Insolvency

Question 1

What is Insolvency

Answer 1

when a borrower is unable to meet their financial obligations, leading to the appointment of a receiver to sell the property to recover the outstanding debt.

Question 2

What is the primary purpose of a Deed of Appointment in insolvency proceedings

Answer 2

The primary purpose of a Deed of Appointment is to formally appoint a receiver in managing and recovering a debt secured against a property. It outlines the scope of the receiver’s authority and responsibilities.

Question 3

List some common contents that you would typically find in a Deed of Appointment

Answer 3

Contents typically found in a Deed of Appointment include the names of the parties involved, a description of the property, the appointment’s effective date, the receiver’s powers and duties, and provisions for remuneration and indemnity.

Question 4

Explain the significance of the Law of Property Act (1925) in the context of receivership.

Answer 4

The Law of Property Act (1925) is a significant piece of legislation in the context of receivership. It provides receivers with legal powers to take possession of, manage, and sell properties on behalf of lenders or charge holders, helping to secure repayment of debts.

Question 5

What powers does the Law of Property Act (1925) grant to receivers?

Answer 5

The Law of Property Act (1925) grants receivers the power to take possession of a property, collect rents and income, sell the property, and execute documents necessary for the sale, among other powers. These powers are essential for the efficient recovery of debts secured by property.

Question 6

What responsibilities do LPA (Law of Property Act) Receivers have in relation to both the lender and the borrower?

Answer 6

LPA Receivers have a duty of care to both the lender and the borrower. This means they must act impartially, responsibly, and in the best interests of both parties while carrying out their duties. They must balance the lender’s goal of debt recovery with the borrower’s rights and interests.

Question 7

What steps did you take to formally accept the appointment of the Receivers for the industrial unit in Berkshire?

Answer 7

To formally accept the appointment of Receivers, I ensured that the relevant documentation was prepared, signed, and delivered to the Receivers. This included the Deed of Appointment, which outlined their authority and responsibilities. I also communicated these acceptances to the Lender and the Receiver’s solicitors.

Question 8

Describe the security measures you took for the vacant property in Berkshire.

Answer 8

To address the vacancy of the property in Berkshire, I arranged for the locks to be changed and an alarm to be installed. These security measures helped safeguard the property from unauthorized access and potential damage during the period it remained vacant.

Question 9

What factors led you to recommend selling the industrial unit in Berkshire via auction?

Answer 9

After producing a strategy report for the industrial unit in Berkshire, I recommended selling it via auction. This method was chosen because the unit was vacant and in poor condition and therefore would appeal to cash buyers. Selling via auction ensures that the property is marketed to the widest possible audience and therefore was deemed the most appropriate to achieve the best price for the property.

Question 10

In the case of the leasehold flat in London, what did you do to establish its market value?

Answer 10

To establish the market value of the leasehold flat in London, I engaged with local agents and Allsops residential auction team. Based on my conversations I established that there were good levels of demand for one bedroom flats in the area however the property was situated on a busy main road with no outside space which may deter owner occupiers. Therefore we applied a 10% discount to reflect this.

Question 11

Explain the process you followed when the Borrower in London wanted to repay the debt in full.

Answer 11

When the Borrower in London expressed their intent to repay the debt in full, I promptly informed the Lender and provided the Borrower with a redemption statement. This ensured transparency and facilitated the Borrower’s repayment process.

Question 12

What actions did you take to cease the Receivers’ involvement in the London case after the Borrower refinanced?

Answer 12

After the Borrower refinanced the London property, I arranged for the Receivers to cease their actions. This included notifying all relevant parties and issuing a final outcome statement to discontinue the appointment.

Question 13

What is a Validity report?

Answer 13

A validity report is a legal document that outlines the security under which we were appointed fixed charge receivers over the Property and the validity of that appointment. Included in the document is the parties, the charge, the property, Insolvency check, appointment, any other interests, borrower contact details and the powers of the receivers.

Question 14

What are the different types of Debt recovery?

Answer 14

• Company voluntary arrangements (CVAs)
• Administration
• Winding up of the company or compulsory liquidation
• Receivership (or receivership)
• Voluntary liquidation

Question 15

What is administration?

Answer 15

• A company is insolvent if the value of its assets is less than its liabilities
• Administrators are appointed over a company whereas receivers are appointed over a fixed charge asset.

Question 16

What is liquidation?

Answer 16

Voluntary Liquidation occurs when a business or individual voluntarily decides to liquidate their assets. It may be the result of various reasons, including the desire to close a business, retire, or resolve financial difficulties.

