Selling repossessed property - a clarification
The High Court has this week given a welcome clarification of receivers’ and lenders’ obligations when selling repossessed property over the head of the borrower.[1]
A borrower sought an injunction (initially granted) to prevent receivers from selling repossessed property too cheaply (as the borrower saw it) under section 91 of the Law of Property Act 1925. The borrower wanted more breathing space to conduct an extended marketing campaign in the hope of securing higher offers than the receivers’ own efforts had achieved. There appears to have been no serious suggestion that the receivers had misconducted the sale process, only a two in the bush type argument from a disappointed borrower. When the matter came to its return hearing the Court refused to interfere in the receivers’ actions.
The Court observed:
Section 91 powers should only be exercised in exceptional circumstances. Whilst the Court didn’t attempt to define exceptional, the starting point was that a lender was entitled to recover its money following a default and did not have to wait the most favourable market before selling.
Absent serious unfairness to the borrower, circumstances will never be exceptional. The fact that the sale would leave the borrower with a negative equity was not exceptional. It was part of the rules of the game.
In order to succeed the borrower would have needed to produce a higher offer from a buyer ready willing and able to proceed. But the Court would not entertain interfering in the receivers’ sale in the mere hope of such a person coming forward at some undetermined future time.
Isca Legal comment
Whilst this decision does not make new law, it will comfort lenders and receivers that provided they adopt a reasonable marketing strategy appropriate to the asset being sold, the Court will be very slow to criticise them.
It also reminds us that lenders do not have to wait for the market.
As ever, cases turn on the evidence before the Court. Almost all borrowers take the most optimistic view of the value of their assets. Their opinion will count for little unless backed-up by appropriate market evidence.
Both parties were commercial entities who were presumed to understand the legal framework within which they were operating. The Court hinted that a slightly more indulgent approach might be taken in residential cases.
[1] Fairmont Property Developers v. Venus Bridging [2025] 2 WLUK 453