil.org.uk/.../Public Access Guidance for Barristers - March 2010.pdf

 

 

Find a Barrister - The Bar Council's directory

Edited May 24, 2011 by Ed999

[Ed999]

The problem is the LPA route they do not have to go to court when appointed and when power of sale is exercisable therefore there is no power to supervise and ensure no corruption.

 

 

That is not quite correct: the borrower has power to sue for breach of contract, in the same way under a mortgage contract as under any other type of contract, if there has been a breach of contract: i.e. a breach of any of the agreed terms contained in the mortgage deed, or any of the statutory terms set out in the 1925 Act.

 

It would be prudent to obtain professional advice as to what, precisely, those terms are, in relation to a Receiver. Then one could consider whether the practices of the lender have breached the applicable terms.

 

The Barrister might also be asked to draft a claim based on breach of a duty of care, if the contract contains an implied contractual duty for the lender or receiver to act in the interests of the borrower.

Edited May 24, 2011 by Ed999

[Ed999]

they do not sign a single POA on each property they sign a single POA ,in my view this does not stack up and should therefore allow for the mortgagee to challenge the POA ,the POA only carries about seven lines of text that does not cover everything it is just assumed that the LPA have more authority than they are actually allowed ...

 

but with a buy to let mortgage their is no need whatsoever to go down the legal road of court action because they have a single peice of paper the POWER OF ATORNEY ,and in my veiw this POA is and can be challenged in law because it bears no resemblance of what the mortgagee believed it to be , "OH JUST SIGN THIS SHEET OF PAPER " ITS ONLY FOR OUR PROTECTION DONT WORRY IT DOESN'T AFFECT YOU "

 

 

I wonder whether you are aware that an appointment of a Receiver is made under Part 3 of the Law of Property Act 1925, and not under the Powers of Attorney Act 1971?

 

Any legal challenge would be for failure to comply with the 1925 Act, or with the express terms of the contract set out in the mortgage deed.

[Ed999]

So they only paid out for about 22 weeks when the house was unoccupied for 60 weeks?

 

Was this insurance part and parcel of your MX mortgages, or was it a separate insurance you took out?

 

 

It is not uncommon for an insurance policy to include a provision for a cut-off date, whereby the insurance claim is only valid for a specified number of months of loss.

 

Twenty two weeks sounds like a cut-off point of 5 months.

[Ed999]

it is interesting in the letter it states the benefits of clearing the arrears "They will hand the property back". Whereas one of my portfolio has no arrears and they have said they will not hand back. And I think they have also said to you they may or may not hand properties back.

 

Thanks again Caro, really appreaciate your help and I know you have tried. It would have been interesting to tell them some portfolios have no arrears yet they still will not hand back and are waiting until empty and then try to sell.

 

 

Advice from a Barrister, in writing, on the contract terms in a Mortgage Express mortgage deed - and on the implied terms added to the contract by the 1925 Act - could clarify whether the LPA Receiver has a legal obligation to hand management of the property back to the borrower, and if so under what circumstances.

[Ed999]

According to the Mortgage Express website:

 

Following nationalisation, we are now closed to new mortgage business and are unable to offer new Buy to Let deals or further loans.

 

Our goal is to protect and create value for UK taxpayers by winding down our mortgage business, so we want to help you avoid payment problems, pay-off your Buy to Let mortgage or find a better deal elsewhere.

[Ed999]

An LPA Receiver’s powers are limited to section 109 and 109(3) of the Law and Property Act 1925.

 

 

The statutory powers the LPA Receiver has under Section 109 of the Act are:-

 

· To demand and recover all income due (including rent) on the property that they are appointed receiver on. This can be recovered by action, distress or any other means needs. They are required to provide valid receipts for income (or other) taken.

 

· If directed by the mortgage lender, the receiver can insure and keep insured against loss or damage by fire. This can be taken by from money received by the receiver and can be used against anything compromised in the mortgage.

 

 

The lender can also delegate its contractual powers to the receiver, under section 109(3) of the Act. If the lender wishes to delegate its contractual powers this must be done in writing. The contractual powers generally are:-

 

· The power to sell the mortgaged property on such terms as the receiver sees fit.

 

· When the lender is in possession of a property, it has the power to cut and sell timber and other trees after consulting with a qualified arboricultarist.

 

· The power to make leases.

 

 

The LPA Receiver or mortgage lender may apply to the court on matters of uncertainty about the appointment, powers or remuneration of the receiver.

 

 

The lender can require that all monies received in connection with insurance of the mortgaged property be applied as follows:-

 

· Towards the discharge of the mortgage money owed.

