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PART 5
May 2008
PROTECTION OF PROPERTY BY THE OFFICIAL RECEIVER
This part covers what the official receiver should do to protect the bankrupt’s interest in a dwelling-house.
The guidance in Part 1 should be applied in all cases where section 283A applies and the bankruptcy petition was presented on or after 1 April 2004. (Details of the provisions of section 283A are given in paragraph 33.7 in Part 1).
In cases where the bankruptcy order was made on a petition presented before 1 April 2004 refer to Annex 3 where section 283A applies. (Details of the transitional provisions of section 283A are given in paragraph 3 of Annex 3.) The official receiver should have also have regard to the guidance in this Part and in Parts 2 to 4 and 6 to 8 of this chapter.
33.137 Land Registry and solely owned registered property
In every case, notice of the bankruptcy order should be given to the Chief Land Registrar [note 1] (see Chapter 4 - Initial procedure when a bankruptcy order made, paragraph 4.60; details of the procedure for the registration and the effect of a bankruptcy restriction are contained in Chapter 50 - Dealings with Land Registry, Part 2). Where the official receiver becomes aware of specific land or charge(s) affecting land in the sole name of the bankrupt, he/she should affect a search of the register of the relevant title at the relevant District Registry [note 2] to ensure that a bankruptcy restriction has been registered. If the bankruptcy restriction has not been registered, the official receiver should first ensure that the Land Charges Department has been notified of the bankruptcy order and if form LRRABO has not been despatched, it should be sent immediately.
This may be necessary where the bankrupt has a common name. In this situation the official receiver should send an office copy of the bankruptcy order, with Form LRCBI, to the Chief Land Registrar requesting registration of a bankruptcy restriction against the title(s) of the bankrupt. An acknowledgement should be obtained. (See paragraph 50.56 and 50.57)
If there is a possibility that a third party has a beneficial interest in the property, the official receiver should ensure that a bankruptcy restriction or Form J restriction has been registered against the property at the Land Registry (see also paragraph 33.140).
33.139 Land Registry and jointly owned registered property
Notice of the bankruptcy order should be sent to the Chief Land Registrar [note 1] (see paragraph 4.60) even though that will not of itself provide protection in respect of jointly owned property. Once the official receiver as trustee is satisfied that the bankrupt is the joint owner of registered land he/she should register a Form J restriction against dealings with the relevant District Registry in relation to that property [note 3] (in accordance with Chapter 50 - Dealings with Land Registry). A Form A restriction should also be registered [note 3] (see paragraph 50.79 and 50.37). When entered on the register this restriction implies that the joint tenancy has been severed. It also means that, should one of the joint owners die, the rule of survivorship whereby the surviving owner automatically receives the deceased’s share, would not apply. There is no fee payable for the registration.
(See also paragraph 33.141 on notification of third parties when the bankrupt's interest is in a dwelling-house and section 283A applies.)
For further information on registering a restriction see Chapter 50, paragraph 50.79, and the Case Help Manual chapter on Freehold Property – Jointly owned: Registering a Form J restriction.
33.139A Repossessed property (amended October 2008)
It is important to ensure that the beneficial interest in a jointly owned property is protected, and until a repossessed property has been sold, the bankrupt retains an interest in the proceeds of sale. When dealing with a jointly owned property that has been repossessed by the mortgagee but a sale is yet to be agreed, a Form J restriction should still be entered to protect the insolvent’s interest. A letter should also be sent to the mortgagee in possession (and all other mortgagees), requesting that they notify the official receiver of any dealings with the property [note 6]. Where a repossessed property is later sold, if a Form J restriction has not been entered then there is the risk that any surplus will be sent on to the joint owners and lost to the estate.
The only time a restriction may not be appropriate, is if a sale has already been agreed, and to do so would hinder that sale. In these cases, it may be possible to obtain an undertaking from the mortgagee’s solicitor that the bankrupt’s share of any surplus will be forwarded on to the official receiver, as trustee, on completion. If the property has already been sold by the mortgagee, a letter should be sent to the mortgagee requesting a copy of the completion statement to ascertain whether there was a surplus on the sale, and if so to whom that surplus was sent to. See Chapter 50, Part 7, particularly paragraph 50.83 for information on Form J restrictions.
The only protection available for the trustee, without seeking a caution against first registration (applicable only to solely owned registered land until October 2005) or first registration of the unregistered land (only available where the unregistered land is solely owned), is that afforded by the registration in the register of writs and orders at the Land Charges Department and the control of the title deeds where possible (see Chapter 50, Part 7). (See also paragraph 33.141 on notification of third parties when the bankrupt's interest is in a dwelling-house and section 283A applies.)
33.141 Notification to bankrupt and other interested parties when section 283A applies
When the official receiver is trustee and identifies a dwelling-house that was the sole or principal residence of the bankrupt, bankrupt's spouse, civil partner, former spouse, or former civil partner at the date of the bankruptcy order, he/she should give notice [note 4] to the bankrupt's spouse, civil partner, former spouse, or former civil partner that section 283A applies.
The official receiver should also notify all other third parties (other than the spouse, civil partner, former spouse, or former civil partner) that have an interest in the dwelling-house that the bankrupt's interest has vested in the trustee. (Form 6.83 may also be used for this purpose).
(See paragraph 33.11 in cases where the bankruptcy petition was presented on or after 1 April 2004.)
Early notice of the bankruptcy order should be given to all mortgagees of the property [note 5]. The official receiver should ascertain the following from the mortgagee:
(a) The name(s) and address(es) of the borrowers.
(b) The title number, if registered.
(c) The purchase price of the property.
(d) The amount(s) and date(s) of all advances
(e) The present balance(s) outstanding, including arrears.
(f) The current monthly payment.
(g) Details of any other charge notified.
(h) Whether any possession proceedings.
(i) Details of insurance covering for the property, including the name and address of the insurance company, the policy number and the amount of cover (see paragraphs 33.148 to 33.149).
(j) Details of any other security held, such as an endowment policy, including name and address of the security provider and any policy number.
(k) Details of any other mortgage borrowing known
(l) Details of any bank accounts from which the most recent mortgages payment was made.
When dealing with unregistered land, the official receiver should arrange to place notice of the bankruptcy order (form MP3) with the title deeds, which are usually held by the mortgagee.
33.143 No surplus for the bankrupt’s estate (amended February 2011)
If no surplus funds are expected from the bankrupt’s interest in the property at the initial stages of a case, the bankrupt’s interest in the property should be reviewed at the two year three month point (see paragraph 33.25 and 33.31).
Following the appointment of the official receiver as trustee, form MP3 should be sent to the mortgagee, and acknowledgement sought to ensure that the official receiver’s interest in the property is noted. The case should then be transferred to RTLU for review at a later date. If the bankrupt’s interest in the property is to be sold (where it is in the interests of creditors to do so), no further contact is necessary between the official receiver and the mortgagee/chargee, but confirmation from the bankrupt and/or proposed purchaser will be needed to show that arrangements have been made to deal with any outstanding mortgage/charge on completion.
Where section 283A(1) applies and the bankrupt's interest in the dwelling-house has minimal (less than £5000 should be used as a guide figure) or no value, the official receiver should also refer to Annex 3 paragraphs 10 and 11 in cases where the bankruptcy petition was presented before 1 April 2004 and Part 1 paragraphs 33.20 to 33.23 and 33.28 to 33.29 in cases where the bankruptcy petition was presented on or after that date.
It should be remembered that the equity in any endowment policy charged to the mortgagee should be taken into account when calculating the bankrupt’s equity in the property (see also paragraphs 33.81 and 33.82).
33.145 Request to be informed of any dealings
Irrespective of whether there is a possibility of a surplus for the benefit of the bankrupt’s estate at the date of the bankruptcy order, subsequent repayments or changes in the property market may create an equity at a later date and the mortgagees or chargees should be requested to inform the official receiver of any attempted dealings with the property. A written request should be sent confirming any telephone conversation if the official receiver is receiver and manager, but where he/she is trustee, the formal notice should be used [note 6] and should be served even if the official receiver as trustee intends to apply to the court for a charging order.
The official receiver as trustee should not rely upon a mortgagee informing him/her of any attempts to deal with the property if it is jointly owned and should register a Form J restriction against dealings (see paragraph 33.139). The official receiver as trustee should request the mortgagee to inform him/her of any attempted dealings, even though a Form J restriction against dealings has been registered, to ensure that he/she is made aware of any attempts to dispose of jointly owned property [note 6].
In the unlikely event that the property is unencumbered, the official receiver should immediately make enquiries to establish where the documents of title are being held and any reason(s) for this. The official receiver should take possession, where practicable, of the deeds of solely owned property, pending the case being transferred to RTLU (where there is a willing purchaser) or the appointment of an insolvency practitioner as trustee (where there is no willing purchaser and the bankrupt is likely to resist an attempt to sell the property).
33.148 Buildings Insurance
Where property owned by the bankrupt is likely to have equity for the benefit of the estate, the official receiver should ensure that adequate buildings insurance cover is in force pending the case being transferred to RTLU or the appointment of a trustee and ask the insurers to note the official receiver’s interest in the policy. If enquiries reveal that there is no, or inadequate, buildings cover in force, the official receiver should take immediate steps to obtain adequate insurance cover for the property, including public liability cover. If it is extremely unlikely that there will be any benefit from the property for the estate, the official receiver should inform the mortgagees of any absence of or inadequacy in the buildings cover and suggest that they obtain the cover required without delay.
33.149 Public liability insurance
Public liability cover is advisable (whether or not there is likely to be any equity) as there are always particular risks of injury or damage to people on or near the property. This cover may be cancelled on the appointment of an insolvency practitioner as trustee, on disclaimer of the property, on its repossession by a mortgagee or if the dwelling-house falls under section 283A when the bankrupt's interest in it re-vests in him/her (see also paragraphs 33.14 to 33.15 and Chapter 49 – Insurance, paragraphs 49.6, 49.8, 49.12 and 49.27.)
If the equity in the property is more than £1000 but is insufficient to secure the appointment of an insolvency practitioner as trustee, the official receiver may apply to the court for a charging order to protect his/her interest in the property [note 7]. Such applications are rarely made and details of the circumstances when an application should be made and guidance on applications generally are contained in Annex 2 of this chapter.
Reference should also be made to Part 1, paragraphs 33.20 and 33.21 (if the bankruptcy petition was presented on or after 1 April 2004) where the dwelling-house falls to be dealt with under section 283A.
[Back to Part 4 – Matrimonial or civil partnership ‘home rights’ and applications to court for eviction] [On to Part 6 – Dealing with property with minimal/no equity]