Ask the Receiver - Fixing fees

Ask the Receiver - Fixing fees




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The terms ‘Law of Property Act Receiver’ and ‘Fixed Charge Receiver’ are used interchangeably. There are, however, subtle differences; the first is appointed by a mortgagee and enjoys the extended powers contained within the mortgage deed, the latter is appointed by the mortgagee but has only the (limited) powers contained in the Act, plus any delegated powers that the mortgagee enjoys.
 
But is there any limit to a receiver's charges and is there an argument for the receiver's charge itself to be fixed?
 
Section 109(6) Law of Property Act 1925 states: “The receiver shall be entitled to retain out of any money received by him ‘a commission at such a rate, not exceeding five per centum on the gross amount’”.
 
Section 109 is usually varied or excluded by the terms of the charge and NARA’s (Non Administrative Receivers’ Association) code of conduct on this matter states that a receiver must agree fees in writing with the appointing lender before an appointment is accepted. 
 
In practice there are some unscrupulous receivers who choose to use the lender's fixed charge as a licence to "print money" and to raise fees liberally.  If this is the case then Section 109(2) of the Law of Property Act allows a lender to dis-instruct a receiver who might also be the subject of a claim by the borrower.  This seems to be a growing trend, judging by instructions that we are starting to receive to act as expert witnesses in claims by borrowers against receivers for a variety of matters.
 
It would, of course, be best from a lender’s perspective to try and fix the receiver’s fees in advance.  Strettons’ registered RPR receivers typically charge a fixed fee at the outset for validating and accepting the appointment, undertaking all the due diligence that is required (and there is quite a bit), inspecting the premises, researching values and reporting to the lender and setting out a strategy.  If the appointment is to be straightforward (provided you have appointed a receiver who has in-house property management, agency and auction facilities at their disposal) then the receiver might not charge any further as the receiver's practice will receive fees commensurate to the task in hand. 
 
Clearly there are occasions where a receiver needs to appoint outside agencies but a receiver working on their own without any additional in-house support is always going to cost the lender and the borrower more.
 
Fixed charge receiver? Maybe this is an appropriate name after all. If in doubt, appoint a qualified registered property receiver.

 

Simon Tilsiter is a Director of Strettons and is a qualified registered property receiver and can be contacted on 0208 509 4430.


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