(Amended October 2012)
The new Rules, The Insolvency (Amendment) Rules 2010, came into force on 6 April 2010 and apply to all cases where the date of presentation of the petition was on or after 6 April 2010 (unless in a company case there was a voluntary winding up resolution or an administration prior to that date). For these cases this Case Help Manual part applies.
For winding up and bankruptcy cases where the petition was presented before 6 April 2010 (or in company cases where there was a voluntary winding up resolution or administration before 6 April 2010) the ‘old’ version of the rules will continue to apply, and the previous version of this Case Help Manual (CHM) part (Disclaimers – September 2008 ) may be followed. To view this CHM part click HERE.
2. What is a disclaimer?
A disclaimer is a formal notice on a prescribed form issued by a liquidator or trustee in respect of ’onerous’ property. It has the effect of removing from the liquidator or trustee all responsibility for the property disclaimed and discharges all personal liability in respect of it.
When acting as liquidator or trustee the official receiver should disclaim onerous property as soon as possible unless there is doubt as to whether there is any equity or realisable value. For example, it may be possible to disclaim in a company case where there is a commercial property, although it will be necessary to ascertain that a lease is of no value before issuing a disclaimer. In practice, most disclaimers issued in bankruptcies are in respect of domestic tenancies, but a disclaimer may be used against a variety of onerous property that cannot be disposed of by any other means.
A disclaimer can be issued at any time in the proceedings once the official receiver is liquidator or trustee.
3. What does ‘onerous property’ mean?
Careful regard must be made to the definition of onerous property. The Insolvency Act 1986 defines onerous property as:
Details must be obtained by the examiner, either at interview or on inspection, of any property which may warrant a disclaimer. These details must be sufficient to clearly identify the property. In general this will involve obtaining details of:
Details must also be obtained of all tenancies and leases in which the insolvent has had an interest.
For more detailed guidance on this and more complex matters such as the disclaimer of freehold property, fixtures and tenant rights etc. see Technical Manual (TM) Chapter 34 – Disclaimer.
4. Who can issue a disclaimer?
The official receiver can issue a disclaimer only when he or she is liquidator or trustee of the estate and will only tend to do so where he or she is likely to remain so, i.e. there is no likelihood of an Insolvency Practitioner (IP) being appointed. Where an IP is appointed, all relevant documents regarding possible disclaimers should be provided in the handover papers and the IP’s attention drawn to them (see also paragraph 14).
Where the official receiver is liquidator or trustee the power to disclaim is extended to any assistant official receiver appointed as a deputy official receiver to that official receiver. It is likely that an assistant official receiver in a standard official receiver’s office will have been appointed as a deputy but, where there is doubt, reference should be made to the relevant certificate of appointment provided by the Secretary of State.
5. Notice of Disclaimer
The notice of disclaimer form NODIS ‘Notice of disclaimer’, ISCIS ‘Docs’ tab should be prepared regarding the property in question, including a description of the property detailed enough to leave no doubt as to the identity of the property to be disclaimed, including, where appropriate, the nature of interest.
Where the insolvent is tenant of only part of a premises, care must be taken that the disclaimer only refers to the part of which the insolvent is tenant (TM 34.7). Where the disclaimer relates to the insolvent’s interest in land or buildings the nature of the interest e.g. freehold or leasehold must be stated. If the property is registered with the Land Registry the title number needs to be noted.
Part 1 of the form should then be signed by an official receiver or deputy official receiver.
6. To whom should the notice of disclaimer be sent?
For the disclaimer to become effective, any person, including the bankrupt, having an interest in the property must be notified that the property has been disclaimed. There is no need to serve notice on the company in a winding up, since the official receiver (as liquidator and the company’s representative) would effectively be serving him or herself.
Make sufficient photocopies of the form NODIS for each interested party to be sent a copy. Enter the details of the interested party to whom the form NODIS copy is to be sent in Part 2 of the form together with the date that the disclaimer was signed. Notice is served by sending each person a copy of the notice of disclaimer, under cover of form DISENC, ‘Disclaimer - Letter serving’ (ISCIS ‘Docs’ tab) within 7 business days of the notice being signed by the official receiver or deputy official receiver. Interested parties will include the bankrupt, other tenants, the landlord and guarantors etc.
The rules state that the official receiver must keep detailed records of the persons to whom the disclaimer has been issued. These details must include each person’s name, address, their interest in the disclaimed property and the date the notice was sent or given to them. In order to comply with the rules it is important to keep copies of all DISENC forms issued on the official receiver’s file.
7. What if the disclaimer relates to a dwelling-house?
When the disclaimer relates to a dwelling house, all persons who have, or may have a right to occupy must be sent a copy of the notice. The bankrupt should be asked to identify in writing all occupants and persons with a legal right to occupy. This includes any spouse, partner, civil partner, estranged spouse, estranged civil partner and any other occupants over the age of 18. Notice to minors, children under the age of 18, is effected by serving notice on the minor's parent or guardian. It is not necessary to list minors on the form.
