March 2006
Introduction
i Why does the official receiver have to register a Form J Restriction?
The Land Registry will not register a bankruptcy restriction against any jointly owned land in which the bankrupt has an interest, even where all the owners are subject to bankruptcy proceedings. As a result the official receiver has to lodge a Form J Restriction (formerly known as a caution) with the Land Registry in order to protect his/her interest in a property where one or all of the owners are bankrupt. Under the Land Registration Act 2002 (LRA2002) cautions against dealings were abolished and replaced with Form J Restrictions.
The effect of a Form J Restriction is that if an attempt is made to sell the property, any prospective purchaser who obtains a copy of the register of title will become aware of the official receiver’s interest in the property. The prospective purchaser will then generally contact the official receiver to query why the caution or Form J Restriction is held and request that it be withdrawn, at which point the official receiver can consider the most appropriate course of action.
For more information on this please refer to the Case Help Manual parts: Freehold Property: Jointly owned - Registering a Form J Restriction and Freehold Property: Solely owned - Registration of a Bankruptcy Restriction.
ii When should the official receiver withdraw a Form J Restriction or a caution?
The official receiver or his/her solicitor may withdraw a caution or Form J Restriction at any time.
iii Why would the official receiver withdraw a caution or Form J Restriction?
Where the official receiver no longer holds any legitimate entitlement to an interest in a property or part thereof, it follows that he/she should remove any precautions taken by him/her to secure the asset. For example, where the official receiver is selling his/her beneficial interest in the property to the bankrupt’s spouse or a third party, he/she would then be required to withdraw the caution or Form J Restriction registered at HM Land Registry but only on completion of the sale.
The official receiver may also be requested to withdraw his/her caution or Form J Restriction where an insolvency practitioner is appointed trustee after the official receiver has registered his/her interest in the property with the Land Registry. Upon his/her appointment, the trustee may specifically request that the official receiver should remove his/her caution or Form J Restriction with the Land Registry.
iv What if the owners are selling their property themselves?
Where joint owners are selling their property at "arm's length" (i.e. not to a relative or associate) and one of them is bankrupt, their conveyancing solicitor may contact the official receiver to request the withdrawal of his/her caution or Form J Restriction.
Before agreeing to do so, the official receiver should ensure that the property is not being sold at an undervalue and must obtain an undertaking from the solicitor that he/she will receive half of the net proceeds from the sale of the bankrupt’s share (or all, if both owners are bankrupt) as agreed by the official receiver for the benefit of the bankrupt's estate. Any queries regarding such a sale should be referred to the B1/examiner.
v How is a caution or Form J Restriction withdrawn?
The official receiver or his/her solicitor may withdraw a caution or Form J Restriction by making application to the relevant District Registry where it was first registered, using the appropriate Land Registry form.
In cases where a caution (pre LRA2002) is to be removed there is an approved version of the form available on the document production system namely LRWCT (Land Registry withdrawal of a caution). There is a specific Land Registry form RX4 that must be used in cases where a Form J Restriction is to be withdrawn. The form is available from the Land Registry’s website and should be downloaded from http://www.landreg.gov.uk/.
If TLT Solicitors are involved in the conveyancing, where the official receiver is "selling " the bankrupt’s interest in a jointly owned property to the other non-bankrupt joint owner, for example, they will withdraw the caution or Form J Restriction on the official receiver's behalf.
A non-bankrupt joint owner (or the bankrupt) for example, could apply to the Land Registry to have the caution or Form J Restriction withdrawn. If the official receiver has not requested that this be withdrawn, it may well be the case that he/she is not agreeable to the removal of the caution or Form J Restriction in that particular matter. Thus, it is imperative that the 'warning letters' (see paragraph viii) are not ignored but are referred immediately to the B1/examiner for instruction.
vi What are the effects?
In practical terms, by withdrawing a caution or Form J Restriction the official receiver is in effect giving up any interest in the land. In law he/she is probably only losing the benefits that a caution or Form J Restriction might bring.
vii Will the Land Registry confirm when the caution has been removed?
The Land Registry does not send written confirmation that the caution or Form J Restriction has been removed. As part of their procedure in removing the entry from the Land Register, they will send a 'warning letter' to the person who has registered the caution or Form J Restriction, in this case the official receiver. The notice clearly states the time limit involved for the receipt of an objection and points out the options available. If no objection is received from the official receiver, the caution or Form J Restriction will cease to have an effect and will be automatically cancelled from the register.
As the RTLU should be dealing with the property concerned it is envisaged that the majority of these 'warning letters' should be dealt with by them. It is important to act promptly when one of these 'warning letters' is received in the office, in view of the short timescale involved.
Where can I find out more?
Land Registration Act 2002
Land Registration Rules 2003
Technical Manual
Chapter 50 Dealings with the Land Registry -
Case Help Manual
Freehold Property: Jointly owned - Registering a Form J Restriction
Freehold Property: Solely owned – Registration of a Bankruptcy Restriction
Forms to be used:
LRWCT: Land Registry withdrawal of a caution
RX4 Application to withdraw a Form J Restriction (available from the Land Registry)
Click HERE to view the flowchart for Withdrawing a Caution or Form J Restriction
Procedure
Part A
Dealing with a request for the removal of a caution or Form J Restriction
1. Receive a request for the OR to withdraw his/her caution or Form J Restriction lodged at the Land Registry.
2. If an IP has been appointed trustee and is still in office, forward the request to him/her.
3. If the insolvency practitioner who has been appointed trustee makes the request:
4. Prepare 2 copies of form LRWCT on LOIS (DO73) if it is a caution that is to be withdrawn and send to the OR for signing together with the letter from the IP and proof of his/her appointment, or
5. Where a Form J Restriction is to be removed complete 2 copies of Land Registry form RX4 and have them signed by the OR.
6. When the OR has signed forms LRWCT or Land Registry RX4, send one to the relevant Land Registry by normal post and place the other on the office file. Write to the IP confirming the action that has been taken.
7. Record the details on LOIS screen 15.
8. If the RTLU are dealing with the property please forward the letter to them.
9. Where the property is not being dealt with currently by the RTLU, refer the matter to the B1/examiner for instructions on how to proceed.
Part B
'Warning letter' received from HM Land Registry
10. It is imperative that these notices are dealt with urgently as there are time limits within which they must be dealt with. