Financial Remedies – The rise and rise of the LPA Receiver 

1. Anecdotally practitioners are noting a surge in the instruction of LPA Receivers. Lenders are increasingly appointing LPA Receivers instead of repossessing Buy-to-let properties. There are a couple of reasons for this phenomenon, Receivership is fast, cheap, efficient and there is no oversight of the court. Receivership provides a lender almost unfettered power. This article intends to provide a snapshot of the law and what to do when one encounters an LPA Receiver in financial remedy proceedings. 

When will you encounter an LPA Receiver?

2. In Financial Remedy proceedings parties often own investment properties – these properties are usually held on Buy to Let mortgages – the LPA Receiver’s instruction predominantly arise in these circumstances. A property may be tenanted but a party may struggle to pay the mortgage due to various reasons, it could be a tenant’s non-payment of rent, the parties own financial difficulties or simple spite. Whatever the reason behind non-payment – the consequence is almost always negative for both parties as the Receiver acts singularly in the interests of the lender. 

What is an LPA Receiver?

3. A LPA Receiver is a colloquial reference to the Law of Property Act 1925 Receiver. The Receiver is usually a professional appointed by a lender to manage or even sell a property when a borrower defaults on their mortgage. 

Who can act as an LPA Receiver?

4. The Law of Property Act 1925 does not specify a profession or qualifications for a Receiver. In theory it can literally be anyone appointed by the lender. Most if not all Receivers are insolvency practitioners or surveyors. 

When will an LPA Receiver be appointed?

5. The appointment of the LPA Receiver is determined by the mortgage agreement; the key requirement is that the lender must have the right to exercise the power of sale under a mortgage. This happens primarily due to the borrower’s default on the loan payments or by breaching other terms of the mortgage agreement for example residing in a Buy to Let property against the terms of the mortgage agreement. 

What is the procedure the lender must follow to appoint a Receiver?

6. Again, the procedure will largely be dictated in the mortgage agreement, in most cases, the lender is required to serve a written notice demanding payment within a specified timeframe, if the borrower then fails to make the payment in accordance with the notice then a Receiver can be appointed. 

What can a Receiver do?

7. Well, the Receiver technically becomes the owner/borrower’s “agent”, this is a legal artifice because the Receiver largely ignores the borrower/owner and will only act in the lender’s best interests. The Receiver can do anything the owner can do – collect rent, renovate, change the locks, manage the tenants even sell the property without a court order. Receivership is an extremely powerful tool. 

Will the Receiver change the locks?

8. If the property is vacant – the Receiver will almost certainly change the locks immediately. The Receiver will also assume the property is empty if the tenant does not contact them and they will proceed to change the locks. If the property is tenanted the Receiver will attempt to obtain as much information from the tenants as possible, the Receiver may retain the tenants to clear the outstanding arrears – however in practice most Receiver’s opt to sell property to clear the arrears and redeem the mortgage – this is the quickest possible way for them to clear the arrears and outstanding mortgage. 

Will the Receiver evict the tenants?

9. The Receiver has the power to evict the tenants – they tend to exercise this power if the tenant does not cooperate or the property is rented at below market value. Sometimes it is only possible to fulfil the lender’s financial needs by selling the property. Receivers have long been criticised for utilising section 21 [no fault evictions] to evict innocent tenants who have been implicated in their landlord’s arrears and breach of the mortgage contract. Only time will tell whether the Renter’s Reform Act will have an impact on Receiver behaviour. 

How will the instruction of a Receiver affect the parties in financial remedy proceedings?

10. The Receiver has the power to sell the property – and they use this power mercilessly. The Receiver’s loyalty is only to the lender – in short the Receiver will sell the property for a sum they deem is fit to satisfy the lender and recoup their own fees. The impact of this is that the borrower does not realise the full value of the property and will invariably not achieve the full market value of the property. Receivers often opt to sell properties quickly – and they will list the property at a local auction house. The net outcome is that the parties will lose money – there will be less available for the matrimonial pot. 

What can I do to stop the Receiver being instructed?

11. If a client is struggling to pay the mortgage on their investment/BTL property, I advise clients to contact their lender and negotiate immediately to prevent an instruction. Being transparent with a lender and explaining clearly what one can realistically pay will go a long way to assure the lender – permission can also be sought to disclose copies of court orders to the lender if the sale of the portfolio is on the horizon. The borrower will be expected to complete an income and expenditure form and send bank statements to the lender – so be prepared to be fully transparent. 

12. If the lender rejects the borrower’s payment proposal there one final manoeuvre – this is only open to litigants who hold their investment properties through a limited company. If the property is held by a limited company, then it is possible to seek administration of the company – this will buy some time to consider re-financing. Once in administration a moratorium is put in place – this prevents creditors taking legal action against the company – this includes the appointment of a receiver. By entering administration, a company gains a period of time restructure and a breathing space to explore alternative funding options. 

What can I do if the Receiver has already been instructed?

13. If the Receiver has already been instructed the options are stark. The first option is to redeem the mortgage in its entirety. Most people cannot afford to do so. It is important to note that once a property is in receivership it is not possible to obtain a second mortgage. It may be possible to obtain alternative funding, but any debt secured against the property is impermissible. 

14. The second option is to persuade the lender to revoke a Receivership– it is very unlikely the lender will revoke the Receiver – there have been rare circumstances where a plea/application to revoke has been accepted by a lender – this is usually on the basis that all arrears are paid immediately and all the Receiver’s fees are paid and a significant sum is placed on account. It is worth seeking advice from a suitably qualified insolvency professional before approaching the lender with a proposal. 

15. It is important to note that once a Receiver is instructed the owner/borrower is no longer permitted to sell the property themselves – or suggest a price for the sale. The owner/borrower invariably loses as the Receiver’s primary duty is to the appointing creditor and their focus is only on recovering the debt. 

Conclusion: 

When a lender threatens to appoint a Receiver – advise clients to take heed. Urge the client to pay the mortgage and not ignore the problem. Failing to acknowledge and pay the arrears will cause catastrophic financial consequences – especially if there is a larger property portfolio.

 

 

Aysha Miah 

33 BR 

30 June 2025