The concept of using a fixed charge receiver for a commercial property is something new in Ireland. However, it has existed in the UK for quite some time. The appointment of the appropriate receiver for a commercial property depends on the type of work the entity needs to handle.
When do you need a fixed charge receiver? If the property in question is a fixed asset, such as a vacant piece of land or building, or an investment to let, a fixed charge receiver may be appropriate for it.
In such a circumstance, the entity needs to focus on the administration and management of the property. The tasks involved may include arranging repairs and maintenance work, paying bills and collecting rent. However, the focus is on the sale of the property to redeem as much as possible to repay the loan.
When do you need an insolvency expert? On the other hand, if the property involves running a business, receivership may not be appropriate for it. Good examples of such properties are hotels, restaurants and so on.
For such properties, appointing an insolvency expert is often the right idea. The management of the staff, the payment for the utilities and the stock transactions necessary for such properties require specific skills. While insolvency experts have the knowledge to handle this, property receivers may not have the requisite skills for this.
How do you choose the right receiver? It is a good idea to opt for an estate management company that specialises in these tasks to act in this position. For this, you need to find a few such companies at the initial stage of selection.
Arrange an appointment with the representatives from the management companies to find out the details of their areas of specialisation. This will give you an idea whether they are appropriate for your property. The next task is to determine the duties and responsibilities that they need to handle as fixed charge receivers.
How do you appoint the receiver? The mortgage deed outlines the duties and responsibilities of the receiver. This is supplemented by the guidelines set by the Land and Conveyancing Reform Act of 2009.
The lender must create the legal document for the appointment of the receiver for the property. This document provides every detail regarding the powers of the entity. It also provides the terms and conditions of the agreement, the breach of which may lead to removal of the receiver from its position.
What is the biggest challenge for a receiver? While the lender appoints a receiver for a commercial property, and the entity must work on the lender’s behalf, the entity also needs to have a good faith relationship with the borrower.
To overcome this challenge and create a balance between the responsibilities towards the lender and the borrower, the receiver must work according to the terms set in the contract of appointment. After sale of the property, the receiver must also pay the debts and taxes and pay any remaining amount to the borrower.
Alias Hamilton has worked as property consultant in Ireland and specialises in offering real estate advice. He offers a brief overview of the way in which a property in receivership functions. He suggests the use of the services of competent property management companies for handling such situations.