LOW VALUE HOMES – BANKRUPTCY ONLY
This Part of the chapter gives guidance on the special provisions regarding a low value family home. For clarification, the guidance relates only to a property that is a family home (see Part 3) and that qualifies as a ‘low value home’ (see paragraph 31.3.198).
There are certain restrictions on how the official receiver, as trustee, may deal with a low value home. The intention of these legislative provisions is to recognise that the benefit to creditors in dealing with a low value home is often outweighed by the suffering imposed on the bankrupt and/or his/her family by the loss of the home.
Where the official receiver, as trustee, is dealing with a low value home, he/she is may not make an application for an order for sale or possession of the property, or an application for a charge against the bankrupt’s interest [note 4].
If such an application is made, the court is bound to dismiss it and the interest in the property will automatically re-vest in the bankrupt unless the court orders otherwise [note 5].
Where the official receiver is dealing with a low value home, he/she should not send the standard letter inviting offers to purchase the bankrupt’s interest (see paragraph 31.3.159) and, instead, the property should be transferred to the LTAU for later review (see paragraph 31.3.11).
It is possible that the official receiver, as trustee, will receive, from the bankrupt or a third party, an unsolicited offer to purchase the bankrupt’s interest in the property prior to the two year and three month review (see Part 8).
The official receiver should give consideration to the offer received (taking into account the guidance in paragraph 31.3.165), accepting it if it is in the interests of the creditors to do so.
Where the bankrupt makes an approach to the official receiver requesting that his/her interest in the property be dealt with prior to the normal review period of two years and three months (see Part 8) in the exceptional circumstances that the extended uncertainty in determining the interest could cause undue distress and may exacerbate a disability (especially one that relates to mental health), or potentially cause a mental illness, the official receiver, as trustee, may consider selling the bankrupt’s interest for a nominal sum (providing the costs of sale are provided to the official receiver too).
An example of where it may be appropriate to apply for early re-vesting of a low-value home (see paragraph 31.3.87) would be where a disabled bankrupt (or a bankrupt with caring responsibilities for a disabled person) may have made specific adaptations to their home in order to cope with the disability. In such a situation, the uncertainty with regard to their interest in the property may cause distress.
Similar consideration should be give for requests based upon caring responsibilities such as illness, old or young age or pregnancy where the uncertainty may lead to mental illness.
This discretion must only be exercised by the official receiver, as trustee, on a case by case basis.
Where the bankrupt’s interest in a family home is in the form of a charge to protect a future interest in the property (usually this will be in relation to matrimonial proceedings and the charge is placed on the home of a former spouse), the future interest will generally relate to the value of the property at a certain point in time e.g. the future age of a child (usually 18) or a date of re-marriage. The interest in the property is a deferred interest and where the value of the charged property is below £1,000, the official receiver should not consider this to be a low value property, as the relevant date for calculating the value will be the date that it is able to be realised, by which time it may be worth over £1,000.
The official receiver should follow the guidance in paragraph 31.3.278 when dealing with a charged interest.