The use of bridging finan\u00e7as<\/a> has grown significantly, offering property developers, investors, and homeowners<\/a> quick access to liquidity. However, because bridging loans feature short maturities and high interest rates, they also experience a high rate of default. When a borrower fails to exit the facility on time, bridging lenders typically bypass lengthy court channels and immediately appoint Fixed Charge or Law of Property Act (LPA<\/a>) receivers to seize and sell the secured property. <\/p>\n\n\n\n Historically, an operational paradox slowed down this enforcement<\/a> route when dealing with owner-occupied properties. Under standard<\/a> mortgage terms, receivers are legally designated as the agents of the borrower to protect the lender from liability. This created a difficult legal question: How can an agent sue their own principal for possession of the property?<\/em> <\/p>\n\n\n\n The landmark High Court case of Menon contra Pask <\/em>2019 <\/em>EWHC 2611 (Ch) <\/em><\/a>resolved this long-standing dilemma. <\/p>\n\n\n\n To understand the importance<\/a> of the Menon v Pask decision, it helps to review why lenders prefer using receivers in bridging disputes. <\/p>\n\n\n\n When a borrower defaults<\/a> on a bridging loan<\/a>, the lender’s main goal is to recover their capital as quickly as possible. Selling a property with tenants or the owner still living inside reduces its market value and delays<\/a> the transaction. <\/p>\n\n\n\n Lenders rely on the Lei sobre o Direito de Propriedade de 1925<\/a> and express mortgage terms to appoint receivers. This approach provides distinct advantages<\/a>: <\/p>\n\n\n\n The system works smoothly for comercial<\/a> or tenanted properties. However, if the borrowing individual<\/a> ou developer<\/a> refuses to move out of the property, receivers face immediate legal obstacles. <\/p>\n\n\n\n Em Menon contra Pask<\/em>, Mr and Mrs Menon charged their residencial<\/a> home in West London<\/a> to apoio<\/a> a business<\/a> loan facility. When the facility defaulted, the lender appointed joint fixed charge receivers to take control of the asset. <\/p>\n\n\n\n Because the Menons remained in the house, the receivers initiated possession proceedings in the County Court. Due to standard industry<\/a> practices at the time, the claim was originally filed as: <\/p>\n\n\n\n “Menon and Menon, acting by Pask and Goode as joint fixed charge receivers… v Menon and Menon.”<\/em> <\/p>\n\n\n\n This meant the borrowers, via<\/a> their legal agents, were technically suing themselves for possession. The Menons defended the action using two main arguments: <\/p>\n\n\n\n The County Court rejected these defences, prompting the borrowers to appeal<\/a> to the High Court. <\/p>\n\n\n\n Mr Justice Mann dismissed the borrowers’ appeal, establishing clear rules for modern receivership enforcement. The High Court resolved the dispute using two main legal concepts: <\/p>\n\n\n\n The court held that filing a claim where the borrower effectively sues themselves is procedurally incorrect. Instead, receivers are entitled to bring possession proceedings against a borrower in their own names. This separation<\/a> solves the procedural<\/a> conflict<\/a> while respecting the receiver’s statutory<\/a> and contractual duties. <\/p>\n\n\n\n The court looked beyond strict agency rules to examine the commercial purpose of the underlying mortgage deed<\/a>. Mr Justice Mann explained that the right of a receiver to take possession arises because: <\/p>\n\n\n\n The judgment confirmed that a receiver does not need a formal property estate to claim possession. They only need a contractually supported better right to possession than the borrower, which takes<\/a> effect the moment the underlying security becomes enforceable. <\/p>\n\n\n\n While Menon contra Pask<\/em> strengthened options for lenders, it also introduced a vital protection for individual residential borrowers. <\/p>\n\n\n\n The court considered whether a borrower could rely on Sec\u00e7\u00e3o 36 da Lei da Administra\u00e7\u00e3o da Justi\u00e7a de 1970<\/a> to delay or stay possession proceedings brought by a receiver. Historically, this protection applied only to actions brought directly by a mortgagee<\/em> (the lender). <\/p>\n\n\n\n Mr Justice Mann ruled that Section 36 does apply to possession claims<\/a> brought by receivers. The court decided that a receiver acts as a vehicle for enforcing<\/a> the lender’s property rights. <\/p>\n\n\n\n As a result, an individual residential borrower can ask the court to adjourn, suspend, or stay a possession order if they can demonstrate a realistic plan to pay off the loan or clear the arrears<\/a> within a reasonable timeframe. <\/p>\n\n\n\n The decision in Menon contra Pask<\/em> balances commercial utility with consumer protection in the bridging finance sector. By resolving the agency paradox, it confirms that receivers can directly sue occupying borrowers for possession to realise the underlying security. <\/p>\n\n\n\n At the same time, extending Section 36 protections<\/a> to these actions ensure individual borrowers retain a legal tool to save their properties if they can present a viable financial exit. Navigating these disputes requires clear documentation, proper procedural filings, and an understanding<\/a> of mortgage litigation. <\/p>\n\n\n\n Ben Lewis is an Associate Solicitor in RFB\u2019s Litigation department. For\u00a0enquiries on this topic, please contact<\/a> Ben Lewis via email at\u00a0B.Lewis@rfblegal.co.uk<\/a>\u00a0ou pelo telefone 0203 947 8892.<\/p>","protected":false},"author":12,"featured_media":9932,"parent":0,"menu_order":0,"template":"","format":"standard","meta":{"_acf_changed":false,"om_disable_all_campaigns":false,"_uf_show_specific_survey":0,"_uf_disable_surveys":false,"footnotes":""},"categories":[20],"tags":[81],"class_list":["post-9931","insight","type-insight","status-publish","format-standard","has-post-thumbnail","hentry","category-property-litigation","tag-litigation-team-dj"],"acf":[],"aioseo_notices":[],"aioseo_head":"\n\t\t\n\t\n\t\n\t\n\t\n\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\tThe Mechanics of Receivership in Bridging Finance <\/h3>\n\n\n\n
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The Facts and the “Agency Paradox” in Menon contra Pask<\/em> <\/h2>\n\n\n\n
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The High Court’s Ruling: Business Efficacy and Standing <\/h2>\n\n\n\n
Sued in Their Own Names<\/strong> <\/h3>\n\n\n\n
The Core Business Efficacy Test<\/strong> <\/h3>\n\n\n\n
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The Silver Lining for Borrowers: Section 36 Discretion <\/h2>\n\n\n\n
Practical Strategies for Bridging Loan Disputes <\/h2>\n\n\n\n
Strategies for Lenders and Receivers<\/strong> <\/h3>\n\n\n\n
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Strategies for Borrowers and Guarantors<\/strong> <\/h3>\n\n\n\n
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Resumo <\/h2>\n\n\n\n
Bridging Loan Dispute Solicitor, Ben Lewis – Contact Us <\/h2>\n\n\n\n