8. What if the disclaimer relates to a solely owned freehold or leasehold property?
When the disclaimer relates to a solely owned freehold or leasehold property that is registered with the Land Registry, the official receiver must arrange for the disclaimer to be sent to HM Land Registry to enter notice of the disclaimer against the property. A covering letter requesting confirmation that the disclaimer will be noted should accompany the disclaimer.
The official receiver may also send notice to other persons or organisations if he or she thinks it advisable. For example, the official receiver may wish to notify the local authority that an interest in an unsafe or dangerous structure has been disclaimed.
10. Notification to court or the Registrar of Companies
In bankruptcy cases a copy of the signed disclaimer notice, NODIS, should be filed in court under cover of form DMRCT1. A copy of the form must be retained on the official receiver’s file as evidence of the date upon which the notice was filed with the court.
In a winding up a copy of the disclaimer notice, NODIS, should be sent to the Registrar of Companies with form F10.2 which is a Word template attached to this Case Help Manual part – see ‘Forms to be Used’. A record should be kept of the date this notification was sent by retaining a copy on the official receiver’s file.
Secure tenancies, assured tenancies and protected tenancies of dwelling properties do not form part of the bankrupt’s estate and do not have to be disclaimed. For more information see TM Chapter 34.14/5.
Almost all local authority and housing association tenancies are secure or assured tenancies and do not need to be disclaimed. Form NTL (notice to landlord) (ISCIS, ‘Assets’ tab) does not require a copy of the tenancy agreement in these cases.
In the event of uncertainty, the official receiver should use form NTL to contact the landlord with a view to confirming the nature of the tenancy agreement and to determine whether or not it forms part of the bankruptcy estate.
12. Should the official receiver surrender a lease or tenancy agreement?
In a winding up the property does not vest in the liquidator and there is generally no personal liability in respect of any of the company’s property. In certain circumstances, it may thus be possible to negotiate the formal surrender of a lease or tenancy agreement with the landlord although such an interest would be better disclaimed. In no circumstances should the official receiver attempt to enter into an ‘informal surrender’ of a lease or tenancy agreement.
In a bankruptcy the official receiver should always disclaim rather than attempt surrender of a lease or tenancy agreement because of the personal liability that may fall upon the trustee. This is true even in those cases where the landlord has indicated that he is prepared to accept possession by way of an informal surrender of the lease or tenancy agreement.
13. What if there is doubt over a claim to be an ‘interested party’?
Occasionally there may be some doubt as to whether a particular person has an interest in the property to be disclaimed. In such cases the examiner should request that form DMRLIP ‘Disclaimer, (ISCIS ‘Docs’ tab) letter to interested party’ be sent. The interested party then has 14 days from receipt of the notice in which to declare the nature and extent of his or her interest. Note the reply by date and if any response is received it should be passed to the examiner immediately for further instructions. The examiner should also be informed where there is no response or the notice is returned undelivered by the Post Office.
14. What if the official receiver is asked to decide if he or she will issue a disclaimer or not?
The official receiver may receive an application from an interested party, under section 178 (5) (winding up) or section 316 (bankruptcy). This requires the official receiver as liquidator or trustee to make a decision as to whether or not property is to be disclaimed. Such a request previously had to be submitted in a form known as a ‘notice to elect’ and applications may still be received in this form. With the introduction of the Insolvency (Amendment) Rules 2010 the application is no longer required to be delivered in a prescribed form nor does it have to state that it is a notice to elect. The application can be served on the official receiver either in person, by electronic means, or by any other means of delivery which enables proof of receipt to be provided on request. Service by email will only be valid if the official receiver has previously consented to electronic communication with the sender and the notice is sent to the email address provided for that purpose by the official receiver.
Care must be taken if an application is received requiring the official receiver to make a decision whether to disclaim; it should be passed to the examiner immediately as it must be acted upon within 28 days.
15. What if the official receiver is asked to decide if property will be disclaimed when he or she is only receiver and manager?
(Amended July 2013)
In a bankruptcy, where the official receiver is only receiver and manager and not trustee, he or she should inform the person serving the notice to elect of that fact using form DMRORX - ‘Disclaimer, OR not trustee’ (ISCIS ‘Docs’ tab) and advise that the application cannot presently be dealt with. The official receiver should undertake to inform them in writing when a trustee is appointed, whether the official receiver or an IP. The server should also be informed that where an IP is appointed it will be necessary to serve a new notice to elect.
16. What if the official receiver is asked to decide if property will be disclaimed and the official receiver is liquidator?
In a winding up, where the official receiver becomes liquidator on the making of the winding-up order, unlike in a bankruptcy case, no such rules apply that would delay matters and the application must be dealt with within the 28 day period.
17. What if the official receiver fails to deal with an application requiring a decision to be made on a disclaimer within the 28 day period?
Failure to deal properly with a request by an interested party under section 178(5) or section 316 within the 28 day period may constitute negligence and lead to a possible liability, so it is imperative that it be dealt with immediately on receipt. If action to disclaim is not taken within the 28 day period, the liquidator or trustee will then be unable to disclaim the property.
