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Public Guide 23D (TIB) – Applications by a trustee in bankruptcy for a restriction to protect a bankruptcy order made against one of joint proprietors

Updated: July 2012

Update

This edition of the guide replaces the October 2011 edition. Section 2 has been amended to clarify that some objections may not prevent completion of the restriction application, as explained in section 3.

Scope of this guide

This guide is intended to help people who may receive a Land Registry notice about a trustee in bankruptcy's application for a restriction to protect a bankruptcy order made against one of joint proprietors.

1 Introduction

A restriction is an entry in the title register of a property that prevents Land Registry from registering certain transactions (such as a transfer or a mortgage) until the terms of the restriction have been complied with. For example, somebody's consent may need to be obtained.

If you need more information about the application or why it has been made, please contact the applicant or their legal representative. Their details are in the notice we have sent you.

You may wish to object to the application. Our notice tells you how to do this and the date by which you have to do so.

If you do object, Land Registry will consider what you say. However, your objection may not be successful and we may still complete the application. This is because what you have said does not (as a matter of law) affect the applicant's right to enter a restriction in your title register. In such a case, the registrar will have decided that your objection is 'groundless'. This means that if the application is otherwise in order, we must complete it.

2 Common reasons for objection

This guide attempts to answer some points that are often made in response to applications by trustees in bankruptcy for a restriction to protect a bankruptcy order. The points in section 3 Points/answers are examples of common objections which may not be successful, for the reasons given in the answers. If your objection raises one or more of these points, it may not affect the applicant’s right to apply for a restriction and the registrar may rule your objection groundless.

Please read the guide carefully before you reply to our notice. If you need legal advice please see a solicitor or other qualified legal adviser as soon as possible. Land Registry staff cannot give you legal advice. Possible sources of advice are:

a solicitor
a law centre
a Citizens Advice Bureau
the National Debtline (www.nationaldebtline.co.uk, tel: 0808 808 4000).

Note: It is unlikely that you could object to the application successfully while the bankruptcy order is in force. Under the Insolvency Act 1986, where a person is a joint proprietor (owner) of land they have a beneficial interest in that land. A court makes a bankruptcy order against that person because their beneficial interest in the land passes automatically to the appointed trustee in bankruptcy. The trustee in bankruptcy is then entitled to protect the bankruptcy order by a restriction until:

the court makes a further order that cancels the bankruptcy, or
the trustee in bankruptcy transfers the bankrupt's former beneficial share in the land as part of the bankruptcy process (for example, back to the bankrupt or to another joint proprietor), or
the bankrupt's beneficial interest automatically returns to them (under section 283A of the Insolvency Act 1986).

3 Points/answers

P1: I have not been made bankrupt – it is my partner/co-owner.

A1: If your partner/co-owner owns the property jointly with you, the bankruptcy order made by the court will affect their beneficial share and the trustee in bankruptcy will have a right to apply for the restriction. The restriction makes it clear who the bankrupt is.

P2: I didn't know anything about the court proceedings or the bankruptcy order.

A2: If you are the bankrupt and you did not know about the court proceedings you should contact the court or the trustee in bankruptcy for more information. Unless the court orders otherwise, the trustee in bankruptcy remains entitled to apply for the restriction. If your co-owner is the bankrupt, the court proceedings will involve only them and not you; the petitioning creditor and the trustee in bankruptcy do not have to tell you about those proceedings (unless the court directs this), so this is not a valid reason to object.

P3: I have applied to the court to have the bankruptcy order annulled.

A3: Even if you have applied to annul the bankruptcy order, it remains effective until the court makes an order to annul it. The trustee in bankruptcy can therefore still apply for the restriction. If the court annuls the bankruptcy order, you (and any co-owner) can apply to Land Registry to cancel the restriction or ask the trustee in bankruptcy to withdraw it (but see 'Note' at P8/A8 below).

P4: The creditor should not have petitioned for bankruptcy or has not followed the proper procedures.

A4: If you consider this to be the case, you should contact the trustee in bankruptcy and/or the court, or seek legal advice. The bankruptcy order (unless void) remains effective unless and until the court orders otherwise. The trustee in bankruptcy is entitled to apply for the restriction to protect their interest. (Even if the order is void, it is most likely that the point will need to be decided judicially).

P5: I have (or the bankrupt has) entered into or proposed to enter into a voluntary arrangement to repay my (their) debts.

A5: The bankruptcy order remains effective, and the trustee in bankruptcy is entitled to apply for the restriction until:

the court orders otherwise, or
the trustee in bankruptcy transfers the bankrupt's former beneficial share in the land as part of the bankruptcy process, or
the bankrupt's beneficial share automatically passes back to them under section 283A of the Insolvency Act 1986.

P6: Will the restriction stop me from selling or mortgaging my property?

A6: Not necessarily. The restriction will not stop you from selling or mortgaging, provided that its terms are complied with (if they apply). It would however be up to a buyer or a lender to decide whether to proceed if there is a restriction on the register.

P7: Will the restriction affect a bankrupt's credit history?

A7: It is the bankruptcy itself that may affect the bankrupt's credit rating, not any entry in the register that may result from it.

P8: Can the restriction be removed in the future if I do not object now?

A8: Yes, in certain circumstances. For example:

if the bankrupt's beneficial interest automatically passes back to them under section 283A of the Insolvency Act 1986, or
if a non-bankrupt co-proprietor buys the bankrupt's beneficial share from the trustee in bankruptcy (any transfer of the legal title is a separate matter for the proprietors to attend to) (see also 'Note' below), or
if the court annuls or rescinds (cancels) the bankruptcy order or orders that the restriction(s) be removed.

Note: As well as the restriction specifically in their favour, the trustee in bankruptcy may have applied to enter a restriction in the following form (Form A), if it does not already appear in the register.

'RESTRICTION: 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.'

If a Form A restriction is entered in the register, the trustee in bankruptcy cannot apply to withdraw it. In certain circumstances the registered proprietors may be able to apply to cancel it. For more information you may wish to refer to Public Guide 18 – Joint property ownership. The guide can be downloaded in English and Welsh from our website at www.landregistry.gov.uk or obtained by phoning Customer Support on 0844 892 1111 (0844 892 1122 for a Welsh-speaking service). This is a complex area of law and we strongly recommend that you seek legal advice.