Trustees 'can sell interest in home'
Trustees have secured flexibility in dealing with interests in a bankrupt's home after a ruling in the High Court.The court confirmed that a trustee could sell his interest in a residential property for a right to share in the proceeds of a future sale. Law firm Mischon de Reya acted for commercial landlord Metropolitan Property Realisations in the case. The landlord was owed around £100,000 and obtained a judgment then pursued an individual involved in the company for the sum. The individual then declared bankruptcy.
The Insolvency Act states that a bankrupt's interest in his own home will re-vest in him on the third anniversary of the bankruptcy unless the trustee takes steps to "realise" his interest in the property before the three year deadline. In this case the trustees were not prepared to take action in respect of the bankrupt's home so Metropolitan purchased their interest in the property for nominal amount on the condition that the trustees get a share in the proceeds.
When Metropolitan took steps to secure and sell the interest in the property, the now-discharged bankrupt and his wife objected and issued proceedings on the basis that the word "realises" in section 283A of the Insolvency Act meant the trustees had to receive cash in hand for their interest in the property before the end of the three years.
However, Justice Proudman agreed that the sale of the interest was 'realising' the interest.
Danny Davis, head of insolvency at Mishcon de Reya, said: "This is an important ruling because it clarifies the extent of a trustee's ability to deal with the bankrupt's home, usually the main asset in the bankruptcy estate. If a trustee is struggling for funds [to take action] they could sell the interest in a property to a creditor for very little money and a deferred payment."
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