Involuntary Liquidation typically occurs when an entity is unable to meet its financial obligations, and creditors or a court intervene to liquidate its assets to repay outstanding debts. This process is often initiated by creditors who have not been paid, and it is overseen by a court-appointed trustee.

Question 17

What is bankruptcy?

Answer 17

Individual bankruptcy, often referred to as personal bankruptcy, is a legal process by which an individual who is overwhelmed by debt seeks financial relief and a fresh start by having some or all of their debts discharged (eliminated) or restructured.

Question 18

What is included in a Deed of Appointment?

Answer 18

• Date
• Lender details
• Receivers names
• Property Address
• Title no.
• Borrower details
• Charge details
• Terms of charge

Question 19

Talk me through the process of accepting a receivership appointment?

Answer 19

• Carried out a conflict check
• 24 hours to accept an appointment - arranged for the Receivers to formally accept the appointment and sent written acceptances to the Lender and Receiver’s solicitors
• Added to block insurance policy
• Check validity of appointment & whether first/second charge (check with solicitors and look at charge document)
• Instruct managing agents
• If the borrower is a company need to inform companies house within 7 days of acceptance (RM01 form) that they have been appointed over an asset which is registered to a company
• Contact HMRC to check VAT position of property
• Contact borrower
• Contact occupiers – no response then send an investigator
• Contact tenants – inform with bank details & what’s happening

Question 20

What is included in an acceptance Letter?

Answer 20

• Date and time of appointment
• Date and time of acceptance
• Receivers names
• Property Address

Question 21

How did you inspect a property once appointed?

Answer 21

• Check title documentation (walk the boundary)
• Check occupancy
• Is it safe, secure anything that would affect insurance
• Any health and safety implications
• Surrounding area
• For sale/let signs

Question 22

How do you cease to Act?

Answer 22

• Cancel insurance/remove from block policy
• Remove property management
• Inform solicitors if there is a redemption
• Cease to Act Letters to solicitors, lender and borrower
• Review final invoices
• RM02 letter to companies house (if borrower is a company) – Receivers have ceased to act and no longer appointed over asset

Question 23

What factors led you to conclude that there was no reason to delay the sale of the Smethwick property?

Answer 23

There was no reason to delay the sale of the Smethwick property because the debt could be fully recovered by selling on occupied on terms unknown, and receivers do not have a duty to improve the property.

Question 24

Explain why you recommended selling the Smethwick property via auction and the advantages of this approach.

Answer 24

I recommended selling the Smethwick property via auction because it was the most appropriate method considering the time constraints involved and the fact that receivers have no duty to improve the property. Auctions offer a streamlined and efficient way to achieve a sale.

Question 25

In what circumstances might a property be more attractive to investors rather than other types of buyers?

Answer 25

A property may be more attractive to investors rather than other types of buyers when it offers potential for rental income, capital appreciation, or redevelopment. Investors often seek properties with income-generating potential or opportunities for value enhancement.

Question 26

What factors might influence the choice between selling a property subject to unknown occupation or formalizing an existing occupation

Answer 26

In the case of receivership, I would consider whether the debt can be recovered in full by selling occupied on terms unknown. If the debt cannot be recovered, then formalising the occupation would be appropriate to reduce uncertainty and attract buyers.

I would also take in to consideration who would be purchasing the property. An owner occupier may be less inclined to purchase a property occupied on terms unknown.

Question 27

How can the absence of lease documentation affect the sale of a property?

Answer 27

The absence of lease documentation can affect the sale of a property by introducing uncertainty about the rights and obligations of the occupant. This uncertainty may deter potential buyers, particularly those seeking clear and well-defined terms of occupation.

Question 28

How can the poor condition of a property impact its insurance policy and coverage?

Answer 28

The poor condition of a property can impact its insurance policy and coverage by potentially leading to higher premiums, coverage limitations, or the need for specific insurance riders. It is crucial to inform insurers about the property’s condition to ensure proper coverage.

Question 29

What steps did you take when the Borrower expressed an intent to repay a debt in full?

Answer 29

When a Borrower expresses an intent to repay a debt in full, it is essential to facilitate the repayment process promptly. This involves providing the Borrower with a redemption statement that outlines the total amount due and the process for repayment.

Question 30

What is included in a redemption statement?

Question 31

What is the difference between a lease and a license

Answer 31

a lease is a legal agreement that
- grants exclusive possession
- involves a specific duration
- tenant has more extensive rights

A license
- is limited permission to use someone else’s property without exclusive possession.
- licensor (property owner) can terminate the license at any time, often without cause.
- licence is temporary or for specific purposes such as car park space / storage.