Angry landlords are accusing buy to let lenders of taking over their properties with the help of a 100 year old law and LPA receivers rather than work with them when they face mortgage problems.
Many landlords say their lenders have grabbed their buy to lets under the Law of Property Act (LPA) – a piece of legislation from the 1920s.
Landlord Joan Keeley claims her lender used the LPA law to snatch a portfolio of homes worth £2 million.
Now, she owes the bank nearly £400,000 and has no right of appeal against the receivership.
The 1925 law lets banks and building societies appoint a receiver to manage a rental property if a borrower has breached the terms of their mortgage.
They collect rents, look after repairs and manage tenants.
But landlords are complaining that they charge huge fees that are added to the borrower’s debt.
Another issue between landlords and receivers is an LPA receiver is unregulated. Although trade bodies the Royal Institution of Chartered Surveyors (RICS) and the Insolvency Practitioners Association (IPA) set an exam and code of practice, supervision is loose.
LPA receivers do not have to take the exam but do have to hold an insolvency licence.
LPA rules allow no representation or right of appeal by a landlord at a receivership hearing.
Keeley’s lender appointed an LPA receiver after she withheld mortgage payments in a dispute about the balance of her account.
She says she received a letter demanding £2 million in loan repayments and then, when expecting to go to court, was notified a receiver had been appointed.
The Insolvency Service is an agency of the Department for Business Innovation and Skills (BIS).
Statistics on LPA receiverships are hard to come by as they are grouped with corporate insolvencies.
Although the latest BIS statistics show corporate insolvencies are falling quarter on quarter, it’s not possible to tell how many are LPA receiverships.
In Q3 2013, the number of corporate insolvencies was 253, falling to 236 in Q$ and 205 in Q1 2014.©LandlordZONE® – legal content applies primarily to England and is not a definitive statement of the law, always seek professional advice.