Irrevocable Security power of Attorney

[CYNthesys]

Been doing a bit more digging on the effect of mental incapacity on an irrevocable security power of attorney, and came across some info on the Land Registry site
Im finding it confusing and conflicting, so perhaps someone is able to untangle it for me

Land Registry Practice Guide 36A, section 4.3. says:-

Is the disposition affected by the bankruptcy, death, incapacity, or winding up of the borrower

The mortgage will usually give the LPA receiver the right to sell or otherwise dispose of the mortgaged property and will often include a power of attorney in the receivers favour. THE POWER OF ATTORNEY IS NOT A SECURITY POWER and will not survive liquidation of a company. However the power to hold and dispose of the mortgaged property and the power to execute in the name and on behalf of the borrower will survive liquidation of a company. (Sowman v David Samuel Trust, Barrows v Chief Land Registrar)

The Barrows case does not exclude the possibility of this principle applying in the case of individual insolvency. Land Registry's view is that the right of the LPA receiver to sell on behalf of the borrower will survive winding up and bankruptcy as well as death and incapacity.

This practice guide refers only to registered land, I cant find any similar guidance in respect of unregistered land. Is there any difference for the purpose of this guidance?

Im struggling to understand the logic in the following-

Under POA 1971, with the exception of irrevocable security powers, powers cease on the mental incapacity of the donor. It says above that powers in favour of a receiver are not security powers (so in my view they should terminate when donor loses capacity) yet it goes on to say that it is the Registry's view that these powers will survive mental incapacity

HELP. it doesnt make sense to me

Can lenders transfer/confer their irrevocable security powers onto a LPA receiver?

[leclerc]

Re: Irrevocable Security power of Attorney

Been doing a bit more digging on the effect of mental incapacity on an irrevocable security power of attorney, and came across some info on the Land Registry site
Im finding it confusing and conflicting, so perhaps someone is able to untangle it for me

Land Registry Practice Guide 36A, section 4.3. says:-

Is the disposition affected by the bankruptcy, death, incapacity, or winding up of the borrower

The mortgage will usually give the LPA receiver the right to sell or otherwise dispose of the mortgaged property and will often include a power of attorney in the receivers favour. THE POWER OF ATTORNEY IS NOT A SECURITY POWER and will not survive liquidation of a company. However the power to hold and dispose of the mortgaged property and the power to execute in the name and on behalf of the borrower will survive liquidation of a company. (Sowman v David Samuel Trust, Barrows v Chief Land Registrar)

The Barrows case does not exclude the possibility of this principle applying in the case of individual insolvency. Land Registry's view is that the right of the LPA receiver to sell on behalf of the borrower will survive winding up and bankruptcy as well as death and incapacity.

This practice guide refers only to registered land, I cant find any similar guidance in respect of unregistered land. Is there any difference for the purpose of this guidance?

Im struggling to understand the logic in the following-

Under POA 1971, with the exception of irrevocable security powers, powers cease on the mental incapacity of the donor. It says above that powers in favour of a receiver are not security powers (so in my view they should terminate when donor loses capacity) yet it goes on to say that it is the Registry's view that these powers will survive mental incapacity

HELP. it doesnt make sense to me

Can lenders transfer/confer their irrevocable security powers onto a LPA receiver?

Is it about security being put on land so for example, power of attorney over MR H does not mean that you can use it as security to buy land yourself but you can take decision about the upkeep/maintenance of that land.

I hope that makes sense but I will take another look a little later on....

[CYNthesys]

Re: Irrevocable Security power of Attorney

A clause in the mortgage says: -
" The Owner hereby irrevocably appoints the Bank and any receiver or receivers appointed hereunder jointly and also severally the attorney and attorneys of the owner for the owner and in his name and on his behalf and as his act and deed or otherwise to sign, seal, deliver, and otherwise perfect any deed, assurance, agreement, instrument or act which may be required or may be deemed proper for any of the purposes hereof"

Under POA 1971 a power of attorney given as security and expressed to be irrevocable is not affected by the death/incapacity of the donor, but as the Land Registry says that powers conferred on receivers are not security powers, in my view they can only be general powers that automatically lapse on the donors loss of capacity????

If the power of attorney has been given in exchange for valuable consideration I imagine that the security powers only extend to and can be exercised by the lender and not by 3rd party receivers.

I know what my brain is thinking but its hard to put into words.

[CYNthesys]

Re: Irrevocable Security power of Attorney

Around 18 months ago BPB instructed Hugh Jory to advise me

Will have to dig out his advice, but if my memory serves me well he said that either the Bank should have sold as mortgagee or a court of protection receiver should have been appointed by the receivers?

To my mind this suggests that the irrevocable security powers were solely conferred on the Bank. This would then make sense with what Land Registry say about receivers powers not being security powers?

