Practice Guide 34 – Personal insolvency

Updated: September 2012

Update

This edition of the guide replaces the February 2011 edition. Amendments have been made as a result of the issue of new Practice Guide 36A – Receivers appointed under the provisions of the Law of Property Act 1925, to clarify the procedure following disclaimer, and also as a result of the Land Registration (Amendment) Rules 2011, which change the definition of ‘conveyancer’ to make it consistent with the Legal Services Act 2007.

Scope of this guide

This guide explains what entries may be made on the register of a title where the proprietor, or one of the proprietors, is a person subject to bankruptcy proceedings. It also explains how insolvency affects powers of disposition. It is aimed at conveyancers and trustees in bankruptcy. Land Registry staff will also refer to it.

1 Abbreviations and terms used

In this guide:

‘conveyancer’ means an authorised person within the meaning of s.18, Legal Services Act 2007 who is entitled to provide the conveyancing services referred to in paragraphs 5(1)(a) and (b) of Schedule 2 to that Act, or a person carrying out those activities in the course of their duties as a public officer. It also includes an individual or body who employs or has among their managers such an authorised person who will undertake or supervise these conveyancing activities (r.217A, LRR 2003)

‘credit account’ means an account authorised by the registrar under the current Land Registration Fee Order. For more information please contact the Accounts Section, Land Registry, Seaton Court, 2 William Prance Road, Plymouth PL6 5WSY

‘day list’ means the computerised record of pending first registration applications, pending dealings applications and official searches with priority (the priority of which has not expired) kept under r.12, LRR 2003

‘debtor’ means an individual who is, or has been (whether or not the proceedings have been dismissed, withdrawn, annulled or rescinded and whether or not the person is or is not a bankrupt or discharged bankrupt) the subject of bankruptcy proceedings under the IA 1986

‘EA 2002’ means the Enterprise Act 2002

‘IA 1986’ means the Insolvency Act 1986

‘IR 1986’ means the Insolvency Rules 1986

‘LCA 1972’ means the Land Charges Act 1972

‘LRA 2002’ means the Land Registration Act 2002

‘LRR 2003’ means the Land Registration Rules 2003

‘proper office’ means the Land Registry office designated as responsible for the administrative area (that is the local authority serving the area) in which a particular property is situated – see Practice Guide 51 – Areas served by Land Registry offices.

2 Introduction

This guide explains the land registration issues and procedures whenever bankruptcy proceedings are undertaken against an individual. It describes the entries we will make when the debtor is a sole or joint registered proprietor. It explains the nature and effect of a bankruptcy notice, a bankruptcy restriction and a Form J restriction and the evidence required to remove those entries. It explains the position of the Official Receiver and of a trustee in bankruptcy. It provides brief guidance on after-acquired property, the disclaimer of onerous property and other associated topics. Finally, it gives guidance about entries and searches at the Land Charges Department.

This guide assumes that the bankruptcy proceedings were begun on or after 29 December 1986, this being the date on which the IA 1986 and IR 1986 came into force.

See also Practice Guide 35 – Corporate insolvency, Practice Guide 36 – Administration and receivership and Practice Guide 36A – Receivers appointed under the provisions of the Law of Property Act 1925 for further information about these subjects.

3 Bankruptcy proceedings where the debtor is the sole registered proprietor

3.1 General

The bankruptcy process involves two stages.

• The bankruptcy petition to the court for a bankruptcy order.

• The bankruptcy order subsequently made by the court.

After the bankruptcy order is made a trustee in bankruptcy is appointed. The trustee will be either an authorised insolvency practitioner (ss.388-398, IA 1986) or the Official Receiver.

When the appointment of the trustee in bankruptcy takes effect the bankrupt’s estate (defined in s.283, IA 1986) vests in the trustee automatically without any transfer (s.306, IA 1986). That estate includes any registered property or registered charges that the bankrupt person owns for their own benefit. Property held by the bankrupt on trust for any other person is excluded (s.283(3)(a), IA 1986).

3.2 Making of bankruptcy entries

As explained in section 9 Registration and cancellation of bankruptcy entries and official searches at the Land Charges Department, bankruptcy petitions and bankruptcy orders are registered at the Land Charges Department. This is whether or not it is known that the debtor owned property and whether or not they own any registered property or registered charges.

The registrar must, as soon as practicable after the registration of a bankruptcy petition at the Land Charges Department, register a bankruptcy notice against the title of a sole proprietor of any registered property or charge which appears to be affected (s.86(2), LRA 2002).

Similarly, the registrar must, as soon as practicable after the registration of a bankruptcy order at the Land Charges Department, register a bankruptcy restriction against the title of a sole proprietor of any registered property or charge which appears to be affected (s.86(4), LRA 2002).

Where the debtor is a joint proprietor, bankruptcy notices and bankruptcy restrictions are never entered – see section 6 Bankruptcy proceedings where the debtor is a joint proprietor.

When a bankruptcy petition or a bankruptcy order is registered in the Land Charges Department, the department provides Land Registry Bankruptcy Unit with:

• details of the bankruptcy proceedings, which include the name of the debtor and details of the bankruptcy petition or bankruptcy order
• a list of title numbers which may be affected. This is taken from the index of proprietors’ names, which the registrar is required to keep under r.11, LRR 2003. This shows the names of the proprietors of the property and of any registered charge together, in each case, with the title number in respect of the register of each title.

Land Registry Bankruptcy Unit is at Seaton Court, 2 William Prance Road, Plymouth PL6 5WS.

Based on the available information, Land Registry then decides whether the debtor disclosed in the bankruptcy proceedings is the same person as the registered proprietor of the property or of any charges on the titles which have been revealed. If it is clear that the debtor is not the registered proprietor then we will take no further action. If it appears that the debtor is the registered proprietor, we will make an appropriate entry in the register of the title affected and inform the registered proprietor.

In some cases we cannot initially determine whether the debtor is the registered proprietor. In such cases, we will make an enquiry of the registered proprietor under r.167(2), LRR 2003 at their address for service (and to the property address, if different) whether they are the person referred to in the bankruptcy proceedings. If the registered proprietor signs the statement that they are not the person referred to and returns the form to us, then no further action will be taken, unless there are exceptional circumstances. If the registered proprietor states that they are the debtor, then we will make an entry. If they do not respond within the time allowed, another enquiry will be sent. If there is still no response, we will usually make an entry.

