Receivers in the Sale of Property Solicitors

Receivers play an important role in the enforcement of secured lending. When a borrower defaults on their obligations under a loan agreement, a lender may appoint a receiver to take control of the secured property and realise its value. The most common appointment is of a fixed charge receiver, who is empowered to manage and sell the property in order to recover the sums owed to the lender.
For lenders, receivership can provide a swift and efficient way of recovering debts. For borrowers and stakeholders, the appointment of a receiver can be complex and disruptive. It is therefore essential to understand the receiver’s powers, duties and obligations during the sale process.

Appointment of Receivers

A receiver is usually appointed under the terms of a legal charge or mortgage. Once appointed, the receiver acts as the agent of the borrower, but in practice exercises wide powers to:

  • Take possession of the property.
  • Collect rents and manage income.
  • Instruct agents, surveyors and solicitors.
  • Sell the property in order to repay the secured debt.

The Receiver’s Duties

Although receivers are appointed to act in the lender’s interests, they owe certain duties to the borrower, including:

  • A duty to act in good faith.
  • A duty to take reasonable care to obtain the best price reasonably obtainable for the property on sale.
  • A duty to manage the property properly while it is under their control.

Sale of Property by Receivers

The sale of property by a receiver follows many of the same procedures as an ordinary sale, but with some key differences:
The receiver will usually market the property and instruct solicitors on behalf of the borrower.
Purchasers must understand that the receiver sells the property without giving the same warranties and assurances as an ordinary seller.
Title investigations and due diligence are therefore particularly important for buyers.

Why Legal Advice Matters

Receivership sales raise specific legal issues for lenders, borrowers and buyers alike. Lenders must ensure the appointment of the receiver is valid. Borrowers may wish to review whether the receiver has complied with their duties. Purchasers must take care with title, disclosure and potential liabilities attached to the property.
For any questions you may have, our commercial property solicitor James Williamson can help you.