Acting for receivers on the sale of a prime central London apartment
Insight
In each edition of the Brief, the Farrer & Co Residential Property partners give us a brief insight into their working lives. This month, we provide an overview of advice given to receivers appointed by a lender on the sale of a penthouse apartment in Chelsea.
The Brief
We were recently instructed by receivers appointed by a lender on the sale of a penthouse apartment in Chelsea. The Jersey incorporated special purpose vehicle (SPV) that owned the property had defaulted on the mortgage, so the bank had exercised its power of sale, and the property was being actively marketed for sale. Given current market conditions, the receivers had taken the difficult decision to reduce the asking price for the third time following a candid conversation with the lender, but a purchase offer was now expected imminently.
Executing the Brief
The receivers were targeting a prompt sale to somewhat offset the lengthy marketing period, so we worked with them to prepare the sales pack straight away, ahead of the property going under offer. Within a week of our instruction, the receivers accepted an offer on the property from a buyer based in the Middle East. With the sales pack already in hand, we were able to issue it to the buyer’s lawyer immediately following the issue of the memorandum of sale.
We then arranged a call with the buyer’s lawyer to take them through the pack and to ensure they were clear that the receivers would not be providing the property information form (TA6) and leasehold information form (TA7). We emphasised that as the receivers are not the registered owners of the property and have no knowledge of it, they cannot confirm information about the property including what (if any) third-party rights or interests affect the property and will offer no warranty or indemnity in respect of any such interests, meaning the property will be transferred with no title guarantee.
Happily, the buyer’s lawyer understood the position and was familiar with transactions of this nature, so knew that this reflects standard market practice when buying property from receivers. However, as the penthouse is located within a relevant building for the purposes of the Building Safety Act, the buyer’s lawyer was keen to understand whether the lease was held under a qualifying lease. We discussed this point with the receivers. Appreciating the buyer's position, our client was keen to be helpful so was content for us to analyse the position as if we were in the buyer's shoes, and to provide as much information as we could without risking liability for the receivers.
The buyer's lawyer also queried the status of the SPV that owned the property as the register of overseas entities retained by Companies House flagged that the SPV had failed to comply with its annual updating requirement. We highlighted that while this would ordinarily mean the Land Registry would be unable to register the transfer of the property, the usual restriction did not apply here as a transfer made in the exercise of a power of sale is not caught by this restriction.
The debrief
The transaction progressed smoothly, with the early preparation of the sales pack and clear communication of the receiver position helping to maintain momentum following acceptance of the offer.
