A Law of Property Act fixed charge receiver is a single asset receiver appointed over a property, rather than a company. It is a means for a lender to "ring fence" an asset and its income within a company, over which they have a fixed charge or mortgage. The terms LPA and fixed charge come from the Law of Property Act 1925, under which we are appointed and which gives rights to act.  The right to appoint occurs at the time in which power of sale has arisen. They are then brought into sharp focus by terms within the fixed charge, such as the mortgage deed, which gives the receiver his power to act.

The powers to act are set out in the LPA, and in the mortgage deed. Once appointed the receiver is acting in the interests of, and as an agent of the borrower. But we are not acting as Estate Agents. Once an appointment has been made the borrower no longer has any rights to act; he cannot collect rents or issue valid receipts, he cannot sell or let the property and he has no rights in terms of the property management. He neither has the right to enter the building, nor to interfere in the management of the asset in any way.

The receiver, however, has the power to collect rents, enter into leases, and enter into contracts for sale or any other relevant contract pertaining to the management of the building. However, while appointed by the lender and acting for the bank, the receiver still owes a duty of care to the borrower and is treated in law as the borrower's representative.  The borrower remains the legal owner of the property and is responsible for all costs and liabilities, including empty rates.  This is the responsibility of neither the receiver nor the bank. An LPA receiver has a number of legal responsibilities, which we will elaborate on shortly.

The first thing you need to do is secure confirmation from a lawyer that an appointment is valid. Once validated, there are many attractive advantages to LPA Receivership, such as the ease in which an appointment can be made. The bank simply needs to advise the borrower of the breach and serve a formal demand for repayment of the debt. This demand gives rise to the power of sale and triggers the ability to appoint.

Best practice dictates that 24 hours later the bank can issue appointment letters to the receivers. This is subject to having secured clearance from their lawyers for the correct legal authority to appoint. They must sign, date and return acceptance of that appointment within 24 hours, or one working day. This is statutory for Limited Companies (not individuals) and good practice for all appointments. If the borrower is a UK Limited UK Company, a form (LQ01) needs to be sent to Companies House in order to register the appointment. The cost is nominal and the appointment is immediate. There is no need to apply through the courts. Legally, the client does not have to give the property back to the borrower. This is down to the politics of the situation and whether or not the lender is prepared to continue the relationship with their client.

There are many reasons why you should be prepared to appoint an LPA Fixed Charge Receiver. The appointment itself is often enough to provoke a borrower to resolve their financial debt. Many times have been appointed for arrears that are longstanding that quickly get repaid when borrowers face losing the ability to collect rent

.Borrowers are not always honest.  Sometimes they use the rent to pay a creditor who is shouting louder than the others. By appointing a receiver we can investigate the property and provide clarity of information, so we can prepare a full report on all the issues that may impact the bank's ability to get the best exit.  It will also help us to determine whether there are issues that impact security.

It is very important to remember that one can always dis-instruct. The appointment of a receiver is not like repossession. Once a client is satisfied that everything is back in order a lender can hand control back to the borrower at their discretion and matters can proceed as they previously existed.

Timing is crucial. When a property gets to a recovery team the relationship has usually broken down.  We find that a borrower will do their utmost to stop a lender from taking action. It is important that an appointment be made as soon as possible, as for example, banks lose money when delays result in lost planning consents.

Appointment of an LPA need not be an aggressive move if handled carefully. We are happy to have a pre appointment meeting with the lender and the borrower where we explain that if he can get the loan working again, there is every chance that he will get the building back. We simply explain that we will manage the building so that the borrower can focus on getting his finance issues resolved.

Timing is also very important when considering collecting rents. Sadly some borrowers will collect rent without passing it on to the lender. It is not unknown for borrowers to collect rent in advance (by offering tempting discounts to tenants for paying 6-12 months in advance).  This compounds the problem once an LPA is appointed.

What are the advantages of appointing LPA Fixed Charge Receivers?LPA fixed charge receiverships are used because of the ease and speed in which the lender can get control of the building and the situation, while still maintaining a comfortable distance. Repossession needs a lender to go through the courts; it is an action in which a lender has taken the legal ownership away from the borrower and has to bear all liabilities.

Receivership also allows you to investigate fully what is going on with the building and to uncover whether the borrower has been entirely honest with you. Additionally, if you find something burdensome, you have the option to walk away and leave the borrower with the liabilities. An example of such a situation is where there is contamination.

LPA fixed charge receiverships are used because of the ease and speed in which the lender can get control of the building and the situation, while still maintaining a comfortable distance. Repossession needs a lender to go through the courts; it is an action in which a lender has taken the legal ownership away from the borrower and has to bear all liabilities.

Receivership also allows you to investigate fully what is going on with the building and to uncover whether the borrower has been entirely honest with you. Additionally, if you find something burdensome, you have the option to walk away and leave the borrower with the liabilities. An example of such a situation is where there is contamination.

There are no prescribed responsibilities, but the receiver acts as an agent for the borrower and as such should act in good faith at all times. He is expected to act to protect the asset and to achieve the best price upon realisation of that asset subject to prevailing circumstances. He does not actually have to take instruction from the borrower or the bank and can act on his own volition. However, a receiver who has integrity will want to ensure that the lenders and borrowers interests are looked after and will work together with the lender. Bear in mind that a receiver is not appointed in the way that an estate agent is; he has liabilities and responsibilities.  As such, he should be proactive in advising the bank always remembering that he is charged with securing best price for the borrower within approved guidelines.

A receivers' other legal responsibilities including maintaining adequate and appropriate insurance, suitable gas safety checks for residential property, and certificates that are in place for health and safety issues. The receiver is held personally responsible and liable so he must act to deal with these matters irrespective of conditions, especially where health and safety matters are concerned.

We also are responsible to ensure that the appointment, when appropriate, is registered at Companies House and returns are made at the correct times. We have to collect VAT on rents and disposals as appropriate and make returns to HMRC, though we cannot make VAT reclaims.

We also keep concise and transparent accounts so we can demonstrate expenses and income if challenged by the lender or the borrower.

• With LPA Receivership you can always dis-instruct, which makes it useful for short or long periods of time, while we check the true financial position of the building.

• Waiting too long gives unscrupulous parties time to extract money and cover their tracks. We have seen many parties go into fake leases or offer tenants a discount if they pay 6 or 12 months' rent up front prior to our appointment.

• A receiver can resolve issues that you cannot; he can enter into contracts and leases.

• If a borrower is selling but not being realistic in his asking terms, a receiver can step in, agree the sale and complete the contract for you.

Chart property charges most fees at the end and subtracts them from the sale, so that there are no major cash flow issues. For a more comprehensive guide to LPA Fixed Charge Receivership please contact NARA.