 

· To recoup monies, loss or damage to which the funds are for.

 

 

Remuneration for the LPA Receiver:

 

The receiver is entitled to retain out of any monies received (after discounting costs) a rate not exceeding 5% unless specified otherwise. If an application to the court has been made, they can also specify the rate of remuneration dependant on the individual case.

 

 

 

Statutory powers

 

The s.109 powers of the LPA Receiver include:

 

· To demand and recover rent to give receipts for income.

· To insure any property against loss or damage.

· To grant a lease over the property at the best reasonably obtained rent.

· To accept a surrender of a lease in order to grant a new lease.

· Obtaining possession if it is occupied illegally or the occupier has defaulted on his obligations, for example to pay rent

· seeking planning consent or otherwise dealing with the property

· paying monies collected to repay the loan due

· agreeing a settlement with creditors if needs be

· paying to the owner/borrower any money that is left over after repaying all the debts and costs

 

In a well drafted mortgage the above powers of an LPA Receiver are extended and would allow the LPA Receiver to take control of the property and act as he considers fit with the consent of the mortgagee (i.e. the mortgage lender, not the borrower). The LPA Receiver's decisions in dealing with the property gives them full discretion.

 

Thus the LPA Receiver takes control of the property, and the owner cannot deal with the property in any manner (e.g. cannot let it out to tenants).

 

 

The Receiver has total discretion but must act reasonably. Any obligation on a person to act reasonably is potentially open to challenge on the ground that he has not acted reasonably.

 

For example, selling a property without using an Estate Agent is fraught with potential claims that the sale has not been at arm’s length, so could result in legal action by an aggrieved borrower.

 

 

 

Appointment by lender

 

An LPA Receiver is appointed by a lender who has a fixed charge over property under the statutory power given to that lender in section 109 of the Law of Property Act 1925.

 

Such an appointment of a Law of Property Act (LPA) Receiver may only take place if:-

 

1. the mortgage money has become due, and

 

2. the mortgagee has become entitled to exercise the statutory power of sale, where:-

 

2.1 there has been default in repayment of a loan for 3 months after a notice requiring it, or

 

2.2 Interest remains unpaid for 2 months after becoming due, or

 

2.3 there is another breach of the Act.

 

 

A Law of Property Act (LPA) Receiver's powers are limited to collecting rents and income, however the Law of Property Act Receiver does have a duty to keep property in good repair and to insure the property.

 

 

There is an interesting Court of Appeal decision, which is known as Chatsworth Properties Ltd v Effiom (decided in 1970), which could be of importance to a shorthold tenant under a letting unlawfully entered into in breach of the mortgage terms - who, in the right circumstances, might have a valid tenancy, albeit one subject to section 21 of the Housing Act 1988.

 

 

 

Negligence

 

The mortgage lender is not liable for the actions of the LPA Receiver, since, on their appointment by the lender, the LPA Receiver becomes the agent of the borrower, not of the lender.

 

The effect of this is that the borrower will not be able to sue the lender for any negligence that may result from any acts or omissions of the LPA Receiver. However, the LPA Receiver himself will find himself in the unhappy position of being in the firing line in the event that the borrower suggests he has carried out his duties negligently.

 

 

An allegation of direct or residual negligence has to bear in mind the Court of Appeal decision in %20EWCA%20Civ%201965.html"]Raja v Austin Gray [2002] EWCA Civ 1965 (19 December 2002), concerning the negligence of a Valuer and his principle, the Receiver, in which the Court of Appeal refused to treat the agent of the Receiver as owing a duty of care directly to the mortgagor-borrower ("it would not be fair, just and reasonable that an agent employed by a mortgagee to advise him should be under a duty of care to the mortgagor in giving that advice ... [as] there was no sufficient relationship of proximity between them").

 

 

Though, in Raja, Peter Gibson LJ did say this -

 

Equity intervenes to ensure that proper account is taken of the interests of the mortgagor and others interested in the equity of redemption. The mortgagee is only interested in the discharge of the debt owed to him, but equity makes sure that the mortgagee acts fairly to those interested in the equity of redemption when the mortgagee exercises the power of sale. In a case such as the present, the sale being an exercise of the power of sale of DFL as mortgagee, it seems to me that the relevant person to be treated as interested in the equity of redemption must include the mortgagor who has mortgaged the properties in question to DFL in circumstances where DFL's power of sale is being exercised by the receivers. I would therefore hold that the receivers did owe a duty of care to Mr Raja when they exercised DFL's power of sale of the properties, even though the receivers were appointed by the mortgagee of DFL.

