Banks are appointing receivers rather than taking possession — but this might not always be appropriate

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Since the banking crisis, banks, in enforcing their security, are increasingly appointing Law of Property Act 1925 (LPA) or fixed charge receivers rather than taking possession. There are usually said to be two main advantages of such appointments.

First, following the appointment of a receiver, it will be for the receiver to obtain possession of the property (if necessary) and find a buyer for it. Awkward or violent mortgagors will therefore be problems for the receiver and not for the mortgagee.

Second, pursuant to s109(2) of LPA, an LPA receiver is deemed to be the agent of the mortgagor. Similarly, a charge permitting the appointment of a fixed charge receiver almost invariably provides for the receiver to be the agent of the mortgagor. Consequently, in the absence of such interference by the mortgagee as can be said to nullify the receiver’s independence, the mortgagor (not the bank) is solely responsible for the receiver’s acts or defaults (unless the mortgage deed otherwise provides — which it never does)…

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