3.3 Form and effect of a bankruptcy notice

R.165(1), LRR 2003 prescribes the form of a bankruptcy notice. Where registered property is affected, we will enter the following form of notice in the proprietorship register.

‘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 [name of debtor], presented in the [name] Court (Court Reference Number_________ ) (Land Charges Reference Number PA_________ ).’

Where a registered charge is affected, we will enter the following form of notice in the charges register.

‘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

charge dated_________ referred to above appears to be affected by a petition in bankruptcy against [name of debtor], presented in the [name] Court (Court Reference Number_________ ) (Land Charges Reference Number PA_________ ).’

Unless cancelled by the registrar (see section 4 Removal of bankruptcy entries (bankruptcy notices and restrictions)), a bankruptcy notice remains in force until a bankruptcy restriction is registered, or the trustee in bankruptcy (s.86(3), LRA 2002) or a purchaser from the trustee in bankruptcy is registered.

If we receive an application by the registered proprietor of the property to register a transfer, charge or lease after the entry of a bankruptcy notice against the registered property, the registration will be made subject to the bankruptcy notice. This is unless it is clear the interest of the transferee, chargee or lessee has priority over the bankruptcy proceedings. We will do this by entering a note in the register. In the case of a transfer of whole the following will be entered.

‘The registration of the proprietor is subject to the rights of all creditors of [transferor’s name] (a former proprietor) protected by the Bankruptcy Notice(s) referred to above.’

This entry will be suitably adapted for transfers of part, charges of whole or part and leases of whole or part. The note will be cancelled if the bankruptcy notice giving rise to it is cancelled.

If there is a bankruptcy restriction entered as well as the bankruptcy notice, then such dealings cannot, usually, be registered (see sections 3.4 Form and effect of a bankruptcy restriction and 3.5 Protection of purchasers).

3.4 Form and effect of a bankruptcy restriction

R.166(1), LRR 2003 prescribes the form of a bankruptcy restriction. Where registered property is affected the following form of restriction is entered in the proprietorship register.

‘Bankruptcy Restriction entered under section 86(4) of the Land Registration Act 2002, as the title of the proprietor of the registered estate appears to be affected by a bankruptcy order made by the [name] Court (Court Reference Number_________ ) against [name of debtor] (Land Charges Reference Number WO_________ ).

No disposition of the registered estate is to be registered until the trustee in bankruptcy of the property of the bankrupt is registered as proprietor of the registered estate.’

Where a registered charge is affected the following form of restriction is entered in the charges register.

‘Bankruptcy Restriction entered under section 86(4) of the Land Registration Act 2002, as the title of the proprietor of the charge dated referred to above appears to be affected by a bankruptcy order made by the [name]

Court (Court Reference Number_________ ) against [name of debtor] (Land Charges Reference Number WO_________ ).

No disposition of the charge is to be registered until the trustee in bankruptcy of the property of the bankrupt is registered as proprietor of the charge.’

The effect of the bankruptcy restriction is that no disposition (other than the registration of the trustee in bankruptcy) affecting the property or charge in respect of which the restriction has been entered can be completed by registration until the restriction is cancelled as to the whole or part of the property or charge. The restriction may additionally have the effect of precluding the entry of notices to protect certain third party interests.

The entry of a bankruptcy restriction does not prejudice dealings with, or in right of, interests or charges having priority over the bankrupt’s charge or estate. So, for example, the proprietor of a registered charge, which was registered before a bankruptcy restriction (and any bankruptcy notice) was entered in respect of the registered property, could exercise their power of sale, notwithstanding the entry of the bankruptcy restriction in the proprietorship register. However, the restriction would need to be considered on a disposition by a receiver appointed by the chargee because the receiver is agent for the chargor, not the chargee.

3.5 Protection of purchasers

S.86(5), LRA 2002 provides that where the proprietor of a registered estate or charge is adjudged bankrupt, the title of their trustee in bankruptcy is void against a person to whom a registrable disposition of the estate or charge is made if:

• the disposition is made for valuable consideration
• the person to whom the disposition is made acts in good faith
• at the time of the disposition no bankruptcy notice or bankruptcy restriction has been entered against the registered estate or charge. Where an application to enter a bankruptcy notice or bankruptcy restriction is taken out during the priority period of an official search made by a purchaser and the purchaser lodges their application within that period any entry of the notice or restriction will be postponed to the purchase (rr.147-154, LRR 2003)
• at the time of the disposition, the person to whom the disposition is made has no notice of the bankruptcy petition or adjudication.

A person to whom a registrable disposition is made is not required to make any search under the LCA 1972 (s.86(7), LRA 2002).

4 Removal of bankruptcy entries (bankruptcy notices and restrictions)

4.1 Removal where the bankruptcy proceedings do not relate to the registered proprietor

There will be occasions when we make a bankruptcy entry (ie a bankruptcy notice or restriction) because the title appears to be affected when, in fact, it is not. This is usually because the debtor and the registered proprietor have a similar or the same name, address or occupation, or where an entry has been made owing to the lack of any response to a notice (r.167(1)(c), LRR 2003). See section 3.2 Making of bankruptcy entries.

If we have made a bankruptcy entry against a person’s title to property, or a charge, and that person is not affected by the bankruptcy proceedings, they (or their legal adviser) should contact us immediately. If we have made the entry recently, then, normally, we will remove it when the person signs and returns a disclaimer (supplied by Land Registry) that they were not the subject of the bankruptcy proceedings. In some cases, particularly where the entry was made some years ago, they may be required to supply a statutory declaration or statement of truth to similar effect.

Production of a clear land charges search showing that the registration of the relevant bankruptcy petition and/or order under the LCA 1972 is no longer subsisting is not sufficient without further evidence. This is because such registrations expire five years after the registration date (unless renewed) (s.8, LCA 1972). Furthermore, even where the five-year period has not expired, the entries may have been removed pursuant to an order under s.1(6), LCA 1972. However, neither expiry nor an order under s.1(6) re-vests any property, which has vested in the trustee in bankruptcy, in the bankrupt or former bankrupt.