Edited May 28, 2011 by Ed999

[Ed999]

The function of the Barrister in this type of case is to research recent court decisions concerning section 109 of the 1925 Act, and to provide a written summary of the points of law that emerge from those cases upon which a mortgage borrower can realistically challenge any aspects of the LPA Receiver's actions, or those of the mortgage lender.

 

It is important to note that the Barrister does NOT investigate the case, nor does he gather the evidence. That is YOUR job. He is not a Solicitor. Nor is he a private detective. YOU put the evidence before him, and he advises you in writing as to what outcome might be possible in a court.

Edited May 28, 2011 by Ed999

[Ed999]

The recent case of Bell v Long & Others [Court of Appeal, June 16th 2008] brought a Receiver's obligations, on selling a property portfolio, into sharp focus.

 

The issue concerned the sale by the Receiver of a portfolio of four properties in circumstances where they had previously received offers for three out of four of the properties from individual sellers. Having taken their local selling agent's advice, the Receiver decided to reject the individual offers and sell the properties as a portfolio of four, and ultimately achieved a successful sale of the portfolio

 

However, the Receiver was sued by the Borrower's assignee on the grounds that the Receiver could and should have obtained a better price had the properties been sold on an individual basis. There were also secondary allegations that the Receiver did not take adequate valuation advice, relying only on the selling agent's opinion, and that the Receiver had failed to test the market properly in relation to the sale of the individual properties.

 

The court, however, rejected all those arguments and found in favour of the Receiver.

 

In effect, the court reaffirmed the receiver's wide discretion.

 

 

The Court held that -

 

· While the Receiver was under an obligation to obtain a proper price for the properties, he was not obliged to either "ride the market" or to take on onerous expenditure in order to achieve a sale.

 

· The Receiver had the right to choose the time of the sale no matter how disadvantageous that may be for the borrower. In addition, whilst the marketing of any property had to be appropriate, the Receiver nonetheless should look to the lender's interests in deciding how to sell.

 

· In the circumstances of this particular case, given that serious offers had been received for the portfolio of properties, had the Claimant's arguments been adopted the Receiver would have been put in the position of rejecting those offers and holding out until individual sales of the properties were achieved. In the circumstances, weighing the certainty of the portfolio sale (given the firm offer received) against the uncertainties of a possible lengthy marketing campaign of the individual properties, the Receiver was well entitled to adopt the chosen strategy in relation to the timing of the sale.

 

 

 

The claim in Bell arose from the sale of four properties as a portfolio at a discount from their individual valuations, the court held that receivers are entitled to choose the time of sale even if this means getting a lower price than might otherwise have have been obtained.

 

The receivers appointed valuers to market and sell the properties. The valuers used three bases of valuation. The open market values and estimated realisation prices each produced the same combined total for the properties of £995,000. Both these presumed a marketing period of six months prior to sale.The third formula - estimated restricted realisation price (i.e. reduced price for a quick sale) - produced a combined valuation of £660,000.

 

After a short period of informal marketing and around three weeks' formal marketing the receivers sold the properties as a portfolio for £775,000. Shortly afterwards, the new buyer sold the properties on individually for a combined value of £1.1m.

 

The claimant contended that the sale price was significantly lower than could have been achieved had the properties been more effectively marketed for a longer period of time.

 

 

 

An earlier case of Silven Properties v RBS also found in favour of the Receiver.

 

It decided that a Receiver had no obligation to incur expenditure in order to prepare a property for sale. In that case a borrower unsuccessfully argued that the Receiver should have expended funds in order to apply for planning permission as the planning consent would have increased the potential realisation.

Edited May 28, 2011 by Ed999

[Ed999]

Sadly, my personal opinion is that the type of court action you've outlined won't succeed.

 

For starters, long ago - more than ten years ago - the court rules were changed to prevent a claim of this nature from being begun in the High Court. You would be expected to issue your proceedings in the County Court for the district in which the property is located. The High Court is now mainly an appeals court, supervising the lower courts.

 

Also, from the minimal research I have done, the point that most clearly emerges is that such a claim is so complex it needs to be drafted by a Barrister, in order to best allow for the different legal grounds - both in contract and in tort - on which a challenge might realistically be based.

 

You are starting the case without first doing the necessary legal research, into the recent case law, that is essential in order to establish how to maximise the prospects of winning. This needs to be done first, and it needs to be done by a professional, who could also present the case at a hearing. The Bar Council's public access rules are tailor-made for such a case as this - and you're not taking advantage of them!

