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Buachaill
Buachaill, Barrister
Category: Law
Satisfied Customers: 10528
Experience:  Barrister 17 years experience
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What happens after a lease hold property is disclaimed by official

Resolved Question:

What happens after a lease hold property is disclaimed by official receiver, will ownership automatically revert back to the original owner (previously bankrupt) or do i need to use a vesting order to purchase - what happens if i do not use vesting order as i have a residential mortgage on the property.
Submitted: 1 year ago.
Category: Law
Expert:  Buachaill replied 1 year ago.
1. Where an Official Receiver disclaims a leasehold interest, he thereby brings it to an end. That is the leasehold interest no longer exists. The property reverts to the landlord or freehold interest who holds the reversion to the lease. But there is no longer any leasehold interest. The leasehold interest does not revert to the bankrupt as when in bankruptcy, the Official Receiver is acting as agent and trustee or the bankrupt, so the Official Receiver's actions bind the bankrupt. So if the Official Receiver disclaims a lease when appointed to a compulsory bankrupt's affairs, this terminates the leasehold interest and brings it to an end. If the bankrupt had a residential mortgage on the property, the personal debt owed by the bankrupt to the bank gets wiped clean as part of the bankruptcy. The secured interest the bank held over the leasehold property disappears, as the leasehold interest is extinguished when disclaimed by the Official Receiver. So the bank has its debt extinguished and its security removed. The bankrupt gets a clear pass out of the situation as the debt is no longer owed by him and the security the bank held over the bankrupt's leasehold interest vanishes.2. If you are the bankrupt, you no longer have any interest in this property. Nor do you have any residential mortgage any longer. However, don't expect the bank to ever offer you credit again!!
Customer: replied 1 year ago.
so, in order to retain possession of the property as vesting order must be applied for - how is the value of this obtained or agreed?
Expert:  Buachaill replied 1 year ago.
3. It is simply the market value placed on it by an auctioneer or valuer. VAlue it on the open market principle. What a willing seller would receive from a willing buyer.
Customer: replied 1 year ago.
Does this apply to section 315 when a property is onerous - i know of a person who's investment property was returned to them without a vesting order.
Expert:  Buachaill replied 1 year ago.
4. Can you explain who you are? And what is your interest in the residential leasehold property? Did you live in the property? Were you the bankrupt? Or are you a family member of the bankrupt? Is your objective to become seised of the leasehold interest in the property? This will determine where you go from here.
Customer: replied 1 year ago.
I own(ed) the property but was not living in it at the point of bankruptcy although i have a residential mortgage. I moved back into the property shortly after bankruptcy. The official receiver does not consider the property to be my primary residence but is aware that i have been paying the mortgage throughout my bankruptcy (i thought this was paying a preferred creditor if the property is not considered my family home?) Due to an issue with the boiler, the official receiver has deemed the property onerous and given me the opportunity to buy the beneficial interest with a vesting order before disclaiming but i am confused by this as I know a person who's buy to let property was returned to them when deemed onerous and disclaimed and 5 years after disclaiming/bankruptcy still own the property without a vesting order. Simply put, i am unsure whether the vesting order is the best course of action as i am confused as to what happens to my mortgage once the property is disclaimed.
Customer: replied 1 year ago.
my objective is to keep the property if i can.
Expert:  Buachaill replied 1 year ago.
5. A vesting order can be made under section 320 of the Insolvency Act, 1986. The reason the Official Receiver is seeking to disclaim the leasehold interest is that a personal liability attaches to him if he doesn't disclaim the lease. So, to be prudent, he is disclaiming the property. I don't know how your friend with the buy to let properties managed to retain ownership of them without a vesting order. It might be the case that the bankruptcy either turned out to be solvent or else the trustee in bankruptcy applies for the vesting order on his behalf.
Expert:  Buachaill replied 1 year ago.
6. Under section 320, any person living in the property may seek a vesting order. As you both now currently own it and live in it, you can apply for a vesting order. Be aware that the terms of the vesting order will be that the mortgage continue as it existed previously. This means that the bank will not be a creditor in your bankruptcy but will continue to seek repayment of the mortgage from you. There is a three month time limit after disclaimer within which the vesting order must be made. Be aware that under section 321, if you decline to accept the vesting order, then you will be excluded from any interest in the property.
Expert:  Buachaill replied 1 year ago.
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