Breathing space moratorium does not block LPA receivers’ sale

Law of Property Act receivers may sell a property owned by a debtor subject to a mental health crisis moratorium where the security enforces a company’s separate indebtedness rather than a debt protected by the moratorium, the High Court has ruled.

HH Judge Klein granted summary judgment to Together Commercial Finance Ltd and its receivers, Andrew Foster and Chris Walker of Watling Real Estate, declaring that the proposed sale of Farley Meadow View in Matlock was not prohibited by the Debt Respite Scheme regulations and would not be null and void.

Together lent £2.4 million to Ameycroft Leisure Ltd in August 2023. Its security package included a debenture, a charge over company property, and a personal guarantee and a legal charge granted by a director over Farley Meadow View.

After Ameycroft defaulted, Together demanded £2.43 million and appointed Foster and Walker as LPA receivers over the property in June 2024. The company entered compulsory liquidation the following month. Bent Farm, another secured property, was later sold for £890,000, while Farley Meadow View was marketed for offers above £450,000.

The director entered a mental health crisis moratorium in April 2026. He argued that a sale by the receivers would amount to enforcement action prohibited under regulation 7 of the Debt Respite Scheme (Breathing Space Moratorium and Mental Health Crisis Moratorium) (England and Wales) Regulations 2020.

The case turned on the distinction between the director’s personal payment covenant and the company debt secured by the charge.

HH Judge Klein found that the director had assumed a personal obligation to pay or discharge Ameycroft’s liabilities, creating a debtor-creditor relationship between him and Together. That personal obligation was a qualifying debt capable of falling within the moratorium because it was not itself secured.

However, the charge over Farley Meadow View secured only Ameycroft’s indebtedness under the loan agreement, not the director’s separate personal obligation. The company’s debt could not be a moratorium debt because it had not been incurred by the person benefiting from the moratorium.

The receivers’ sale would therefore enforce security held in respect of Ameycroft’s debt, rather than the director’’s protected debt. It was not enforcement action “in relation to” or “in respect of” a moratorium debt and was not prevented by regulation 7.

HH Judge Klein nevertheless highlighted substantial uncertainty in the regulations, endorsing earlier judicial criticism that their drafting was “impossible to admire”. The judgment left unresolved whether an LPA receiver could qualify as a creditor’s “agent” under the regulations, despite ordinarily acting as agent of the mortgagor, and whether regulation 7 restricts agents even though its primary prohibition refers to creditors.

Those questions did not need to be decided because Ameycroft’s debt was not a moratorium debt. HH Judge Klein said the issues were not sufficiently straightforward to resolve summarily and could have required fuller interpretive material had the secured debt fallen within the moratorium.

The Court declared that the receivers could proceed with the sale notwithstanding the moratorium.

Read the decision here.

Roger Laville of New Square Chambers (instructed by Walker Morris) acted for Together and the receivers.