 

I have outlined some promising lines of research, and a barrister who specialises in mortgage law or land law will certainly be familiar with these and other possibilities.

 

So far as I can make out, you have not even sat down with a mortgage adviser from the Citizen's Advice Bureau, to discuss the relevent legal principles involved, even though their help is free.

 

 

 

 

Bar Council's Public Access Rules:

Public Access Guidance for Barristers - March 2010.pdf

 

Find a Barrister - The Bar Council's directory

 

 

It is important to note that the Barrister does NOT investigate the case, nor does he gather the evidence. That is YOUR job. He is not a Solicitor. Nor is he a private detective. YOU put the evidence before him, and he advises you in writing as to the law, and he presents the case in a hearing.

Edited May 30, 2011 by Ed999

[Ed999]

Your comments are fair enough.

 

However, this thread was begun by chillinlong. And my comments have principally been directed to chillinlong. He has said repeatedly that he wanted a way forward, and he has actually begun an expensive court action. I have been suggesting what might be more effective uses for his money than his current unfocused endeavours in his current court case.

 

Also, I'm aware from this thread that other users have been canvassed regarding the possibility of a group action, in which a number of users might contribute to the cost.

 

Also, I'm aware from this thread that other users have actually obtained assistance in similar circumstances from a Barrister in the past.

 

Also, I've not suggested instructing a Barrister to review an existing case. That would be a waste of money, in my opinion. I have only mentioned the possibility of getting a Barrister to review the case law, in the leading cases on section 109, and to advise on where there is a possibility of a legal challenge being made.

 

It would not be appropriate for the Barrister to be asked to review the facts of an existing case. That would not produce the plan of campaign that I am suggesting. He would only be asked to do something much more straightforward: an advice, in writing, summarising the law in the leading cases, on those points which allow a mortgage borrower to challenge the receiver's actions.

 

I'm not suggesting a Solicitor at all, with or without a conditional fee agreement.

 

I agree that it is too complex for a Solicitor. And that it falls outside the field of the Citizens Advice Bureau.

 

By the same token, where it seems reasonably clear that a case is likely to prove beyond the capabilities of both a Solicitor and the CAB, it also seems likely to prove beyond the capabilities of a litigant in person - unless he has specialist help. The Bar's public access rules might be one way of getting that help. A way, moreover, that does not involve also meeting the extravagent fees of a Solicitor.

Edited June 1, 2011 by Ed999

[Ed999]

Originally Posted by mungos mum

 

I think it was a very informative meeting and having an M.P and a Barrister there certainly helped me to see things in a slightly different way.

 

Both the M.P & Barrister seemed quite surprised that the lender we were having the most problems with is MX...a company wholly owned by the British taxpayer.

 

... The Barrister was great, we have over the last few years met countless solicitors and Barristers, but this guy was different and unusually for a Barrister, quite human!

 

 

It would be useful to know the name of the Barrister, and which set of Chambers he works out of.

 

Barristers tend to specialise in particular areas of law, much more so than Solicitors. A Barrister who practices criminal law is of no use when you have a mortgage problem regarding land law. In approaching a Barrister under the public access rules, it's essential to select someone who is experienced in the type of case you are fighting.

[Ed999]

Is there any interest in my doing further research into the issue of negligence claims against an LPA Receiver?

 

That is something which was mentioned by chillinlong, as being a type of claim he hopes to eventually make.

 

The on-line law reports on the Appeal Court's website will presumably include any recent leading cases in that area.

[Ed999]

A class action is out of the question, unfortunately, because that would be a claim brought on behalf of all borrowers - everywhere! - who have a mortgage with Mortgage Express. It is impractical to seek the consent of the thousands of borrowers in that class.

 

 

As far as I can see, you all have a basic lack of understanding of the difference between a solicitor and a barrister.

 

You can instruct a solicitor to conduct your entire claim against the LPA receiver; but you will be paying him, in large part, to do things you could probably do yourselves: namely, gather the relevent facts, and prepare witness statements containing those facts, and brief the barrister to advise on the law and/or appear at a hearing.

 

A barrister can't handle your case for you. But he can do things a solicitor can't, namely the most important thing, legal research. Barristers who specialise in this field of law will have a specialised library of legal journals and law reports that deal with this field. And a LOT of personal experience of other cases similar to yours.

 

Am I teaching my grandmother to suck eggs?

 

Do you really need me to tell you that you need to prepare a written statement of the facts?