4.2 Removal of bankruptcy notice where the bankruptcy petition is dismissed or withdrawn by leave of the court

Where a bankruptcy petition has been dismissed or withdrawn by leave of the court, an application to cancel a bankruptcy notice must be made on Land Registry form AP1 accompanied by an office copy of the relevant court order in form 6.22 (in Schedule 4, IR 1986). The order must expressly authorise the cancellation of the pending land action at the Land Charges Department under the reference number set out in the bankruptcy notice. No fee is payable.

4.3 Removal of bankruptcy entries (bankruptcy notices and restrictions) where the bankruptcy order is annulled or rescinded

Where a bankruptcy has been annulled or rescinded by the court an application to cancel a bankruptcy notice and/or bankruptcy restriction must be made on Land Registry form AP1 accompanied by an office copy of the relevant order of annulment in form 6.71 (in Schedule 4, IR 1986), or the order for rescission under s.375, IA 1986. The order must expressly authorise the cancellation of the pending land action and/or the bankruptcy order in the register of writs and orders affecting land at the Land Charges Department under the reference numbers set out in the bankruptcy notice and/or bankruptcy restriction. No fee is payable.

4.4 Discharge from bankruptcy

Discharge from bankruptcy does not entitle a debtor to have any bankruptcy entries cancelled because discharge does not re-vest property in the debtor. Consequently, a consent by the trustee in bankruptcy to the removal of any bankruptcy entries is not sufficient.

The registered property or charge will have vested in the trustee in bankruptcy even if they are not registered as proprietor. Except as mentioned in section 4.5 Re-vesting of the bankrupt’s home, a transfer by the trustee in bankruptcy will be required before the land or charge can be re-vested in the former bankrupt. If the trustee in bankruptcy is not registered as proprietor the transfer must be supported by bankruptcy evidence (as described in section 5.2 Registration of the Official Receiver or the trustee in bankruptcy as proprietor).

Sometimes a debtor will obtain an order, under s.1(6), LCA 1972, ordering that the registration of a bankruptcy petition (under s.5, LCA 1972) and/or a bankruptcy order (under s.6, LCA 1972) be vacated. Upon an appropriate application in form K11 together with the prescribed fee being lodged at the Land Charges Department, the entry (or entries) will be vacated. However, unlike an order annulling or rescinding a bankruptcy order, such an order does not re-vest property in the bankrupt. Any property or charge (whether registered or unregistered) which has vested in the trustee in bankruptcy will remain so vested. Therefore, a bankruptcy notice or bankruptcy restriction will not be removed from a registered title if such an order is lodged.

Bankruptcy entries will never be cancelled purely on the basis of a clear land charges search against the debtor – see section 4.1 Removal where the bankruptcy proceedings do not relate to the registered proprietor.

4.5 Re-vesting of the bankrupt’s home

Section 283A, IA 1986 (inserted by the EA 2002 with effect from 1 April 2004) contains provisions that apply where the bankrupt’s estate includes an interest in a dwellinghouse which, at the date of the bankruptcy order, was the sole or principal residence of either:

• the bankrupt
• the bankrupt’s spouse or civil partner, or
• a former spouse or former civil partner of the bankrupt.

The interest will automatically re-vest in the debtor (without any transfer, assignment or conveyance) three years after the date of the bankruptcy order, unless the trustee in bankruptcy takes action to deal with the interest in the meantime, for instance by selling it or applying for a possession order.

However, if the bankruptcy order was made before 1 April 2004 the period is three years from 1 April 2004.

The three-year period can be extended by order of the court, or if the debtor fails to inform the trustee in bankruptcy or the official receiver of their interest in the property. The three-year period can also be reduced in certain circumstances. If the trustee in bankruptcy considers that:

• the continuing vesting of the property in the bankrupt's estate is of no benefit to the creditors, or
• the re-vesting to the bankrupt will facilitate a more efficient administration of the bankrupt's estate the trustee can send the bankrupt a notice to that effect. The property will then re-vest in the bankrupt one month after the date of the notice (r.6.237CA, IR 1986). See also section 7 Charging order in favour of the Official Receiver or the trustee in bankruptcy.

Where re-vesting occurs in respect of a registered estate or charge which had vested in the trustee in bankruptcy because the debtor was a sole proprietor, the trustee in bankruptcy must, within seven days, make whatever Land Registry application is necessary to reflect the re-vesting on the register (r.6.237A, IR 1986).

This will normally be an application to cancel the bankruptcy restriction (or inhibition). The documents needed are:

• form RX3
• a certificate by the trustee stating that the interest has vested in the bankrupt under s.283A(2) or 283A(4), IA 1986 or s.261(8), EA 2002
• unless the applicant is the Official Receiver, evidence of their appointment as specified in section 5.2 Registration of the Official Receiver or the trustee in bankruptcy as proprietor under the heading – Where the trustee is not the Official Receiver.

No fee is payable.

We will also cancel any bankruptcy notice which relates to the petition under which the bankruptcy order was made. We will not cancel any other bankruptcy notice without the evidence specified in sections 4.1 Removal where the bankruptcy proceedings do not relate to the registered proprietor, 4.2 Removal of bankruptcy notice where the bankruptcy petition is dismissed or withdrawn by leave of the court and 4.3 Removal of bankruptcy entries (bankruptcy notices and restrictions) where the bankruptcy order is annulled or rescinded.

If a re-vesting occurs in a case where the trustee in bankruptcy has been registered as proprietor, the appropriate application is in form AP1 requesting alteration of the register under paragraph 5(b) of Schedule 4, LRA 2002, accompanied by a certificate by the trustee as above. No fee is payable.

Where re-vesting occurs in respect of unregistered land, the trustee in bankruptcy must give the bankrupt a Certificate of Vesting in form 6.84 (prescribed by the IR 1986). This certificate is conclusive proof that the interest has re-vested in the bankrupt. The bankruptcy entries in the Land Charges Register will not be cancelled as they may continue to affect other land.

