Property Receivers: What are they and when are they appointed?

If you’re looking to buy property in the prime central London areas of Victoria, Chelsea or Mayfair, you might come across a home for sale that is in the hands of a receiver.

Sadly, as interest rates have risen over the past two years, and homeowners’ fixed rate mortgage deals have expired, more people have found meeting their mortgage payments difficult leading to an increase in property repossessions. According to the Evening Standard, the high cost of London homes means that is only likely to continue.  

As experienced central London estate agents, we know that many buyers are uncertain about the concept of purchasing a property that is in receivership. They have questions about whether the sale will go smoothly, if there’s anything to be aware of and what exactly receivership is. To explain we look at what happens when a receiver is appointed to a property and answer some frequently asked questions.  

What is a property receiver?  

If a homeowner fails to repay their mortgage, the lender may appoint a property receiver under the Law of Property Act (LPA) 1925. The receiver will take over the property and look for a buyer. In the case of a buy-to-let property with tenants, the receiver will take responsibility for collecting rental income to repay the debt.  

Property receivership is an alternative to repossession of the property by the lender. In the case of repossession, the lender would be responsible for selling the home or managing the tenancy. With property receivership, this responsibility is transferred to a third party.  

When is a property receiver appointed?  

Receivers are appointed if the home buyer fails to meet their mortgage payments. The legal process involves serving a notice demanding payment. If the repayment isn’t made, the lender can then appoint a receiver. In some cases, violation of the terms of the mortgage could allow the lender to appoint a receiver immediately.  

Must the lender prove insolvency first?  

No, repossession of a property or receivership are separate from insolvency and the lender does not need to prove insolvency for a property to be put in the hands of a receiver. 

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What can the property receiver do?  

Once a receiver has been appointed, their responsibilities include making the property secure and arranging any necessary insurance. They will develop a strategy for disposing of the property and collect any rental income, if there are tenants. They will also pursue any planning permission, new leases, tenancy agreements or other legal matters needed to improve the property’s resale value before arranging the sale. 

Should I buy a property from a receiver?  

If you have found a property that meets you needs but is in the hands of a receiver, there is no reason to discount the purchase on that basis. On the upside, the receiver is required to make the sale happen. So, unlike a private seller, they are unlikely to pull out because of a change of mind or circumstance – and may be less likely to hold out for the right offer. The sale will also have the advantage of being chain free.  

There are, however, a few things to bear in mind. The receiver is bound to get the best price for the property so the home may not be taken off the market until exchange. Also, as the receiver is not the registered owner, they won’t know the home’s full history – details of any boundary issues, for example.  

You can mitigate any problems arising from this by instructing a conveyancer with experience of properties in receivership, taking out indemnity insurance and having a full structural survey of the property.  

What happens during the receivership process?  

The steps of the receivership process usually involve: 

• Notifying the borrower of the receivership. 
• Obtaining a valuation of the property. 
• Inspecting and securing the property. 
• Liaising with estate agents over a sales strategy. 
• Contacting tenants and collecting rent, if a rental property. 
• Obtaining possession of the property, using a court order if necessary. 
• Putting the property on the market. 

Want to know more? Read our advice on how to sell super prime London property.

Concluding the receivership  

The receivership ends once the debt is returned to the mortgage lender. In the case of a property for sale, this is usually once completion has happened. 

If you’re looking at property in central London, talk to us about or selection of beautiful homes for sale. We can talk you through any issues that concern you including what happens when a receiver is appointed to a property. Contact us today to find out more.