 

The barrister would need to know the address of the property, the name of lender and borrower,the date of the mortgage, the amount of the original loan, whether it is a repayment or endowment mortgage, the original interest rate, the amount of the monthly payment due currently, the current amount of the arrears, the date the LPA Receiver was appointed, and the name of the Receiver

 

Also, the key dates in any court proceedings: issue of summons, filing of defence, date of final hearing; including details of the court order made at that hearing.

 

And the barrister would need a statement showing the timeline of the loan up to the present date: showing the amount of each payment due, with the due date; all payments made, with the date of each payment; all changes in the interest rate, with the date of each change; and all rental income received from tenants [both BEFORE and AFTER the appointment of the LPA Receiver], with the date and amount of each receipt; and a running total, culminating in the balance currently owed.

 

The more interesting aspect will be preparing a timeline of the LPA receiver's actions since their appointment, in terms of: valuing the property, including the valuation figure, with date of valuation; and letting it to tenants, with dates of each event, i.e. the date of creation and date of termination of each tenancy, with name of tenant and amount of monthly rent due.

 

You can send a Subject Access Request to the mortgage lender. They'll try to only give you limited information: they may claim that because of the Durrant case they don't have to provide all the data requested. If so, threaten them with the Information Commissioner's office.

 

You can also send a seperate Subject Access Request to the LPA Receiver. They keep details of tenant rental payments.

 

Yes, you can pay a solicitor a large sum of money to gather this information slowly. And be sure he will try to gather most of it from you, so you'll be paying him and doing the job for him. You'll enjoy that.

 

 

 

The prudent course of action will be for each individual claimant to prepare those basic statements, in writing, long before you go anywhere near a Solicitor or a Barrister.

 

Ultimately, it might make sense to talk to a Barrister who is a member of the Property Bar Association.

Edited June 4, 2011 by Ed999

[Ed999]

In Raja v Austin Gray [2002] EWCA Civ 1965 (19 December 2002), concerning the negligence of a Valuer and his principle, the Receiver, in the Court of Appeal, Peter Gibson LJ did say this -

 

Equity intervenes to ensure that proper account is taken of the interests of the mortgagor and others interested in the equity of redemption. The mortgagee is only interested in the discharge of the debt owed to him, but equity makes sure that the mortgagee acts fairly to those interested in the equity of redemption when the mortgagee exercises the power of sale. In a case such as the present, the sale being an exercise of the power of sale of DFL as mortgagee, it seems to me that the relevant person to be treated as interested in the equity of redemption must include the mortgagor who has mortgaged the properties in question to DFL in circumstances where DFL's power of sale is being exercised by the receivers. I would therefore hold that the receivers did owe a duty of care to Mr Raja when they exercised DFL's power of sale of the properties, even though the receivers were appointed by the mortgagee of DFL.

 

 

This dealt only with negligence in relation to the exercise of the power of sale, on a forced sale by the mortgage lender [acting through the LPA Receiver], but did not deal with negligence in relation to the management of the mortgaged property prior to sale.

 

Basically, Raja was decided AGAINST the borrower. But it is only about the ultimate sale price achieved for the property by the lender, not about the management of the property during the receivership.

[Ed999]

What is LPA Appointment?

 

LPA receivers derive their authority from the Law of Property Act 1925, and from the mortgage deed, and can effectively do anything that the borrower himself can do, unless in the unusual event that this authority is limited by the terms of the mortgage deed (Hughes, 2007). An LPA receiver is thus a very powerful and effective tool which invariably delivers results.

 

An LPA receiver is an individual, not necessarily an IP, appointed either by the Court or by the holder of a fixed charge. The fixed charge is generally over a property such as an investment property held for rental income (i.e. buy-to-let property). An LPA receiver can be appointed in connection with a limited company, a sole proprietorship, or a partnership.

 

LPA Receiverships are not insolvencies and should not be confused with administrative receiverships.

 

In the case of buy-to-let properties a LPA receiver is appointed by a lender who has a fixed charge over property. The powers of the LPA receiver are as follows:

 

1.To demand and recover rent

2.To give receipts for income

3.To ensure any property against loss or damage

4.To grant a lease over the property at the best reasonably obtainable rent

5.To accept a surrender of a lease in order to grant a new lease

 

In a well drafted mortgage the above powers are extended and would allow the receiver to take control of the property and act as he considers fit with the consent of the mortgagee.

 

Reference:

Hughes, J. (2007), “Law of Property Act Receiverships (Law and Practice)”, Lime Legal, ISBN 0-955-2834-2-6

 

 

Comments

 

The words I have emphasised in bold indicate the existence of an obligation, but not whether it is owed to the lender alone, or to the borrower also.