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LPA RECEIVERS - How To Effectively Challenge Their Appointment


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The appointment of a receiver(s) can be effectively challenged by scrutinising the terms and conditions of the mortgage and the contents and form of letter or deed of appointment.

 

The appointment document must be executed in accordance with the relevant statutory provisions, which may include any or all of the following:

 

  • The Law of Property Act 1925 s109(1) – Must be under ‘his’ hand
  • The Companies Act 2006 s44 – Execution of documents - Hilmi & Associates Ltd v 20 Pembridge Villas Freehold Ltd [2010] EWCA Civ 31
  • The Law of Property Miscellaneous Provisions Act 1989 s1 – If made by deed of appointment, although even if the appointment is not affective as a deed it may still be affective as ‘under his hand’

In practice this means that the letter of appointment must be signed in accordance the Companies Act 2006 s.44 and be signed either by:

 

  • Two authorised signatories
  • A director in the presence of a witness, who attests the signature
  • By a person authorise to execute documents on behalf of the company under a power of attorney , in accordance the Power of Attorney Act 1971

If the letter of appointment is not properly executed the appointment is void and the ‘lender’ and any receiver(s) acting under the appointment are liable for damages.

 

The next thing to check is whether the appointment is in accordance with the mortgage deed, for example if the appointment document appoints two receivers to act jointly and severally, but the mortgage only allows for the appointment of one or more receivers and does not stipulate that they may act jointly and severally then the appointment is deemed ineffective and void.

 

The principle that the Lender is obliged to appoint receivers in accordance with the Mortgage is accepted and applied by the courts throughout the common law world.

 

The Bank purports to appoint Receiver(s) without the aid of the courts in pursuant to its contractual rights under the Mortgage with the Receiver's authority being derived directly from the Mortgage. Therefore the receiver has to be appointed in strict compliance with the terms of the contract between the parties (mortgagee and the mortgagor).

 

Since the receiver's authority is derived from the mortgage under which he is appointed, an appointment is not valid unless it is made in accordance with the terms of that mortgage. This principle has been recognised by the leading commentators (Receivers and Administrators, Kerr & Hunter; and The Law of Private Companies (3rd Ed, Courtney).

 

Lynch-Fannon Corporate Insolvency and Rescue (2nd ed.) has noted that "the penalty for non-compliance with the formalities for the appointment of the receiver is that such appointment is void". She also observed that non-compliance with formalities of appointment amounts to an abuse of process.

 

In Wrights Hardware v. Evans (1988) 13 A.C.L.R. 631 the Supreme Court of Western Australia, the deed of charge authorised the Chargee under clause 4.3 to “appoint in writing any person to be a receiver or receiver and manager ... of the mortgaged premises" and under clause 4.4 "in addition ... appoint in writing any person to be an additional receiver or receiver manager" who had “full powers and authority to exercise all or any part of the powers expressed to be conferred on a receiver appointed...".

 

The Chargee had in fact appointed the defendants “jointly and severally to be receivers and managers" of the plaintiff. The plaintiff sought interlocutory relief restraining the defendants from acting as receivers and managers on the basis that the appointment was invalid, there being no power in the charge to appoint receivers and managers jointly and severally. The defendant argued that the proper construction of the charge authorised the appointment of joint and several receivers and managers or, in the alternative, the appointment was nevertheless valid insofar as it authorised the defendants to act jointly.

 

The Supreme Court of Western Australia held that the relevant clauses could not have the meaning contended for by the defendants and granted the injunction. Franklyn J. emphasised the importance that the terms of the debenture be complied with by stating:

"I am satisfied that the relevant law applying to the appointment of a receiver or receiver and manager, and receivers or receivers and managers pursuant to the charge is as follows:

1. The manner in which a receiver is to be appointed is prescribed by the debenture deed, in this case the charge, and must be strictly followed…”

I am aware that many mortgagees are appointing two receivers to act jointly and severally, when in fact the terms of the mortgage do not permit the appointment of receivers to act jointly and severally; any such appointment is void.

