CML news & views

Appointing a receiver may be a better option for a lender than seeking possession when a borrower stops paying his mortgage. But what should a firm take into account when deciding how to handle a case of arrears?

The use of a Law of Property Act (LPA) receiver is much more common in the buy-to-let market, when a lender will expect the property to be occupied by a tenant. But there may be instances when an LPA receiver could be used in dealing with arrears on a residential mortgage, depending on the lender’s terms and conditions.

The appointment of a receiver is a useful tool where a property is let, and the tenancy would bind the lender if it took possession. Receivership is also useful where security has complications – a receiver can resolve these issues and bring specialist knowledge to the situation. 

But if a receiver is appointed when there is a buy-to-let mortgage, the lender should ensure the receiver complies with the obligations of a landlord under the tenancy agreement. The property should be managed properly, and all tenants and occupiers treated in a professional manner.

Our guidance suggests that the lender should write to the tenant confirming the appointment and giving contact details for the receiver, explaining what he does and what his powers are, and that the tenant should seek independent advice if necessary.

In deciding whether it is appropriate to appoint a receiver, the lender will also consider the interests of the borrower, and give written notice of the appointment.

On 30 June, we are holding a seminar in London, in conjunction with Savills, to explain for lenders’ staff the what, when, why and how of appointing a Law of Property Act receiver. The seminar is aimed at lenders’ accounts managers and legal, arrears and collections staff.

The event will help ensure that staff have a clear understanding of the legal issues affecting the appointment of a receiver. It will explain how the process works, what it costs, other options for dealing with property, and how to manage relationships with the borrower and the tenant. A variety of speakers will address the seminar, including a representative of the Association of Property and Fixed Charge Receivers.