Property Auction Solicitors and Bankruptcy Petitions by Ford Banks Irwin Solicitors - The Property Lawyers in Manchester
Please note: Not to be used or relied upon without legal advice. These notes are for illustrative purposes ONLYProperty Auctions Solicitors and Bankruptcy Petitions
Presenting a petition for a bankruptcy order against an individual has implications for Property Law Solicitors and Lawyers, the Land Registry and Land Charges Department. It affects:-
* the official registers in the Property Title Deeds; and
* the Land Charges Department record of individuals;
Land Charges Department Entries:
When a bankruptcy petition is presented or made by the creditor's Solicitors to the Court, the Court Service notifies the Land Charges Department and applies for the petition to be registered in the Land Charges register. The entry in the Land Charges register looks something like this:
DIDSBURY * MANCHESTER *
(1) P.A. (B) No 12345 Dated 1 August 2045
(2) (5) ALTRINCHAM COUNTY COURT
(6) BUILDER AND DECORATOR
(7) 1 CHEADLE ROAD, MANCHESTER
When making the entry in the register, the Land Charges Department relies on the information that the Court Service supplies, which is taken from the petition. The Land Charges Department then informs the Land Registry of all new bankruptcy petitions. When it appears that the of a sole registered owner of a registered title is affected by a bankruptcy petition, the Land Registry enters a bankruptcy notice in the title register.
Land Registry entries:
Registering bankruptcy notices: After October 2003 the wording of a bankruptcy notice that Land Registry makes in the Property Title Deeds looks like this:
BANKRUPTCY NOTICE entered under section 86(2) of the Land Registration Act 2002 in respect of a pending action, as the title of the proprietor of the registered estate appears to be affected by a petition in bankruptcy against DIDSBURY MANCHESTER, presented in the ALTRINCHAM COUNTY COURT reference 12345) (Land Charges reference number PA abcdef)
Land Registry will make a similar entry to this if the title of a sole owner of a registered charge or mortgage appears to be affected by a bankruptcy petition.
Prior to October 2003 the entry that Land Registry used to make was called a creditors notice and looked like this:
CREDITORS NOTICE entered under section 61 (1) of the Land Registration Act 1925 to protect the rights of all creditors, as the title of the proprietor of the land appears to be affected by a petition in bankruptcy against DIDSBURY MANCHESTER, presented in the ALTRINCHAM COUNTY COURT reference 12345) (Land Charges reference number PA abcdef)
Land Registry also used to make a similar entry if the title of a sole owner of a registered charge or mortgage appeared to be affected by a bankruptcy petition.
Confusion over names: It is inevitable that an entry will occasionally appear under a name in the register maintained by the Land Charges Department that is the same as that of a person who is not the debtor. Normally, the other details in the entry, such as the address and occupation, will make it apparent that that person is not the debtor. If the additional details are limited, however, confusion can arise.
If, when the Land Charges Department informs Land Registry of new bankruptcy petitions, there are any doubts about whether the debtor is the owner referred to in a title register, the Land Registry will write to the owner before entering a bankruptcy notice. This letter will be sent to the address given in the title register. Although this address is often the same as the address of the Property, this is not always the case. In addition, owners are notified when the bankruptcy notice is entered in the title register. If, despite these steps it later transpires that the owner is not the debtor, Land Registry can cancel the entry.
The effect of a bankruptcy petition:
When Solicitors present a bankruptcy petition to the Court, one effect it has is that subsequent disposal of certain Property will generally be void if the bankruptcy order is made, unless the Court consents to the disposal.
This Property includes any estate of which the debtor is the sole beneficial owner. Anyone intended to buy such a Property is unlikely to proceed if there is a petition registered in the Land Charges register or a bankruptcy notice in the title register.
What happens if the bankruptcy petition is withdrawn or dismissed?
The creditor's Solicitors may withdraw a bankruptcy petition with the consent of the Court. The Court may also dismiss a petition. When a bankruptcy petition is withdrawn or dismissed, the Court is obliged to make an order that provides for the registration of the bankruptcy petition in the Land Charges register to be cancelled. It is up to the debtor or debtor's Solicitors to apply to the Land Charges Department to remove the entry, however. The Court will not make the application. If the estate is registered, the debtor or debtor's Solicitors needs to apply to Land Registry for removal of the bankruptcy notice.
How to remove a bankruptcy entry from the Land Charges Department?
The debtor's Solicitors will complete the correct form and submit the appropriate fee to the Land Charges Department.
The application form must be accompanied by a copy of the Court Order that expressly provides for the cancellation (or vacation) of the bankruptcy entry in the Land Charges register under the reference number specified in the bankruptcy notice. After the Land Charges Department has dealt with the application to remove the entry - usually on the same day as the application is received - they will inform the debtor's Solicitors that the entry has been removed.
How remove the notice from the Land Registry Property Title Deeds?
Court Order: The debtor's Solicitors must submit the correct form and include with it a copy of the Court Order under which the petition has been dismissed or withdrawn, that should also expressly authorise the cancellation of the entry in the Land Charges register under the reference number specified in the bankruptcy notice.
The Court Order must be the original or a certified by the Solicitors as a true copy of the original Court Order.
Where the owner is not the debtor: If you, as the owner of the Property, are not the debtor, your Solicitors can apply to Land Registry for removal of the bankruptcy notice on that basis. The requirements are the same other than in place of the Court Order, you must sent a signed statement to the effect that you are not the debtor named in the bankruptcy proceedings referred to in the Title Register of the Property Title Deeds. If the registrar is satisfied that this is the case, the bankruptcy notice will be cancelled. In some cases the Registrar will ask for a statutory declaration as opposed to a statement.
Unfamiliar Terms explained:
Bankruptcy Notice - the entry made in the Property Title Deeds in respect of a bankruptcy petition;
Creditor - the person who presented the bankruptcy petition.
Debtor - the person against whom the petition was made;
Estate - a person's interest in Land or Property, that may be freehold or leasehold.
Land Charges Register - the registers kept by the Land Charges Department, including the register of pending actions
Title Register - the individual register of the Property Title Deeds held for each separate estate by Land Registry.
(All italics in this page are Crown Copyright and reproduced here for your information with permission from HM Land Registry)
Placing the bankrupt's Property in an Auction:
Many Property Law Solicitors and Lawyers are asked to prepare an Auction Pack for Properties that are to be sold by Trustees of the Bankrupt at a Property Auction.
The Solicitor or Lawyer will liaise with the Trustees to choose the searches to be included in the Property Auction Pack.
The Solicitor or Lawyer will complete the sale of the Property following the Auction and place the sale proceeds with the Trustees. The Trustees can then distribute the funds in accordance with the Court Order.
For any further information please contact Ford Banks Irwin Solicitors.