 

If the receivers appointment is void, then the receiver(s) are trespassers and liable to damages for trespassers and if they have sold your property they are liable for conversion and/or trespass with conversion. The lender may also be vicariously liable for trespassers and conversion, and liable for breach of contract.

 

Even if the letter of appointment is valid, receive(s) will routinely act outside of the scope of their powers, and as such commit acts of trespass. Unless the power of the receiver(s) are extended by the terms of the mortgage, the extent of the powers of the receiver(s) are limited to those derived from the LPA 1925 s.109(3) – (8). This means that unless the powers of the receiver(s) have been extended the receiver(s) may not:

 

  • Grant tenancies, or leases
  • Accept the surrender of tenancies or leases
  • Bring possession proceedings unless it is in relation to rent
  • Market or sell the property

Although under s109(3) mortgagee may delegate powers to the receiver(s), on my reading, the mortgagee can only delegate its own powers to the receivers and cannot delegate the powers of the mortgagees and this would make the receiver the agent of the mortgagee. So unless the receiver(s) powers have been extended by the terms of the mortgage the extent of the receiver’s powers as the agent of the mortgagor are limited to those stipulated in the LPA 1925 s.109(3) – (8). If the receiver(s) exercise any power that is delegated by the mortgagee, then the receiver becomes the agent of the mortgagee, and the mortgagee becomes a mortgagee in possession.

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You'll have to excuse my ignorance but why would the Supreme Court of Western Australia be ruling on British law, and how would that influence a case here, as I wouldn't have thought it would carry any weight.

 

Can you provide a link(s) to the source(s) of your information please.

 

Very interesting btw. :)

 

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I see that the piece quoted has been attributed to the piece appearing on this site.

 

Australian judgments in superior courts would be very persuasive here

Edited by Conniff
Quote removed as has no meaning.
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I see that the piece quoted has been attributed to the piece appearing on this site.

 

Australian judgments in superior courts would be very persuasive here

 

Just to clarify, this artical was written by me after over two years of dealing with LPA receivers in and out of court. The purpose of the thread is to give people who are effected by LPA receivers a very strong starting point in obtaining remedy.

 

The site that has copied my thread can be seen here: http://finance.forumsee.com/a/m/s/p12-25867-0139981--lpa-receivers-how-effectively-challenge-their-appointment.html, and has infact credited this site as the source, and if you look at the artical who will see there is formating errors which usually happens when an artical is cut and pasted between different file formats.

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Yes any caselaw from superior courts in other common law jurisdictions (particularly from those countries forming part of the commonwealth) do indeed form persuasive precedents, and if a court in the UK is to over-rule the precedent it needs to explain why, and as this will result in contrictary case law on the point this would consitute good gounds for appeal.

 

When deciding a case the parties will look for UK caselaw to support their case, as these will be binding, if the point has never been decided in the UK, then the parties would look to see if the point has been decided in any other commonwealth jurisdictions, such as Austrailia, Canada, New Zealand, South Africa, Hong Kong, etc.., As there are very little UK case law dealing with challenges to the appointment of LPA receivers, we have to look for case law in other commonlaw jurisdictions.

 

The bottom line is that many people are unable to effectively challenge the appointment of receivers because they don't know how. Unfortunately it is very difficult to get effective legal representation in the UK because it is a specialist area and most solicitors and barristers practicing in receivership law make a lot of money representing banks and receivers, which means when you go to the legal profession they have a conflict. Do they ****-off the banks and receivers by proving that an appointment is void, and perhaps set a new precedent, or do they take you money and then tell you that you don't have a case, in the knowledge that you probably unable to scrutinise the appointment yourself and are entirely reliant on their expertise.

