LPA Receivership: What Are LPA Receivers?
If your company defaults on a mortgage secured by a fixed legal charge, the creditor could have the right to take control of your property asset using something called LPA receivership.
As an agent, LPA receivers have considerable authority and can make the final decision on the fate of the company’s secured asset.
In this guide, we explain how the process works, the threat for businesses and potential recovery options.
Key takeaways: LPA receivership
- LPA receivership enables lenders to appoint a receiver under the Law of Property Act 1925 to manage or sell borrower property secured by a fixed charge upon default.
- Directors retain control over the rest of the business, but lose asset control, potentially impacting rental income or operations.
- The lender issues a payment demand – if unresolved, they appoint a receiver, who registers at Companies House within 7 days, acts as the borrower’s agent and prioritises lender recovery via rents or sale.
- If your business is facing LPA receivership – cooperate with the receiver, make contact early with the lender and seek insolvency or business rescue advice without delay.
What is LPA receivership?
LPA receivership lets a lender appoint a receiver – often an insolvency practitioner or chartered surveyor – about your company’s property asset if it’s secured by a fixed charge.
Lenders use this process under the Law of Property Act 1925 to recover debts without involving the courts. The receiver acts as the borrower’s agent to manage or potentially sell the asset.
Secured creditors – such as a bank – appoint LPA receivers. They can exercise their rights under the loan’s security deed, if your company defaults on the mortgage repayment.
Your business does not need to be legally insolvent before the secured creditor appoints an LPA receiver.
It’s not a formal insolvency procedure from the Insolvency Act 1986 – instead, the default on your secured loan triggers the LPA receivership process.
To start the process, the lender serves a formal demand for payment after the default. Receivers prioritise the lender, while acting as the borrower’s agent.
If you fail to resolve the situation with the lender, they appoint the LPA receiver via a written deed, without needing approval from the courts.
Implications of going into LPA receivership
LPA receivership targets a secured asset, often a property, so that lenders can recover debts without necessarily demanding a full business closure. Read more about the differences between unsecured and secured loans.
As directors, you lose control over those assets but still retain management of the rest of the company. You retain liability for the debts and remain responsible for the receiver’s acts as their agent.
LPA receivership seizes control of the secured property, with implications including but not limited to a loss of rental income, or the end of any operations that are reliant on that asset.
Lenders aim to recover the debts – first from any proceeds, leaving unsecured creditors unpaid and potentially pushing the business toward administration or liquidation.
While directors face no automatic personal liability, you risk business challenges – for example, if the asset sells below its market value.
Receivers can manage, collect rents from or sell the secured property, to repay the lender. Lenders’ charge documents give them a range of powers – such as selling the asset or making repairs, hiring new staff or even developing the property to maximise its value.
But they owe duties of good faith and fairness to the borrower, including securing the best reasonably obtainable sale price.
A typical process involves:
- #1 Lenders issuing a demand after the default, then appointing a LPA receiver via the deed – it’s effective once the receiver accepts it in writing.
- #2 Receivers registering at Companies House within seven days, instructing solicitors for validation, valuing the asset and notifying the borrower.
- #3 The full realisation or sale typically takes weeks to months, depending on market conditions for example. There isn’t any statutory time limit for the process.
- #4 The receivership ends when the lender discharges the secured debt in full, terminating the receiver’s authority over the asset.
- #5 The lender removes the receiver via the deed. They can appoint a replacement if needed, or if the courts intervene.
For companies going through LPA receivership – cooperate with the receiver, maintain good records, review any personal guarantees and seek relevant advice without delay.
FAQs: LPA receivership
What is the difference between a fixed charge receiver and LPA receiver?
Lenders appoint LPA receivers under the statutory powers of the Law of Property Act 1925, granting them limited authority to collect rents and manage property. While statutory LPA powers are limited, deeds typically add sale and management powers.
Technically, fixed charge receivers derive broader powers directly from the lender’s mortgage deed, enabling them to sell the asset, grant leases, or develop it to maximise recovery. For more details, read about the differences between floating and fixed charges.
Practitioners often use the terms interchangeably, as modern deeds extend LPA receivers’ roles to match fixed charge receivers.
What is the difference between a receiver and a liquidator?
Receivers focus on specific secured assets, such as property, to recover debts for a single creditor like a bank, without winding up the entire company.
Liquidators, appointed in formal insolvency proceedings, take control of all company assets, sell them off and distribute proceeds fairly among all creditors before dissolving the business.
Receivership allows directors to retain control over unaffected operations, whereas liquidation ends the company and removes directors’ powers entirely.
What is the difference between LPA and administrative receivership?
Lenders appoint LPA receivers over fixed-charge assets, typically property, under Law of Property Act 1925 legislation. LPA receivership avoids formal insolvency, while administrative receivership functions as one.
Administrative receivers cover all company assets via qualifying floating charges, but the Enterprise Act 2002 largely abolished new such appointments from 2003 onwards. For more details, read this guide – what is receivership?
Final thoughts: LPA receiverships: How to seek help
If your company is facing LPA receivership, make contact with a business rescue specialist or insolvency practitioner for guidance on your options. Prompt intervention helps to improve the business’ future prospects.
For example, placing the business into administration may avoid receivership, as this process grants an eight-week moratorium to develop a rescue plan.
In general, companies in difficulty often require financial or operational restructuring. Depending on the specific circumstances, to help businesses recover and stabilise, options can range from administration to CVAs and more besides.
If you found this guide useful, take a look at some of our most popular recent articles including:
- Putting Personal Money Into A Limited Company
- If a Company Goes Into Administration, Do I Have to Pay Them?
- Is There A Penalty For Not Issuing Payslips (UK)?
Hudson Weir provides expert business rescue, insolvency and financial advice if your company needs help.
For more guidance about debt solutions, please contact us for a no-obligation consultation.
