Reacquiring LPA Receiver Property For Sale With Finance
LPA receivers aim to sell the property to recoup lender investment. See how finance can help you purchase assets from an LPA.
LPA receivers must sell seized assets and property in as efficient a time-frame as possible to recoup a creditor's cash. If your assets are seized, understanding how LPA receivers operate and raising finance from specialist lenders is the key to reacquisition.
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When a company becomes insolvent or fails to repay its debts, a creditor can appoint a receiver to reclaim their assets. The receiver’s role is to help recoup the creditor’s investment by selling on the repossessed asset for the maximum amount of value.
In some cases, this means that businesses that have no debt issues can try and purchase the repossessed property or asset. In others, it presents an opportunity for a company which has had assets seized to repurchase the asset by arranging an alternative finance agreement with a more supportive lender.
In all cases, choosing whether you pursue the acquisition of property or assets from an LPA is highly dependent on your business’ circumstances.
Here at Rangewell, we can help you understand the entire process and can help discuss your finances and potentially arrange a new loan on your behalf to help you buy from the LPA. If you’ve had assets seized, or you’re considering purchasing from an LPA in general, contact us now for free advice, or continue reading to learn more.
What is an LPA receiver?
A lender holding a fixed charge or mortgage can appoint what is known as a ‘receiver’ under the Law of Property Act 1925. The receiver does not have to be an insolvency practitioner, but the purpose of their role is defined by law. Their goal is to repossess the asset they’ve seized and then sell it in the most optimal way to help recoup the lender’s investment.
Threatened with a final demand letter and LPA?
If you've received a final demand letter but haven't yet had the property repossessed, we may be able to help you raise an alternative finance agreement to repay the creditor before the LPA is called in.
Why buy back from an LPA?
If you’ve had an asset repossessed, you may be able to repurchase it from the LPA. As they are tasked with selling the asset to recoup the lender’s investment, you may be able to purchase your seized asset at a below-market rate.
However, the receiver is still concerned with securing the best offer in the market and won’t accept a low offer just for the sake of it. Instead, they must balance the effort of selling the repossessed asset against the need to minimise the delay in repaying the creditor.
Whilst some lenders may hesitate to lend to you based on the default that led to the repossession, others are more understanding and can see the value in financing the re-acquisition of a property.
In the case of commercial property, buying back your premises carries more value than you may have considered. You’ll know the property’s condition, fittings, equipment etc and will have the skills and experience required to start operating from the premises again faster than any other buyer would be able to.
From a lender’s perspective, this provides additional value and security around the future of the property and your business. Whilst you may be worried that lenders won’t finance you because of the repossession, you might instead be surprised by a supportive offer that considers your business experience and the added value you bring to the property in question.
Considerations before buying back from LPA
An LPA acts in a specific way to comply with the law and to reclaim the lender’s funds in as efficient a manner as possible. This naturally leads to a set of considerations you need to take into account whenever you decide to pursue buying back an asset from an LPA.
For a lender to appoint an LPA receiver, they have to follow some strict legal steps. If these are not followed or done incorrectly, the receiver may be deemed as invalid, which will void the sale you’re hoping to pursue.
Unfortunately, in the case of businesses that have had assets repossessed and are now trying to buy them back, this situation doesn’t mean you’ll just get your property back. Instead, it simply delays any sale and means waiting for a new receiver to repeat the process.
Consult a legal professional skilled in insolvency to check the LPA’s appointment details. Your new lender may require evidence of the appointment, so have this done early to smooth out the process.
A receiver has little knowledge of the property they repossess, meaning they won’t accept liability during the sale. This extends not only to personal liability but also to the concept of warranties or representations.
The seller also avoids any liabilities for environmental factors such as contamination. Whilst you as a previous owner, may know the property’s overall condition, any period of vacancy or poor management between your ownership and re-acquisition could have resulted in contamination or environmental damage you didn’t know about. The LPA has no responsibilities for this and therefore, it’s vital you investigate the property thoroughly before re-buying it.
If you’re buying back an asset you owned, we would still recommend using a legal team to investigate the property as if it’s a new purchase. The condition of the property will have changed since your original purchase – whether that’s just through age, or if, during the receivership period, it has been tenanted or used in some way.
As with a standard acquisition, that means carrying out due diligence and having a survey done on the building. Some structural issues or concerns may arise that you hadn’t known about originally, so identifying them now and assessing their impact on your future can help guide the purchase.
Surveys should incorporate a full title review, as the receiver is not the registered owner of the property and, therefore cannot provide any title guarantee. If you are not still the registered owner, you’ll need this information in case a lender asks for it.
In some cases, lenders can offer more credit to help repair the building. At worst, however, taking investigations seriously it may help you avoid re-committing to a failing property.
To summarise, you should always carry out detailed investigations – even if you’re the previous owner and feel you know the property inside and out. At a minimum, you should carry out a building survey as well as searches, including a local authority search, environmental search and highways search.
TUPE and employees
If a property has been repossessed, some employees may have become the LPA’s responsibility during the retrieval period. If you’re considering purchasing back from the LPA, you’ll re-assume any responsibilities for employees under the Transfer of Undertakings (Protection of Employment).
For investors who purchase a property they never previously owned from an LPA, TUPE s a bigger risk. The receiver has no obligation to provide the terms of employment to you before you take on the existing debts, liabilities and employment conditions associated with the asset.
How to buy an asset back from an LPA
Buying property or assets back from an LPA is a case of establishing communications and negotiating on the sale – much the same as from any other vendor. The difference is that the LPA has less knowledge and investment in the property than a typical seller. They want to sell it for the best price they can achieve in the shortest possible timeframe to help the creditor recoup their costs.
If you know the LPA’s details or can find them, you may be able to reach out and negotiate a sale. There are a few things to consider before you do so, but mostly your success will be based on making an offer in a timeframe that suits the LPA’s appointment conditions.
If you’re the previous owner of the building or asset and can demonstrate insight into the maintenance, management or business operation specifics of the property, you may be able to convince the LPA that selling to you is the best option. If you’re still the registered owner of the property, that is even better for your case.
That sounds a little bit confusing, so we’ll use an example. If you were a printing business and had a site that was repossessed, you could demonstrate that your knowledge of the facility and prior business history makes you the ideal purchaser. Unlike other buyers, your offer is based on holding insight into the property and its ability to generate revenue.
Selling to a different type of business would instead mean the receiver accepts a worse price as the new buyer will need to do conversion work, assume the liabilities we mentioned earlier and generally take more risks than you, the ex-owner.
Buying at auction
The receiver’s desire to sell quickly at a good market value means you’ll often find your asset or property listed via an auction. In these cases, you can use a bridging loan to secure cash as quickly as possible in order to win the bid. Once purchased, you can refinance to a longer-term loan to avoid high repayments.
Here at Rangewell, we can help you win back your properties at auction by arranging bridging finance on your behalf. Get in touch now to learn more about how we can help.
Finance for re-buying from an LPA receiver
In a difficult economic climate, businesses can easily fall into debt and struggle to repay loans. Lenders are less patient than ever and are calling in LPA receivers more frequently. If your business has defaulted and had a subsequent repossession, don’t despair. Organising your finances can not only help you repurchase the asset you’ve lost, but it could also help re-establish your cash flow and get your business back on track.
There are a number of specialist lenders who can help with financing for a repossessed asset. To secure the best offer, you should look for expert support from a financial broker like our team here at Rangewell. Speak to us today to get free advice on loans for LPA repossessions or finance for businesses struggling with debt.