The importance of fixed charge receivers

Fixed charge receivers are a viable way of rectifying a situation when the owner of real estate or valuable assets is deemed insolvent or on the verge of insolvency.


A receiver can be appointed by a lender with an interest in the real property or the other specified assets when the owner is in financial difficulty.


Generally speaking, they can be appointed quickly and have broad powers to realise assets and collect rent.


Unlike other insolvency appointments, a fixed charge receiver does not need to be a licensed insolvency practitioner, although most will be registered.


In instances of insolvency, real property, equipment and shares are most commonly secured with the use of a fixed charge.


A lender can start the process by serving a letter of demand to the borrower, often in cases where rent or other monetary payments remain unpaid.


In these instances, the borrower must immediately repay what is owed, although in the case of fixed-term contracts, demands can only be made following the end of that particular term.


If debts are not paid following a demand, a receiver can then be appointed to take charge of the assets and ensure the money is recuperated.


Their powers will depend on the documents and agreements made when the receiver is appointed but under the Law of Property Act 1925, they have limited powers to collect rent that is owed.


A receiver’s principle legal duties are to the lender who appointed them, but they should act in the best interests of all parties wherever possible.


As a result they require due diligence in the sales process, while they should act in good faith and take reasonable precautions throughout.


Appointing a receiver is a fairly simple procedure that enables the securing of debts on real property and offers lenders the opportunities to get back what they are owed.


They offer an opportunity to ensure those that lend in good faith do not lose out as a result of their lending and good will.


By Phil Smith


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