Where the re-vesting occurs in respect of the interest of a debtor who is a joint proprietor, see section 6.4 Re-vesting of debtor’s beneficial interest.

5 The trustee in bankruptcy and registered property

5.1 Debtor is registered as sole proprietor

Where an individual who is registered as the sole proprietor of property or of a charge for their own benefit is made bankrupt, the property or charge will form part of the bankrupt’s estate (as defined in s.283, IA 1986) and when the appointment of a trustee in bankruptcy takes effect the property or charge will vest in the trustee (s.306, IA 1986). This vesting occurs automatically without the need for any formal transfer.

The trustee may apply to be registered as proprietor or transfer the property or charge without becoming registered (see sections 5.2 Registration of the Official Receiver or the trustee in bankruptcy as proprietor and 5.3 Transfer by the Official Receiver or the trustee in bankruptcy where the trustee is not registered as proprietor).

5.2 Registration of the Official Receiver or the trustee in bankruptcy as proprietor

When the estate of a bankrupt proprietor has vested in the Official Receiver as trustee or is vested in an authorised insolvency practitioner as the debtor’s trustee, they may apply to be registered in place of the debtor (r.168(1), LRR 2003). The application must be made in Land Registry form AP1 accompanied by:

• the bankruptcy evidence
• a certificate as to the value of the land or charge
• the fee assessed on that value under the current Land Registration Fee Order.

For land registration purposes (r.168(2), LRR 2003), the bankruptcy evidence consists of:

• an office or certified copy of the bankruptcy order (see NB below)
• a certificate, signed by the trustee, that the registered estate or charge is comprised in the bankrupt’s estate
• where the Official Receiver is trustee, a certificate by the Official Receiver to that effect.

(NB: Land Registry will now accept a copy of an electronic order issued by the court to the Official Receiver’s office, provided that the copy order has been certified by the Insolvency Service.)

Where the trustee is not the Official Receiver, one of the following.

• A certified copy of the certificate of appointment as trustee by the meeting of the bankrupt’s creditors.
• The certificate of appointment as trustee by the Secretary of State.
• An office or certified copy of the order of the court making the appointment.

(If the bankruptcy proceedings began before 29 December 1986, a certificate by the Department for Business, Innovation and Skills (or by the Department of Trade and Industry, if the certificate is dated prior to 12 December 2007) of the appointment of the trustee in bankruptcy is required in place of one of the above certificates or court order.)

Registration will be completed in the name of the Official Receiver or other trustee who will be described as the:

• "Official Receiver and trustee in bankruptcy of [name of bankrupt]", or
• "Trustee in bankruptcy of [name of bankrupt]" (r.170, LRR 2003).

5.3 Transfer by the Official Receiver or the trustee in bankruptcy where the trustee is not registered as proprietor

Where the Official Receiver or trustee in bankruptcy sells the property or charge without first being registered as proprietor, the purchaser must lodge, at the proper office, the bankruptcy evidence, defined in section 5.2 Registration of the Official Receiver or the trustee in bankruptcy as proprietor, in addition to the transfer and Land Registry fee.

5.4 After-acquired property

After a bankruptcy order is made the debtor must, within 21 days of becoming aware of the relevant facts, give notice to the trustee of any property that they acquire or devolves upon them (s.333, IA 1986 and r.6.200(1), IR 1986). The debtor must not, without the trustee’s consent, dispose of this property within 42 days of the date of the notice (r.6.200(2), IR 1986). Within that period the trustee may claim such property by written notice to the debtor. This does not apply to property that is excluded from a bankrupt’s estate, nor to property acquired after discharge.

Upon service of the trustee’s notice the property vests in the trustee whose title relates back to the date at which it vested in the debtor (s.307(3), IA 1986).

If a debtor disposes of property in breach of these provisions the trustee may claim the property from the disponee. However, no such action is possible against a disponee who acquires in good faith for value and without notice of the bankruptcy.

Sometimes bankruptcy entries may not appear on the register of after-acquired property. This is because, although the debtor has been registered as proprietor subsequent to their acquisition, they were not so registered when the bankruptcy petition and order were registered in the Land Charges Department. In these circumstances, a disponee for valuable consideration will be protected provided they act in good faith, has no notice of the bankruptcy and completes the registration of their disposition in the usual way (s.86(5),LRA 2002).

5.5 Disclaimer by the trustee in bankruptcy

5.5.1 Power to disclaim onerous property

By giving the prescribed notice a trustee in bankruptcy may disclaim onerous property (s.315, IA 1986). Such notice must not be given in respect of after-acquired property without the leave of the court (see section 4.2 Removal of bankruptcy notice where the bankruptcy petition is dismissed or withdrawn by leave of the court) nor in cases where the trustee has failed to elect to disclaim within 28 days after a request by an interested party (s.316, IA 1986). The notice operates to determine the rights, interests and liabilities of the debtor and their estate in respect of the property. It does not affect the rights or liabilities of any other person (s.315(3), IA 1986).

5.5.2 Notifying Land Registry without a formal application

Under r.6.178(3), IR 1986, the trustee in bankruptcy must send Land Registry a copy of the notice of disclaimer of a registered estate or of a registered charge as soon as reasonably practicable after it has been authenticated (ie signed) and dated by the trustee. This can be a plain copy. No formal application in form AP1 is required at this stage and no fee is payable. We will make a note in the register in the following terms.

“NOTE 1: A notice dated [….] by the trustee in bankruptcy of […..] stated that the [registered estate in this title] [registered charge dated […] referred to above]  was being disclaimed under section 315 of the Insolvency Act 1986.

NOTE 2: Copy filed.”

Although a trustee in bankruptcy is not required to send us a copy of a notice of disclaimer of a noted or beneficial interest, we will make a similar note if the notice relates to a noted interest. However, we will not make any entry if the notice of disclaimer relates only to a beneficial interest. 

