PROTECTION OF THE OFFICIAL RECEIVER’S INTEREST IN A PROPERTY
In all cases where the insolvent has an interest in a property the official receiver should take action, at the earliest possible opportunity to protect that interest for the benefit of the insolvent estate.
Guidance on long-term protection in the form of a charging order (only where the official receiver is dealing with the family home) can be found in Part 8.
Reference should be made to Chapter 8, Part 6 concerning the action to be taken to secure commercial property. The official receiver should remember that he/she is likely to have a duty of care to visitors and trespassers. Guidance on the steps to be taken is in Chapter 8, Part 7.
The official receiver should obtain insurance (including public liability insurance) where required, following the guidance in Chapter 49.
In essence, this will be required where the insolvent is the legal owner of the property, there is no (or insufficient) existing cover, and/or where the insolvent is owner and/or occupier and there is a particular risk of damage to people or property near the building.
Where the property has no value to the estate the official receiver may limit the insurance to public liability (as required), but should inform the mortgagees of the lack (or inadequacy) of buildings insurance.
(Amended February 2014)
The official receiver should ensure that the insurance is cancelled if an insolvency practitioner is appointed trustee, where the property re-vests with the bankrupt (see paragraph 31.3.89), where the official receiver as trustee obtains a charging order (see paragraph 31.3.271a), where the property is sold (see paragraph 31.3.183), where there is a disclaimer (see paragraph 31.3.27) or on repossession (see paragraph 31.3.33). Further guidance on cancelling insurance is contained in paragraph 59.27B.
The process for protecting the property at the Land Registry is covered in detail in Chapter 50, Parts 2 and 7. The official receiver should ensure that that guidance is followed and that a restriction (see Chapter 50, Part 2) or, where acting as trustee, Form J and A restrictions (see Chapter 50, Part 7) have been placed against the property.
The official receiver should also ensure that the bankruptcy order is recorded on the register of writs and orders maintained by the Land Charges Department (see Chapter 50, Part 2). The winding up order can be registered but it is not generally necessary (see paragraph 50.38).
Where a property has been repossessed it is still necessary to effect the protection at the Land Registry (see paragraph 31.3.61) to ensure that the official receiver’s interest in the property is protected and, particularly, that any surplus is not passed to a joint owner.
The official receiver has discretion not to seek such protection where a sale has been agreed and the protection may hinder that sale.
In all cases of repossessed property, the official receiver should issue the standard letter [note 1] to the mortgagees to put them on notice of the of the official receiver’s interest in the bankrupt’s share of any surplus sale proceeds.
Clearly, where land is unregistered it will not be possible to effect protection at the Land Registry in the form of J and A restrictions, or a restriction.
Where the property is solely owned, the official receiver should arrange for a first registration of the unregistered land, following the guidance in Chapter 50, paragraphs 50.75 to 50.77.
In all cases (jointly and solely owned), the official receiver should ensure that the order has been registered with the Land Charges Department (see Chapter 50, Part 2) and that any third party with an interest in the property is on notice of the official receiver’s interest in the bankrupt’s share in the property. Other than having notice placed with the deeds (see paragraph 31.3.64), such registration is the only effective method of protection.
When dealing with a jointly-owned unregistered property, or where there is likely to be a delay in applying for registration of a solely owned property, the official receiver should, where possible, attempt to gain control of the title deeds where the property is unencumbered or the deeds are otherwise not in the control of the mortgagees. Where the title deeds are under the control of the mortgagee, the official receiver should ensure that the mortgagee in control of the deeds places notice with the deeds of the official receiver’s interest in the property as liquidator/trustee.
Where the official receiver is dealing with the family home (see Part 3), he/she should ensure that the bankrupt and any interested parties are put on notice that the interest has vested in the official receiver as trustee (see paragraph 31.3.82).
The official receiver should ensure that the mortgagees have been issued with the standard letter putting them on notice of the official receiver’s interest in the property, and that that notice has been acknowledged [note 1].
This notice also requests the mortgagee(s) to inform the official receiver of any attempted dealings in the property.
Where the bankrupt has a charge over an interest in a property (see paragraph 31.3.30), the charged property is a qualifying family home (see paragraph 31.3.71) and the official receiver is unable to realise the charge due to its terms (such as a charge in relation to a matrimonial order – see paragraph 31.3.281) , it will normally be appropriate to seek to extend the period in which the official receiver can deal with the interest, following the guidance in paragraph 31.3.85, but only if the interest in the property is in excess of £1,000.
Where the original charge is against a property that is not a family home (see paragraph 31.3.71), the replacement, as beneficiary, of the official receiver in place of the bankrupt (see paragraph 31.3.92) will be sufficient to protect the interest as it will not re-vest at the expiration of the three year period.