0370 270 6000

already registered?

Please sign in with your existing account details.

need to register?

Register to access exclusive content, sign up to receive our updates and personalise your experience on brownejacobson.com.

Privacy statement - Terms and conditions

receivers duties when selling properties - receivers don't have to wait for a better offer to come along

27 August 2008

When selling a companys property a receivers first and foremost duty is to the appointing bank so, provided he gets the best available price at the time, the receiver can choose when to sell. But what about the method of sale? How much discretion does the receiver have? The High Court looked at this question in a recent case and concluded that it was up to the receiver to decide how to market the property.

Bell v Long concerned the sale of four commercial freehold properties let as offices. HSBC had a fixed and floating charge over the assets of Dimple Property Limited (Dimple), which owned the freeholds. Pannell Kerr Forster (PKF) were appointed receivers and engaged the services of a firm of selling agents. The four properties were sold in one lot for £775,000.

Mr Bell, the director and majority shareholder in Dimple claimed that PKF had failed to comply with their duty to the company to obtain the best price reasonably obtainable. He argued that in fact the properties were worth more than £1.2 million and that at that price only three of the four properties needed to be sold to pay off the debt to HSBC. PKF had, he claimed, acted in breach of their duty in deciding to cease efforts to market the properties on an individual basis and accepting a global offer only one week after the issue of sales particulars.

The High Court rejected this argument. The judge took the opportunity to summarise the duties of a receiver when selling property on behalf of a creditor. Obviously there was a conflict between the interest of the bank wanting a quick sale and the interest of the property owner who might prefer to market the property for longer in the hope of a larger return, but case law shows that this difference must be resolved in favour of creditors. A receiver is effectively in the same position as a mortgagee and the mortgagee is entitled to sell whenever he likes in order to secure repayment of the debt owed. Quoting the Court of Appeal, there is nothing "to prevent a mortgagee from accepting the best bid he can get at auction, even though the auction is badly attended and the bidding exceptionally low".

The High Court said that it was consistent with the above principle that mortgagees and receivers alike should have a degree of latitude, not just as to the timing of the sale but also as to the method of sale. The judge observed that inevitably decisions on how and when to sell were complex and multi-faceted and the duty to obtain the best price had to be seen in that context.

In this case the receivers had not breached their duty in selling the properties in one lot as a portfolio. Although there were offers on the table for three of the properties totalling £630,000, there was no individual offer for the fourth and the receivers were entitled to give preference to the portfolio bid. It was no good to produce evidence with the benefit of hindsight that an alternative strategy would or might have produced a higher return. Inevitably, such valuations were influenced by comparable valuations which would not have been available at the relevant time.

The receivers were not bound to wait for an indefinite period in the hope of a higher price when they had a competitive bid for all of the properties in excess of individual offers. They were not, said the court, required to take that kind of risk.

focus on...

Upcoming webinars

Private sector development club

We are pleased to invite you to our first virtual private sector development club, where we guide you through a variety of topics relevant to property development, including updates on leasehold reform and planning law, plus a guide through the negotiation of promotion and option agreements.

View

Legal updates

Corporate Insolvency and Governance Bill: An overview of the significant reforms to the UK’s restructuring and insolvency regime

On 20 May 2020, the UK government published the long-awaited Corporate Insolvency and Governance Bill (the Bill) to implement the temporary measures announced by the Business Secretary on 28 March 2020 and the long planned measures contained in the government’s consultation in August 2018.

View

Legal updates

Cabinet Office advice for contractual behaviour which is impacted by the Covid-19 emergency

On the 7th May 2020, the Cabinet Office released its guidance on responsible contractual behaviour for both public and private sectors relating to the performance and enforcement of contracts which have been “materially impacted” by the coronavirus.

View

Legal updates

Deal prospects for 2020: challenges and opportunities

How will the current extraordinary events impact the transactional market? The COVID-19 crisis has certainly created enormous challenges for the deal market.

View

The content on this page is provided for the purposes of general interest and information. It contains only brief summaries of aspects of the subject matter and does not provide comprehensive statements of the law. It does not constitute legal advice and does not provide a substitute for it.

mailing list sign up



Select which mailings you would like to receive from us.

Sign up