 

The fact that I have only been able to find one successful challenge to the appointment of receivers in the UK, and one in Ireland seems to suggest that we cannot depend on the legal profession in challenging the appointment of receivers, we have to take the lead. Which means that we have to equipt ourselves with as much knowledge as possible, so that if we are instructing a solicitor or barrister we can identify the grounds for our challenge and instruct them to challenge on those grounds. If they are then negligent in prosecuting the challenge you then have a claim against them for professional neglegence.

 

The UK case where the appointment of some of the receivers was sucessfully challenged is: Nautch Ltd and others v Mortgage Express and another [2012] EWHC 4136 (Ch) - [2013] All ER (D) 115 (Mar)

 

The irish case where the appoint of receivers was successfully challenged is:

Merrow Ltd -v- Bank of Scotland Plc & Anor [2013 IEHC 130]

Edited by aptb74
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Can I just ask a technical question please aptb74.

 

Although forumsee gives credit to CAG, was this posted anywhere else as surely forumsee didn't find it and publish it within four hours of you posting it here ??

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I wrote the artical yesterday and have only posted it here - I am as surprised as you that it has been picked up and copied there so quickly, but have no qualms about it because the main thing is to get the information out there to people who need it and can make use it.

 

I would imagine someone who has access to post on forumsee saw the artical here, liked it and so posted it there.

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This site does normally come top of Google search and new threads can appear there within a couple of mins of being posted here.

The main thing, and the one I didn't notice, is that credit is given to CAG and no attempt made to claim it as their own.

 

Thanks for coming back :)

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  • 3 weeks later...

Has anyone used the case Nautch Ltd and others v mortgagelink3.gif Express and another [2012] to challenge the appointment of receivers either in court or prior to it getting to court i.e. the bank dis-instructing the receivers prior to it getting to court?

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  • 3 months later...
Thanks for this post but to be honest its as clear as fog to me. Would someone kindly take a look at my paperwork to see where I stand. Thanks in advance.

 

Hi Stevlynd, if you need assistance you need to take the time to explain what your situation is and the problem you are trying to overcome. It's a bit much to expect anyone to just take on your paperwork without am idea of what the problem is and how the problem arose.

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Hi Stevlynd, if you need assistance you need to take the time to explain what your situation is and the problem you are trying to overcome. It's a bit much to expect anyone to just take on your paperwork without am idea of what the problem is and how the problem arose.

 

My problem is pretty much the same as the other posters on this thread & I have posted numerous times on this site regarding my predicament but unfortunately haven't actually had any real assistance. Hoping this time would be different. I think if you search my name on here the other threads should come up.

Thanks in advance.

 

Thanks in advance.

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  • 2 weeks later...

Hi Stevlynd, from what i can understand, your lender offered you a 5 year facility which they led you to believe would be renewed, but after the five years was up they had run into problems and were not in a position to renew and therefore made a demand for their money. As far as I can see the bank would be under no obligation to extend or renew the facility, and it would be your responsibility to ensure that you there was an extention in place or repay the monies outstanding by the end of the 5 year term. The fact the you did not miss a payment is not an issue, the facility had expired and the law says they are entitled to demand payment.

 

If you failed to make payment on demand at the end of the 5 year period, they would be entitled to appoint recievers according the the terms of the mortgage and the general law, so your only challenge would be on the basis that the appointment was not in accordance with the terms of the mortgage and the general law. To establish whether the appointment is within the terms of the mortgage you must look at the letter of appointment and compare it to the mortgage and facility aggreement. So for example where the terms of the mortgage and/or facility aggreement provide for the appointment of one or more receiver, but does not provide for them to be appointed to act jointly and severely, but the letter of appointment appoints two receiver to act jointly and severely the appointment can be declared void. In such a case the bank and receivers become liable for trespass and you may be able to claim demages.

 

Once you establish that there has been an invalid appointment, it is importantant that you take the right steps and challenge the appointment in the courts by bringing an application (prefferably in the High Court) for a declaration that the appointment is void.

