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Petra van Dijk
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01295 204159
pvandijk@se-law.co.uk

Can Exceptional Circumstances Delay the Sale of a Bankrupt’s Home?

by Petra van Dijk | Oct 12, 2016 |
For Sale Sign

When someone is made bankrupt, their interest in the family home vests automatically in their Trustee in Bankruptcy, upon his or her appointment. The Trustee has 3 years from the date of the bankruptcy order to realise this interest. Ordinarily, the Trustee will first of all ask if a third part is willing and able to purchase the Trustee’s share, usually 50% of the available equity. If that is not possible, then the Trustee will request that the property is sold voluntarily. As a last resort, the Trustee can apply to the Court for an order for possession and sale of the property.

When a Trustee applies for an order for possession and sale after 12 months from the date of his or her appointment, the Court must assume that the interest of the bankruptcy creditors will outweigh all other considerations, unless there are exceptional circumstances.

Exceptional circumstances

What constitutes exceptional circumstances is not defined, but they typically relate to the personal circumstances of the bankrupt’s spouse, such as a medical or mental condition.  In the recent the decision of Grant and Another –v- Baker [2016] EWHC 1782 (Ch), the exceptional circumstances involved the bankrupt’s adult daughter, who had a mental age of 8 or 9, had mobility difficulties and was incapable of living on her own. The bankrupt and his wife had purchased a bungalow to limit her mobility issues, as she had difficulty walking stairs. The property was also near a day centre attended by the daughter. A letter from the family doctor said that a move from the family home would have a real negative impact on the daughter’s well-being.

Decision at first instance

The Judge at first instance found that the circumstances of the case were exceptional.  She made an order for possession and sale, but postponed this indefinitely, namely until such time as the daughter no longer resided at the property.  The Trustee appealed against this decision, arguing that a longstop date should have been set; and that he should have been given permission to apply for further directions if circumstances changed.

Decision on appeal

The High Court Judge who heard the appeal found that the view of the first instance Judge, that the circumstances of the case constituted exceptional circumstances, was an entirely legitimate one. However, he found that the Judge had incorrectly exercised her discretion by ordering an indefinite postponement of the sale of the property whilst the daughter, who had a normal life expectancy, continued to live there.  

The first instance Judge had paid insufficient attention to purpose of the statutory framework, under which a Trustee must within a limited time period realise the interest for the benefit of creditors and to pay the Trustee’s reasonable costs.   The appeal Judge held that in all, save the most truly exceptional circumstances, that purpose requires realisation within a short timeframe, to be measured in months rather than years.  

The appeal Judge also found that the first instance Judge had reached a incorrect conclusion, when considering available alternative accommodation and that far more detailed and cogent medical evidence in relation to the impact of a move on the daughter would have been needed to justify a postponement of the sale of the property for a more than a relatively short period.  

The High Court Judge ordered a further postponement of the sale for twelve months.

Conclusion

This case shows that even in cases of exceptional circumstances, Trustees in Bankruptcy should be permitted to realise their interest within a relatively short time frame. The Judge did not explain what truly exceptional circumstances are, but left the door open for further arguments as to what those might be. Maybe the outcome would have been different, if the property had been especially adapted for the daughter’s needs or if she had a severely reduced life expectancy.

If you require any further information, please contact Petra Van Dijk, Associate at Spratt Endicott Solicitors on 01295 204159 or email pvandijk@se-law.co.uk.

*Disclaimer: While everything has been done to ensure the accuracy of the contents of this article, it is a general guide only. It is not comprehensive and does not constitute legal advice. Specific legal advice should be sought in relation to the particular facts of a given situation.*

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