5.5.3 Disclaimer of leaseholds

A disclaimer of leasehold property does not take effect until:

• a copy of the disclaimer has been served on any underlessee or mortgagees (if the property is a dwellinghouse a copy must be served on every person in occupation or claiming a right to occupy the house)

and either:

• 14 days have elapsed from the day on which the last notice was served without an application for a vesting order having been made to the court, or
• the court has directed that the disclaimer is to take effect (s.317, IA 1986).

A trustee in bankruptcy who has disclaimed a registered lease may apply for notice of the disclaimer to be entered in the register with or without an application to close the title under r.79, LRR 2003 and/or to cancel notice of an unregistered lease in the landlord’s title.

5.5.3.1 Application to enter notice of disclaimer and/or to close the registered leasehold estate under r.79, LRR 2003

The application must be made in form AP1 accompanied by:

• a copy of the notice of disclaimer unless there is already a notification entry in the property register as in section 5.5.2 Notifying Land Registry without a formal application
• the bankruptcy evidence mentioned in section 5.2 Registration of the Official Receiver or the trustee in bankruptcy as proprietor
• the fee as prescribed under the current Fee Order.

If applying to close the registered leasehold title, you must also lodge:

• the original lease (or an adequate explanation of why it cannot be produced)
• evidence of devolution of title if the bankrupt is not the original lessee.

If there is no evidence of any registered or noted charge, sub-lease other third party rights affecting the disclaimed leasehold title, or you can provide satisfactory evidence that every such interest has also come to an end, we will close the leasehold title and cancel any notice of the lease on the landlord’s registered title.

However, as determination of a lease by disclaimer does not affect the rights and liabilities acquired before the disclaimer by persons other than the tenant, we will not close the registered leasehold title if there is a registered or noted charge in the disclaimed leasehold title unless you also lodge:

• an application to discharge the registered charge or to cancel the entry of the noted charge
• evidence that the chargee’s application for a vesting order has been dismissed (so that the chargee is excluded from all interest in the property under s.321(4), IA 1986), or
• evidence of forfeiture of the lease.

If we cannot close the registered leasehold title because there is evidence of a continuing registered or noted charge, we will make the following entries in the title for the disclaimed lease.

• In the property register:

“This lease was disclaimed by the trustee in bankruptcy of the registered proprietor on [date] pursuant to section 315 of the Insolvency Act 1986.

NOTE: Copy disclaimer filed”.

• In the proprietorship register:

“RESTRICTION: No disposition of the registered estate is to be completed by registration.”

We will also add the following note to the notice of the disclaimed lease in the landlord’s freehold or superior leasehold title:

“This lease was disclaimed by the trustee in bankruptcy of the registered proprietor on [date]. The registered leasehold title has not been closed because there is a subsisting [registered] or [noted] charge in favour of [name] dated [date].

NOTE 1: Copy disclaimer filed under [leasehold title number].”

The leasehold title for a disclaimed lease may be closed if there is no registered or noted charge but there is a registered sublease or other third party rights noted in title, in which case the following entries will be made:

• in the property register of any noted registered sublease:

“The lessor’s title was registered but the lease was disclaimed by the trustee in bankruptcy of the registered proprietor on [date].

NOTE: Copy disclaimer filed under [leasehold title number].”

• and in the charges register or L Schedule of the landlord’s title:

“This lease was disclaimed by the trustee in bankruptcy of the registered proprietor on [date]. The registered leasehold title has been closed. There [is a] or [are] subsisting [underleasehold or details of other surviving right(s)] interest under this lease.

NOTE: Copy disclaimer filed [under title number].”

5.5.3.2 Application to cancel notice of an unregistered lease

The application must be lodged in form CN1 accompanied by:

• the original lease (or an adequate explanation if it cannot be produced)
• evidence of devolution of title if the bankrupt is not the original lessee
• the fee based as prescribed under the current Fee Order.

Where there is no evidence of any charge, sub-lease or of other third party rights affecting the disclaimed noted lease, then the notice of the lease in the landlord’s title may be cancelled.

Where there is evidence of a continuing charge, sub-lease or other third party rights affecting the disclaimed noted lease, the notice of the lease cannot be cancelled, but the following entries will be made:

• in the property register of any subsisting registered sub-lease granted out of the unregistered lease:

“NOTE 1: The lessor’s lease was disclaimed by the trustee in bankruptcy on [date].

NOTE 2: Copy disclaimer filed under [freehold/superior leasehold title number].”

• and in the existing entry for the lease in the charges register or L Schedule of the landlord’s leasehold title:

“NOTE 1:This lease was disclaimed by the trustee in bankruptcy on [date]. There [is a ] or [are] subsisting [underleasehold or details of other surviving right(s)] interest under this lease.

NOTE 2: Copy disclaimer filed.”.

5.5.4 Disclaimer of freeholds

Although it is less frequently encountered, a disclaimer of a registered freehold title is possible. If no vesting order is made by the court, the freehold estate determines and the property escheats to the Crown or to one of the Royal Duchies of Cornwall or Lancaster. However, we do not close the registered title unless and until we register either a grant of a new freehold estate from the Crown or a transfer from one of the Royal Duchies.

5.5.4.1 Notifying Land Registry of the disclaimer without a formal application

The requirements are as stated in section 5.5.2 Notifying Land Registry without a formal application.

5.5.4.2 Application for a formal notice of disclaimer to be entered in the register under rr.79 and 173, LRR 2003

The requirements are as stated in section 5.5.3.1 Application to enter notice of disclaimer and / or to close the registered leasehold estate under r.79, LRR 2003.

We will make the following entry in the property register:

“The registered estate in this title has determined on disclaimer by the trustee in bankruptcy on [date] pursuant to section 315 of the Insolvency Act 1985.

NOTE: Copy disclaimer filed.”

If the escheated title is subject to any registered lease(s), we will also make the following entry in the property register for the leasehold title:

“The [lessor’s (or as the case may be)] registered estate has determined on disclaimer by the trustee in bankruptcy on [date] pursuant to section 315 of the Insolvency Act 1986 but the entries relating to the estate continue in the register.

NOTE: Copy disclaimer filed under [disclaimed freehold title number].”

We may qualify the above entries where there is some doubt as to whether escheat has taken place.

5.6 Rights of occupation

The following rights constitute a charge on the estate or interest vested in the trustee in bankruptcy.

