Fixed Charge Receiver
The Drawbacks of a LPA Receiver
There are two drawbacks to relying on the Law of Property Act 1925:-
1. The mortgagees power to appoint a receiver is restricted
2. The powers of receiver once appointed are limited to collecting rents.
Given that a Lender will want to be repaid as quickly as possible, and usually the best way to do that is by selling the property, not to have the power to sell the property can be a major disadvantage.
What About a Fixed Charge Receiver?
Modern mortgage deeds usually give a Receiver lots of additional powers to take possession of the property and do whatever is necessary in order to ensure that the return to the Lender is maximised.
The powers can even be extended to allow the Receiver to borrow money against the property to complete building/development works and also to allow the Receiver to continue to trade the borrower's business. However continuing to trade the business can prove difficult in practice as the Receiver only has access to the charged assets and would be a trespasser if, for example, he used stock not covered by his appointors charges.
It is therefore often better to appoint a Receiver under the terms of the fixed charge, as opposed to the Law of Property Act 1925, assuming of course that the mortgage deed has been properly drafted and has extended the powers of the Receiver.
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