REAL ESTATE | Acquiring a property from an LPA receiver – what are the risks?
2. No replies to enquiries
The receiver will have no personal knowledge of the property and will therefore provide no replies to enquiries and will not give any representations or warranties as to any matters.
Again there are a few ways to help bridge this gap and mitigate this risk including:
- carrying out a full suite of searches.Of particular importance will be a local authority search, environmental search and highways search;
- instructing a surveyor to undertake a building survey;
- inspecting the property and trying to speak to any existing managing agents and occupiers; and
- consider taking out an all risks indemnity insurance policy. Such a policy can cover a wide range of issues including unknown boundary disputes and the property being altered without the correct planning consents.
3. The validity of the appointment of the receiver
There are a number of procedural steps that need to be followed by a lender to appoint an LPA receiver. If these steps are not followed strictly there is a risk the receiver’s appointment maybe invalid and the sale contract could therefore be void.
We would therefore recommend that a buyer instructs an insolvency lawyer at an early stage to check the receiver’s appointment is valid. If the buyer is acquiring the property with debt funding, its lender may expect certain statements and/or confirmations to be provided in the Certificate of Title with regard to the validity of the receiver’s appointment. Also, in most cases in order to register a transfer executed by a receiver, the Land Registry will require a certified copy of the receiver’s appointment documents and certain confirmations from the receiver.
4. Receiver has no personal liability under the sale contract
A receiver will not accept any personal liability under a sale contract. A simultaneous exchange and completion is therefore advisable rather than having a gap between exchange and completion.
In addition, it’s important that the receiver’s appointment documents/confirmations required by the Land Registry are provided before exchange or the receiver’s solicitors provide an undertaking to provide these on completion. Ideally you should also push for an undertaking from the receiver’s solicitors to use reasonable endeavours to assist with any requisitions that might be raised by the Land Registry about the receiver’s appointment.