 

Another protentential challenge is based on how the appointment document has been signed, which as I have stated previously must be signed by either:

 

  • Two authorised signatories
  • A director in the presence of a witness, who attests the signaturelink3.gif
  • By a person authorise to execute documents on behalf of the company under a power of attorneylink3.gif , in accordance the Power of Attorney Act 1971.

If it is not so signed then again the appointment may be declared void.

 

A Receiver(s) also has an obligation to act, he may not sit on his hands, if he sits on his hands and does nothing you can sue him for the loss of income that has arisen from his lack of action. i.e. the loss of rental income that you would have had had he marketed the property for rent. If the receiver informed the tenants to stop paying you rent, but then failed or delayed taking steps to collect rent themselves they will again be liable for any loss of rent that has arisen from their lack of action. If the property becomes vacant and the receivers takes no steps to either rent or sell the property again the receiver becomes liable for lost income.

 

If you can not get you head around what I have written, then I will be willing to have a look at the documents if they are available. These will be:

 

 

  • The letter or appointment
  • The facility aggreement
  • The deed of charge

I believe you will have to send these to the moderators who will then forward them to me.

 

I hope this is of some help to you.

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  • 1 month later...
  • 1 year later...

FAO aptb74

 

http://www.consumeractiongroup.co.uk/forum/showthread.php?345088&p=4960864#post4960864

 

Poster requires your advice.

 

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  • 1 month later...

I manage to pay the arrears balance and have done the following,

 

Asked the Lender you guested (Mortgage Express) via phone and letter sent recorded delivery to provided me documentation were I agreed to use their LR on my behalf, never seem to get through when I asked for this

 

Completed an N22 form asking the court allow me control of the property as there no arrears and remove any outstanding judgements, remind e LPA power of sell. Is there any additional wording or request I could add.

 

(question is there anything else I should request, while I wait for the lenders response?)

 

Savills have written to the tenant stating they well change the locks in 7 days if no contact is made as they assume the property is vacant.

 

They also mentioned the same to me in their letter.

 

I received no court papers

Edited by vizkij
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I'm not sure how I can help but firstly, your bank did not need to advise you that the LPA Receiver was to be appointed and once appointed, the receiver 'steps into your shoes' and becomes your agent and you become legally responsible for the receiver's actions.

 

There would be no court papers as neither the bank or receiver has to apply to court to take this action.

 

You say that you have paid off the arrears......I assume this was after the LPA Receiver was appointed? You also say that you have completed and N22 but I'm not sure why.....have you received correspondence to say that the bank has applied to court for repossession?

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I manage to pay the arrears balance and have done the following,

 

Asked the Lender you guested (Mortgage Express) via phone and letter sent recorded delivery to provided me documentation were I agreed to use their LR on my behalf, never seem to get through when I asked for this

 

Completed an N22 form asking the court allow me control of the property as there no arrears and remove any outstanding judgements, remind e LPA power of sell. Is there any additional wording or request I could add.

 

(question is there anything else I should request, while I wait for the lenders response?)

 

Savills have written to the tenant stating they well change the locks in 7 days if no contact is made as they assume the property is vacant.

 

They also mentioned the same to me in their letter.

 

I received no court papers

 

The Bank has applied in the past, I believe old application could still be used so to ensure this does not happen I applied to the court.

 

The Bank has not, told me they made an application, however they did mention that the route they would take.

 

Yes the arrears was paid after the LPA took procession.

 

Thank you

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Is the property tenanted? Have you sent a Subject Access Request to the bank and receivers? Have you had any communication at all from the bank? As I said, they don't have to advise you that they are about to appoint LPA receivers. What happened when the bank last threatened repossession? Did they actually apply to the court for repossession and how long ago was this?

 

Sorry to ask so many questions but I`m trying to get a picture of what has happened.

 

I assume you haven`t had any legal advice but if you do, you must be very careful to use a solicitor who is an expert in this subject as many don`t know this part of the law and will just take your money and get nowhere.