• Where a spouse’s or civil partner’s home rights under the Family Law Act 1996 are a charge on the estate or interest of the spouse or civil partner who is subsequently made bankrupt (s.336(2), IA 1986).
• Where, by virtue of a beneficial estate or interest, a person occupies a dwellinghouse and is adjudged bankrupt and, at the time when the petition was presented and when the bankruptcy order was made, a person under the age of 18 had their home with the bankrupt (s.337(2), IA 1986).

An application to the court will be necessary to enable the trustee in bankruptcy to deal with the property free of such rights of occupation (ss.336(3) and 337(2), IA 1986).

If the application is made more than one year after the vesting of the estate or interest in the trustee the court is bound to assume, except in exceptional circumstances, that the creditor’s interests outweigh other considerations (ss.335(6) and 337(6), IA 1986).

5.7 Sale by prior chargee

If a charge is already registered before a bankruptcy notice or a bankruptcy restriction is registered the chargee’s interest has priority over the bankrupt’s estate.

If a prospective chargee obtains a clear certificate in response to an official search to protect a proposed charge, and delivers the application to register the charge to the proper office within the priority period of the search then, again, the chargee’s interest has priority over the bankrupt’s estate. (This is so even if the information relating to the bankruptcy proceedings is provided to Land Registry Bankruptcy Unit before the application is made because the official search result confers priority on the applicant charge.)

In either of the above situations, upon an application being made to register a sale by the chargee exercising the chargee’s statutory power of sale, the transferee will be registered and the bankruptcy entries cancelled. (However, the situation is different for a sale by a receiver appointed by the chargee.

Such a receiver is agent for the chargor and does not exercise the chargee’s statutory power of sale.)

6 Bankruptcy proceedings where the debtor is a joint proprietor

6.1 General

Where there are two or more joint proprietors of a registered title they hold the legal estate as trustees. The joint proprietors may, as individuals, also be beneficiaries under the trust (for example, beneficial joint tenants or tenants in common).

If one of those joint proprietors is made bankrupt the consequences are as follows.

• Any beneficial interest of the debtor in the trust on which the property is held, or in the proceeds of sale under such a trust, is part of the bankrupt’s estate and so vests in the trustee in bankruptcy (s.306, IA 1986). No details of the vesting will be recorded in the register.
• If the debtor is a beneficial joint tenant, the joint beneficial tenancy is automatically severed.
• There is no change in the legal estate, which remains vested in the joint proprietors (including the debtor). The legal joint tenancy cannot be severed (ss.36(2) and (3), Law of Property Act 1925). The legal estate does not form part of the bankrupt’s estate (s.283(3), IA 1986). No bankruptcy notice or bankruptcy restriction will be entered on the register. On any disposition the joint proprietors (including the debtor) continue to be the persons who must execute the relevant deed.

6.2 Entry of Form J restriction in favour of the trustee in bankruptcy and/or of Form A restriction

The Official Receiver or trustee in bankruptcy of a bankrupt joint proprietor may apply for a Form J restriction which states:

‘No disposition of the

[choose whichever bulleted clause is appropriate]

• registered estate, other than a disposition by the proprietor of any registered charge registered before the entry of this restriction,
• registered charge dated [date] referred to above, other than a disposition by the proprietor of any registered sub-charge of that charge registered before the entry of this restriction,

is to be registered without a certificate signed by the applicant for registration or their conveyancer that written notice of the disposition was given to [name of trustee in bankruptcy] (the trustee in bankruptcy of [name of bankrupt person]) at [address for service].’

If there is not already a Form A restriction in the proprietorship register the Official Receiver or trustee in bankruptcy will be able to apply for one to be entered. This is because the beneficial joint tenancy will have been severed by the bankruptcy. A Form A restriction states:

‘No disposition by a sole proprietor of the registered estate (except a trust corporation) under which capital money arises is to be registered unless authorised by an order of the court.’

A Form J or A restriction will not prevent the registration of a disposition to which s.27, Law of Property Act 1925 (payment of capital money to at least two trustees) applies, as in the following example.

The debtor and their spouse are joint proprietors and (before the bankruptcy) held the property as beneficial joint tenants. The debtor’s trustee in bankruptcy applies to register Form J and Form A restrictions.

A person in good faith purchases the land or advances money on security of a legal charge. They give notice as required by Form J. They comply with Form A by obtaining a receipt for capital money from two trustees. That person takes free of the trustee in bankruptcy’s interest in the beneficial interest formerly owned by the debtor.

In the case of the purchase the transferee will be registered as proprietor and the restrictions cancelled; in the case of the charge, it will be registered but the restrictions will remain in the proprietorship register.

The trustee in bankruptcy will be unable to object to the registration and will need to look to the registered proprietors to account for any net proceeds.

6.3 Transfer by the debtor and other joint proprietor(s) or (after death of debtor) by the remaining joint proprietors

The debtor and the other joint proprietor(s) or, after the death of the bankrupt, the surviving proprietor(s) (together with any new trustee, if necessary) will be able to sell or charge the land. Provided any Form A or Form J restriction is complied with, the purchaser or chargee is not affected by the bankruptcy – see section 6.2 Entry of Form J restriction in favour of the trustee in bankruptcy and/or of Form A restriction.

6.4 Re-vesting of debtor’s beneficial interest

See section 4.5 Re-vesting of the bankrupt’s home for the circumstances in which the debtor’s beneficial interest in their home will re-vest in the debtor.

Where re-vesting occurs in respect of the debtor’s beneficial interest in a jointly owned property, the trustee in bankruptcy must, within seven days, make whatever Land Registry application is necessary to reflect the re-vesting on the register (r.6.237A, IR 1986).

This will normally be an application to withdraw a Form J restriction. The documents needed are:

• form RX4
• a certificate by the trustee stating that the interest has vested in the bankrupt under s.283A(2) or 283A(4), IA 1986 or s.261(8), EA 2002
• unless the applicant is the trustee named in the Form J restriction, or is the Official Receiver, evidence of their appointment. See section 5.2 Registration of the Official Receiver or the trustee in bankruptcy as proprietor as to the evidence required.