18. What happens after the disclaimer has been issued?
Normally a disclaimer will be effective from the date the notice is signed by the official receiver. However, the person on whom notice of disclaimer was served may be eligible to apply for a vesting order, whereby a person can apply to the court for the property to be vested in them. Such an application must be made within three months of the applicant becoming aware of the disclaimer or receiving notice of it. Any correspondence received regarding the disclaimer should be referred to the examiner immediately.
For further information see TM Chapter 34 part 5 – Effect of Disclaimer: Vesting Orders.
19. Can the official receiver disclaim motor vehicles?
Amended May 2015
Only in exceptional circumstances should the official receiver consider disclaiming a motor vehicle. An example may be where a motor vehicle is not roadworthy and on inaccessible private land.
The official receiver cannot simply disclaim a motor vehicle and abandon it because it is of little or no value. If the scrap (end-of-life) value of the vehicle will provide funds for the estate, the official receiver can instruct agents to deal with it.
In practice the costs incurred usually cause a cost to the estate, so official receivers should where possible use the services of the network of Automobile Treatment Facilities (ATFs), that have been set up by the vehicle manufacturers and the recycling industry to deal with ‘end-of-life’ vehicles. ATF providers that take end-of-life vehicles will dispose of them free of charge, and in most cases collection of vehicles is also free.
For further information on dealing with motor vehicles, see Case Help Manual (CHM) part – Motor Vehicles.
20. Can the official receiver disclaim ‘after-acquired property’?
Where the official receiver claims after-acquired property under the provisions of section 307 of the Insolvency Act 1986, but subsequently discovers that the property claimed has no value or is onerous, that property can only be disclaimed with the permission of the court. For further information see CHM part: – After-Acquired Property.
Where can I find out more?
Insolvency Act 1986
Sections 178 to 182 onerous property (company case)
Sections 315 to 321 onerous property (bankruptcy)
Insolvency Rules (as amended by Insolvency (Amendment) Rules 2010)
Rules 4.187 4.194 (company case)
Rules 6.178 - 6.186 (bankruptcy)
Chapter 31.2 – Motor Vehicles
Chapter 31.3, paragraph 31.3.360
Chapter 31.3, parargraph 31.3.359
Chapter 34 – Disclaimers
Chapter 34, paragraphs 34.9 to 34.14
Case Help Manual
NODIS – Disclaimer, Notice of Disclaimer
NTL – Notice to Landlord
DMRCT1 – Disclaim Letter to Court (1)
DMRLIP – Disclaimer, Letter to Interested Party
DISENC – Disclaimer, Letter serving
DMRORX – Disclaimer, OR not trustee
F10.2 – Disclaimer, sending notice to Companies House
1 The examiner instructs that the issue of a disclaimer of certain property is required.
2 Obtain full details of all ‘interested parties’ including, where appropriate, the nature of their interest.
3 Is there any doubt over a claim to be an ‘interested party’? If yes, send form DMRLIP requiring the ‘interested party’ to respond within 14 days, detailing the nature and extent of their claim.
4 Has an application under section 316 or 178 (5) been received requiring the official receiver to decide whether or not to disclaim property?
5 Is the official receiver only receiver and manager? If so serve form DMRORX (ISCIS, ‘Docs’ tab) in response as the application cannot be dealt with.
6 If the official receiver is liquidator or trustee when an application requiring a disclaimer decision is received, the disclaimer must be dealt with within 28 days.
7 Complete part 1 of form NODIS with full details of the property and where appropriate, the nature of interest and any title number. Send with supporting papers to the official receiver (or deputy) to obtain his or her signature in Part 1.
8 Make sufficient photocopies to provide one for each person to be issued with a signed copy notice of the disclaimer.
9 Complete part 2 of each copy of form NODIS by entering the name and address of the person to whom it is to be sent, together with the date that the form was signed by the official receiver (or deputy).
10 Issue form NODIS to each person to be notified within 7 business days of signature by the official receiver, under cover of form DISENC.
11 Keep a copy of each DISENC issued on the official receiver’s file.
12 In bankruptcies send one copy of the NODIS with form DMRCT1 to court and keep a copy of the letter for the file. In companies send one copy of the NODIS with form F10.2 (Word template – see Forms to be Used) to the Registrar of Companies, and keep a copy on the file.
13 When the disclaimer relates to a solely owned freehold or leasehold property that is registered with the Land Registry, the official receiver must send a copy of the disclaimer to the Land Registry along with a covering letter seeking confirmation that the disclaimer has been noted against the appropriate title.
14 Enter or update details in ISCIS, ‘Notes’ tab and ‘Assets’ tab, as appropriate. Where the interest is in land or buildings a note should be added under notes group ‘Freehold/Leasehold/Tenanted’, of note type ‘Property/Contract disclaimers required’. For all other assets a note should be made against the asset on the ‘Assets’ tab.