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No tenant in the property

 

I have sent a Subject request requesting asking were I've agreed to LPA Receivers to the bank not the Receivers, please advise what my letter should say to the Receivers

 

Repossessions was 2 years ago, but for a different balance, I'm currently in credit.

 

They since sent me a letter stating they are charging the locks in 5 days

Edited by vizkij
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As I explained before, neither the bank or receiver needs to inform you that the receivers are being appointed so there will not be any such letters. Do you have a copy of the LPA receivers letter of appointment? If so, does it state the the receivers have the power of sale?

 

The bank does not need to apply to court for repossission unless you yourself are living in the property. I'm not advising you to move into the property but all I'm saying is, that if you were living in the property, the bank would have to apply to court for repossession and the receivers wouldn't be able to change the locks. Another option is for you to apply to court for permission to sell the property yourself.

 

Has there been any correspondence between you and the bank since you paid up the arrears and since the receivers were appointed?

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As I explained before, neither the bank or receiver needs to inform you that the receivers are being appointed so there will not be any such letters. Do you have a copy of the LPA receivers letter of appointment? If so, does it state the the receivers have the power of sale?

 

The bank does not need to apply to court for repossission unless you yourself are living in the property. I'm not advising you to move into the property but all I'm saying is, that if you were living in the property, the bank would have to apply to court for repossession and the receivers wouldn't be able to change the locks. Another option is for you to apply to court for permission to sell the property yourself.

 

Has there been any correspondence between you and the bank since you paid up the arrears and since the receivers were appointed?

 

 

Yes, not much, they want a sell on the cheap

 

 

Yes I have a letter it states that the receivers well issue a sale

 

I been advise to write to the lender telling them to remove the LPA, as there no arrears if they fail to do this I well applied to the courts at cost to them

 

I also been advised to write to the receiver stating they are not to change the locks if they do I well report it to the police and they well be they be charged of the cost new locks

 

I have also been advise as you say apply to the court to allow me to sell. guessing no initial action from lender is needed for me to make an application.

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Is it a lawyer who is giving you advice? In my experience, if you write to the lender and tell them to remove the receiver, the bank will take no notice of you nor will the court as the bank is acting within it's powers. Also, in my experience, telling the receiver not to change the locks will not make any difference, they will still do it and what is more, the police will not want to know as the bank and receiver are doing nothing unlawful.

 

If you have a letter stating the receiver will be selling the property then you can go straight to court to ask for permission to sell the property yourself and if I were in your position, I would do that immediately or the property will be sold by the receiver very quickly and you will have no control over what happens. You are far better off selling it yourself as you will stop the receivers fees and costs being deducted. Do you think there is equity in the property? You should be able to find out if the property is already being marketed. In my case, the receivers had put properties in an auction and I applied to the court for an emergency hearing and applied, sucessfully, for an injunction to stop the sale. Do you know if the property is being marketed? If you look on all the online property sites and auctions in your area, you will propablybe able to find out. You need to act quickly.

 

Do you have a copy of the receivers appointment document?

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Thank you we'll make an application on Monday, for the receivers powers to be removed and for any sales to be stop, I don't think I have the receivers appointment documentation, what does it contain? I think I need to show I've contacted the bank to remove the receivers even if they ignore my request I think I have shown I've tried to communicate, I well be moving into the property writing receiver. The arrears balance was false, they added the current month as an arrears balance, and they did not show any over payments I made.

 

Is it possible for me to put an application to stop any salright even if they not put up for sale as yet, I just checked, I see nothing, I think they are getting clever.

 

Yes there a large amount of equity in the property.

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I am very concerned that your solicitor may not be fully conversant with this part of the law which would not be unusual as this is the case with many lawyers. I think if you are moving into the property that is a very good idea as the bank will then have to apply to court for possession and you will then be able to state your case and hopefully the court will give you time to sort things out.

 

If you have equity in the property you must do all you can to stop the receivers selling it as they will definitely sell it off cheap. Their only concern is to pay the bank and to make money for themselves.

 

Do you mind me asking which part of the country you are from?

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