No fee is payable.

Sometimes the application will be to withdraw a caution against dealings in favour of the trustee in bankruptcy. The documents needed are:

• form WCT
• a certificate by the trustee stating that the interest has vested in the bankrupt under s.283A(2) or 283A(4), IA 1986 or s.261(8), EA 2002
• unless the caution is in favour of the applicant, or the applicant is the Official Receiver, evidence of their appointment. See section 5.2 Registration of the Official Receiver or the trustee in bankruptcy as proprietor as to the evidence required.

No fee is payable.

The bankruptcy of a joint proprietor who is also a beneficial joint tenant severs the equitable joint tenancy. The trustee in bankruptcy may have registered a Form A (or form 62) restriction to reflect this.

Re-vesting does not undo the severance. The trustee in bankruptcy cannot apply to withdraw the Form A restriction. The registered proprietors may, if appropriate, apply to cancel it.

7 Charging order in favour of the Official Receiver or the trustee in bankruptcy

Where:

• an interest in a dwellinghouse comprises part of the bankrupt’s estate
• the house is occupied by the bankrupt, their spouse or former spouse, and
• the trustee in bankruptcy is unable, for whatever reason, to realise the interest then the trustee may apply for a charging order over that interest for the benefit of the bankrupt’s estate (s.313(1), IA 1986).

An order under s.313, IA 1986 must provide for the property to cease to be comprised in the bankrupt’s estate and to vest the interest in the bankrupt subject to the charging order and any prior charges.

Where the debtor’s interest was a beneficial interest in a trust of land the order under s.313, IA 1986 will take effect as an equitable charge over the debtor’s interest under that trust or in the proceeds of sale. If the property is registered the trustee in bankruptcy will be able to apply for a Form K restriction, which states:

‘No disposition of the

[choose whichever bulleted clause is appropriate]

• registered estate, other that a disposition by the proprietor of any registered charge registered before the entry of this restriction,
• registered charge date [date] referred to above, other than a disposition by the proprietor of any registered sub-charge of that charge registered before the entry of this restriction,

is to be registered without a certificate signed by the applicant for registration or their conveyancer that written notice of the disposition was given to [name of trustee in bankruptcy] at [address for service]), being the person with the benefit of [an interim or a final] charging order on the beneficial interest of [name of bankrupt] made by the [name of court] on [date] (Court reference [insert reference]).’

Where the debtor is the sole owner and does not hold as trustee (ie holds for their sole benefit) the order under s.313, IA 1986 will take effect as an equitable charge of the legal estate. If the land is registered the trustee in bankruptcy will be able to apply for a notice of the order to be entered in the charges register by lodging form AN1 or UN1 (as appropriate) and a certified copy of the charging order.

If (as will usually be the case) a bankruptcy notice and bankruptcy restriction are already on the register the trustee should apply (r.6.237(8), IR 1986) for these to be cancelled when applying for the charging order to be noted.

8 Voluntary arrangements

8.1 General

A voluntary arrangement with creditors consists of either a composition in satisfaction of debts or a scheme of arrangement of affairs. In either case it must be approved by a meeting of creditors (see Part VII of IA 1986).

The arrangement is implemented by a person known as the supervisor of the voluntary arrangement.

The effect of a voluntary arrangement, if any, on the debtor’s property¹ depends on its terms.

¹ All of the debtor’s property will be included in the arrangement, unless specifically excluded – r.5.3.2(a), IR 1986 (as substituted by the Insolvency (Amendment) (No 2) Rules 2002) (SI 2002/2172).

So, if the voluntary arrangement is no more than an agreement to pay regular sums to the supervisor, then any registered estate or interest of the debtor will be unaffected and neither a notice nor a restriction could be applied for in respect of the arrangement.

Where the debtor has a registered estate or other interest in a registered estate, whether the supervisor is entitled to apply for an entry to be made in a registered title will depend on whether the voluntary arrangement provides for the transfer of, or creates an interest in, the debtor’s estate or interest and, if so, the nature of that interest.

Sections 8.2 Notices – unilateral and agreed and 8.3 Restrictions deal with the possible methods of protection for some of the more common interests.

8.2 Notices – unilateral and agreed

If the debtor is the sole proprietor of a registered estate which they hold for their own benefit, and the arrangement creates an equitable charge, a contract for sale, option, or right of pre-emption in favour of the supervisor affecting that registered estate application may be made for entry of an agreed or unilateral notice in form AN1 or UN1, in respect of the interest created.

If the debtor has a beneficial interest under a trust of land of a registered estate, and the arrangement creates an equitable charge, a contract for sale, option, or right of pre-emption in favour of the supervisor affecting that interest, the interest created cannot be protected by an agreed or unilateral notice².

² S.33, LRA 2002 provides that no notice may be entered in the register in respect of an interest under a trust of land. The method of protecting an interest held under a trust of land is by way of a restriction.

8.3 Restrictions

If the effect of the arrangement is to create a trust (either expressly or because, for example, property is stated to be held for the benefit of the creditors³) and it affects a registered estate or interest, then it may be possible to protect the trust by entry of a restriction.

³ Re NT Gallagher & Son Ltd [2002] 1 W.L.R 2380 at 2396.

Any application for a restriction must be in form RX1 and (other than an application by this or with the consent of all of the registered proprietors) must be accompanied by a copy of the arrangement. This shows that the registered estate is subject to the trust and that the supervisor has a sufficient interest in the entry of the restriction sought⁴; and assists the registrar in deciding whether the restriction appears to be necessary or desirable for one or more of the purposes in s.42(1), LRA 2002.

⁴ S.43(1)(c), LRA 2002.

Unless all of the registered proprietors apply for the restriction sought or consent to its entry, notice of the application will be given to the proprietors⁵ and any objection will need to be considered under s.73, LRA 2002 and, if it is not groundless, referred to the Adjudicator to HM Land Registry.

⁵ S.45(3)(a), LRA 2002.