[CYNthesys]

Re: Irrevocable Security power of Attorney

Just come across something else that might be relevant
If a mortgage is not registered at Land Registry, the mortgage is classed as an equitable charge, not a legal charge and a receiver needs a court order to convey
Im 1000% certain that the Bank didnt register my husbands mortgage as, a land charge search was undertaken by the receivers and no results were thrown up in favour of themortgagee
This is just another angle Im going to look into

[CYNthesys]

Re: Irrevocable Security power of Attorney

HELP PLEASE, and maybe Bluebottle can let me know his views on the criminal aspect

Irrevcocable powers put another way-

Under POA 1971 general powers of attorney lapse on the mental incapacity of the donor, however under section 4 POA 1971 powers expressed as irrevocable, and given by way of security survive the donors death/mental incapacity

Mortgage irrevocable security powers are exclusively owned by the lender and do not extend to LPA Receivers because powers of attorney within a mortgage that are conferred on Law of Property Act receivers are not deemed to be security powers.

Under POA 1971 a power of attorney given to secure a proprietary interest may be given to the person entitled to the interest and persons deriving title under him to that interest, and those persons shall be duly constituted donees of the power for all purposes of the power but without prejudice to any right to appoint substitutes given by the power. It seems therefore that LPA Receivers powers can only be general powers that automatically terminate if the donor loses capacity.

I imagine that as receiver’s powers are not security powers, (they do not derive title) in the event of the donor losing capacity the only person who could lawfully exercise the powers would be the lender, as mortgagee in possession?

It seems highly illegal for a lender to confer his security powers onto a receiver, to be exercised by the LPA Receiver in circumstances such as in this case.

I think that this may be caught by s.4a) of Theft Act 1968: -
2)A person cannot steal land, or things forming part of land and severed from it by him or by his directions, except in the following cases, that it to say—

(a)when he is a trustee or personal representative, is authorised by power of attorney, or or as liquidator of a company, or otherwise, to sell or dispose of land belonging to another, and he appropriates the land or anything forming part of it by dealing with it in breach of the confidence reposed in him.

[Sparkie1723]

Re: Irrevocable Security power of Attorney

Cyn,

I know I'm not much help on this stuff ..but I would check if your First Mortgage provider securitised your mortgage which IMO they would have more likely done than not......if they did they would have to join the proceedings ......Three Rivers District Councilv the Bank of England is the case law for this.

Sparkie

[CYNthesys]

Re: Irrevocable Security power of Attorney

100%% certain it wasnt securitised, the Bank didnt even bother registering its charge with Land Registry, and the land was unregistered The sale by the receivers triggered compulsory first registration

[leclerc]

Re: Irrevocable Security power of Attorney

Cynthesis gotta say this is not in my ballpark but I have book marked this thread or subscribed to it and will take a further look tomorrow and over the weekend to see what I can do to help and try and untangle this.

[CYNthesys]

Re: Irrevocable Security power of Attorney

After reading this article it seems that I have been right all along: -


http://www.jgrweb.com/downloads/buy_to_let_property_law.pdf

Page 12. Termination of the receiver’s agency
A receiver ceases to be the agent of the borrower if that receiver (or one of two joint
receivers) receives notice:
• In the case of a borrower who is an individual, when that individual becomes bankrupt,
dies or becomes of unsound mind.
Whilst the borrower was the company, the owner of the company (the mortgagor) was of unsound mind,
• In the case of a borrower who is a company, when that company passes into liquidation.
The company had been liquidated and dissolved prior to the Receivers being appointed
On termination of the agency, the receiver does not automatically become agent of the
mortgage lender and usually becomes a principal ie. not an agent at all. American Express International Banking Corp v Hurley [1985] 3 All ER 564.

Thomas v Todd [1926] KB 51. The receiver of a company in voluntary liquidation contracted for a band of musicians to play at certain club premises. Held: The receiver was personally liable on the contract. The receiver’s agency had terminated and so he had no authority to bind the company.

If a receiver purports to act as the borrower’s agent when that agency has terminated there is a breach of warranty of authority, and the receiver may be personally liable accordingly. Lord Herschell in Gosling v Gaskell [1897] AC 575 at 592.
Despite an agency relationship between the mortgagor/owner and the Receivers being incapable of being formed in the first place the Receivers accepted their appointment and proceeded to act in the name and by the hand of the mentally incapacitated mortgagor.

When a mortgage lender takes possession of a BTL property after the appointment of a receiver, the receiver becomes the agent of the mortgagee.
Though receipt of notice of bankruptcy, death, becoming of unsound mind and liquidation terminate the receiver’s agency, they do not generally terminate the mortgage lender’s or the receiver’s statutory or express powers to manage or dispose of the property.