Purchasing Property from a Receiver? Look before you leap!
Every now and then you may represent a client who seeks to purchase assets
from a company under Receivership. It is usually a “good” deal because the
price is often discounted. It is however a clear case for “buyer beware” and I
am sure you know why. These assets may be landed property or
plant/machinery or both. This article uses a case study of a particular
transaction and highlighting some of the key issues as pointers for Solicitors in
The client (company X) was interested in purchasing property from a company
under Receivership. The client was purchasing a built up factory premises
covered by a Certificate of Occupancy together with the plant/machinery on
the premises. The Receiver had been appointed by the Trustees under a
Mortgage Trust Deed and the Receiver had made an offer for sale to the client.
How do we proceed?
Review the Trust Deed
Review the Trust Deed extensively to be abreast of the following: Does the
Trust Deed cover the property up for sale? Is there provision for appointment of
a Receiver? Who has Power to appoint the Receiver? Do any of the parties have
a power to sell without appointing a Receiver? Are there other parties to the
Trust Deed? Who are they what are their rights? Is consensus required by all the
Lenders? Has the right to foreclosure been duly exercised?
Put an eye on the Receiver
Review a copy of the Deed of Appointment of the Receiver to see that: the
appointment was valid; Appointers can validly appoint; Receiver is legally
appointed; trust deed is complied with; the power to sell was duly granted and
still valid and it covers the property in question. Do not forget to check that
the Deed of appointment of the Receiver is duly executed and registered at the
Corporate Affairs Commission.
Conduct Title Searches
The fact that the Receiver has power to sell and the appointment was legal
does not mean that the property is free from encumbran