We are starting to see a trend of clients coming to us in desperation because either receivers have been appointed or the threat of receivership is hanging over them. Some of the smaller financial institutions appear to be adopting a bullish (some might even go so far as to say a brutish) approach to appointing receivers.
You may have fallen behind on your mortgage payments and been talking to the lender about the arrears and how they can be dealt with, only to suddenly find that receivers have been appointed. The consequences of appointing receivers can be far reaching not only because it impacts on your credit rating but it may also have a knock on effect on other loans or credit cards or facilities you may have, particularly if you are a commercial borrower.
Moreover, the receivers fees and expenses can be added to the amount the borrower owes and these, as we have seen, can be substantial reducing any equity in the property and hampering any hopes you may have to refinance.
The apparent rush to appoint receivers is clearly a sign of the times, even though interest rates now appear to be coming down. It is important to remember that a lender does not have an unfettered right to appoint a fixed charge receiver and can only do so if there is a power to do so under the terms of a fixed charge security and once appointed, the receiver’s powers flow from the mortgage deed containing the fixed charge.
Whilst the appointment of receivers may appear on the face of it to be straightforward, this was not so in a recent case we have dealt with. The fixed charge did not enable the lender to appoint a receiver for an event of default. The client was clearly in arrears and therefore in default under the loan agreement, but that default, or any of the other specified events of default did not apply in this case, so the lender did not have a legal right to appoint a fixed charge receiver.
The fixed charge only enabled the lender to appoint a receiver on the occurrence of the specified circumstances described in the terms of the fixed charge and these were largely insolvency related events e.g. bankruptcy.
There are clearly lots of technical issues here but the starting point is to ask if the appointment of a receiver is valid and we can advise you on this. Ultimately though our experience in dealing with these type of cases clearly shows the importance of being very pro-active and demonstrating to the lender that you are really trying to deal with any arrears by putting forward sensible proposals and importantly documenting and following up on your proposals.
If you are concerned about the appointment of a receiver or any other insolvency related issues please do not hesitate to contact us.