8.3.1 If the debtor is the sole registered proprietor, was before the voluntary arrangement holding the property for their own benefit and is holding on trust for the creditors under the voluntary arrangement

In these circumstances it is considered that an application may be made for a restriction in standard Form A or in standard Form II⁶ (which requires a certificate to be produced on any application to register a disposition that written notice of the disposition has been given to the supervisor).

⁶ For the wording of the standard form restrictions - see r.91, LRR 2003 and Schedule 4, LRR 2003 and The Land Registration (Amendment) Rules 2005.

Application for entry of a restriction in standard Form N or L (in addition to a Form A if applied for) may also be possible if the voluntary arrangement contains a provision that the debtor will not transfer, charge or otherwise deal with the property without the consent of the supervisor.

8.3.2 Joint registered proprietors (one of whom may be the debtor) who were holding on trust for the debtor and others before the voluntary arrangement

If the arrangement contains a charge or assignment of the debtor’s interest or creates a trust in favour of the supervisor an application may be made for entry of a restriction in standard Form A, provided a Form A restriction has not already been entered in the register.

If the voluntary arrangement contains an assignment of a debtor’s beneficial interest, it is considered that the supervisor may also apply for a restriction in standard Form II, because the trust interest will be owned by the supervisor and not by the debtor.

If the interest is held on trust by the debtor for the creditors or charged to the supervisor, it is considered that no form of restriction, other than in Form A (if not already entered), can be applied for unless all the registered proprietors consent to the restriction. This is because the interest of the supervisor or creditors will be derivative⁷.

⁷ While the debtor’s interest would appear to be a right or claim in relation to a registered estate (within s.42(1)(c), LRA 2002), the charge on, or beneficial interests in, the debtor’s interest are one removed from the registered estate and so are considered not to be rights or claims within section 42(1)(c).

If the debtor holds their beneficial interest on a bare trust for the supervisor, it is considered that an application may be made for a standard Form II restriction⁸. Practice Guide 19 – Notices, restrictions and the protection of third party interests in the register contains more information about applying to enter agreed and unilateral notices and restrictions.

⁸ Because the supervisor’s interest is not one removed from the registered estate, as the supervisor may step into the debtor’s shoes.

9 Registration and cancellation of bankruptcy entries and official searches at the Land Charges Department

The Chief Land Registrar maintains five registers of matters affecting unregistered land in England and Wales, under the LCA 1972 and the Land Charges Rules 1974.

Bankruptcy petitions and bankruptcy orders are registered in the register of pending actions and the register of writs and orders respectively. This is irrespective of whether or not the debtor is known to own property.

A purchaser of a legal estate (in unregistered land) in good faith for money or money’s worth will take free of any claim by the trustee in bankruptcy if at the date of completion of the purchase no bankruptcy entries have been made at the Land Charges Department (ss.5(8), 6(5) and 6(6), LCA 1972). A purchaser will also take free of such claim if an official search does not reveal a bankruptcy entry when it should (s.10(4), LCA 1972); or if a bankruptcy entry is made during the priority period of an official search and the purchase is completed during that period (s.11(5), LCA 1972).

When a bankruptcy petition is filed in court, that court must send a request, in prescribed form 6.14, to the Chief Land Registrar at the Land Charges Department that notice of the petition be registered in the register of pending actions kept under s.5, LCA 1972 (r.6.13 (in the case of a creditor’s petition) and r.6.43 (in the case of a debtor’s petition) of the IR 1986).

When the court makes a bankruptcy order at least two sealed copies must be sent to the Official Receiver. On receipt, the Official Receiver must send notice (in prescribed form 6.26) of the making of the order to the Chief Land Registrar at the Land Charges Department for registration in the register of writs and orders affecting land kept under s.6, LCA 1972 (rr.6.34(2)(a) and 6.46(2)(a), IR 1986).

Note 1

Unless it is renewed, a registration of a bankruptcy petition or order ceases automatically at the end of the period of five years from the date on which it was made (s.8, LCA 1972).

Note 2

When a registration of a bankruptcy petition or order is cancelled (for example, upon a petition being dismissed or order annulled) at the Land Charges Department or ceases by expiration of time, the bankruptcy notice or bankruptcy restriction entered against a registered title will not be cancelled unless a specific (successful) application is made to Land Registry.

Note 3

When a bankruptcy is discharged, the registration of a bankruptcy petition or order will not be cancelled unless there is a specific court order of directing cancellation (for example, under s.1(6), LCA 1972). Production of a certificate of discharge is insufficient.

Note 4

If a discharged bankrupt obtains an order, under s.1(6), LCA 1972, ordering that the registration of a bankruptcy petition and/or a bankruptcy order be vacated (under s.5, LCA 1972) then, upon an appropriate application being lodged at the Land Charges Department, the entry (or entries) will be vacated. However, such an order has no effect on the vesting of property, unlike an order annulling or rescinding a bankruptcy order. Consequently, any land or charge (whether registered or unregistered) which has vested in the trustee in bankruptcy will remain so vested and not re-vest in the discharged bankrupt. Therefore, a bankruptcy notice or bankruptcy restriction will not be removed from a registered title if such an order is lodged.

Note 5

To cancel the registrations at the Land Charges Department applications must be made to that department using a separate Land Charges form K11 for each cancellation required and enclosing an office copy of the order and the prescribed fee. The cancellation of a pending action in bankruptcy and/or bankruptcy order at the Land Charges Department will not result in action being taken by Land Registry to cancel a bankruptcy notice or bankruptcy restriction.

10 Enquiries and comments

If you have a particular concern which is not covered by this guide, please contact Land Registry in advance of the transaction – see Contact details. If the transaction is particularly complex, it may be better if you make your enquiry in writing at the Land Registry office that will process your application.

If you have any comments or suggestions about our guides, please send them to:

Central Operations Group
Land Registry
Trafalgar House
1 Bedford Park
Croydon
CR0 2AQ

(DX 8888 Croydon 3)

You can obtain further copies of this and of all our guides free of charge from Customer Support (see Contact details) or you can download them from our website.

Remember

Please note that Land Registry may be unable to process applications that are incomplete or defective and your application will risk losing its priority if we have to return it to you – see Practice Guide 49 – Return and rejection of applications for registration for more information.