A Receiver's obligations

odds_on

A question to get the legally minded posters thoughts on the subject I have had dealings with receivers when trying to purchase a repossessed property and they seem to have immunity from most things about the property.

As a general point of interest, where a receiver is appointed to a business, has the receiver any obligations to the customers?

I am thinking here of a company which rented owned and apartments has financial difficulties and a receiver is appointed.

The receiver is quite happy to continue receiving rent, at least until the tenancy agreement expires.

Obviously, tenants have paid a security deposit, is the receiver liable for the return of the deposit when the tenant leaves (assuming there are no rent arrears nor damage)?

NoQuarter

The receivers primary duties are to the creditors. There is a hierarchy of payment to leave the company (if there is any money left) which starts with secured creditors and then onto unsecured creditors. Customers, I'm afraid to say, will be likely last in a long queue.

odds_on

NoQuarter wrote: »

The receivers primary duties are to the creditors. There is a hierarchy of payment to leave the company (if there is any money left) which starts with secured creditors and then onto unsecured creditors. Customers, I'm afraid to say, will be likely last in a long queue.

Thank you, NoQuarter.

Another good reason for Residential Tenants' deposits to be held by an independent body rather than with the landlord.

Jo King

NoQuarter wrote: »

The receivers primary duties are to the creditors. There is a hierarchy of payment to leave the company (if there is any money left) which starts with secured creditors and then onto unsecured creditors. Customers, I'm afraid to say, will be likely last in a long queue.

It is not quite that simple. A receiver who accepts rent from a residential tenant becomes the Landlord under the Residential Tenancies Act.
"5.—(1) In this Act—

“landlord” means the person for the time being entitled to receive (otherwise than as agent for another person) the rent paid in respect of a dwelling by the tenant thereof and, where the context so admits, includes a person who has ceased to be so entitled by reason of the termination of the tenancy;"

He is obliged to return deposits and may be made personally liable. Receivers can repudiate contracts entered into prior to their appointment but can be made personally liable on contracts they make after appointment.

odds_on

Jo King wrote: »

It is not quite that simple. A receiver who accepts rent from a residential tenant becomes the Landlord under the Residential Tenancies Act.
"5.—(1) In this Act—

“landlord” means the person for the time being entitled to receive (otherwise than as agent for another person) the rent paid in respect of a dwelling by the tenant thereof and, where the context so admits, includes a person who has ceased to be so entitled by reason of the termination of the tenancy;"

He is obliged to return deposits and may be made personally liable. Receivers can repudiate contracts entered into prior to their appointment but can be made personally liable on contracts they make after appointment.

Is that all contracts or contract that could be void because the landlord/owner did not have permission from the lender to rent out the property?

Would they have to stand by or cover for any lease contract made with permission of the mortgage company.

Jo King

odds_on wrote: »

Is that all contracts or contract that could be void because the landlord/owner did not have permission from the lender to rent out the property?

Would they have to stand by or cover for any lease contract made with permission of the mortgage company.

It depends on the type of charge the receiver is appointed under. The original question appeared to be a charge over the assets of a company. Ise the receiver can repudiate all contracts. Some mortgage deeds give a power to appoint a receiver which is a different type of charge. The key issue is whether the receiver accepts rent from the tenant and thus become a landlord.

Peregrinus

All the above. Plus tenants, in respect of the right to the return of a security deposit, are creditors, and the receiver owes a duty to them as such.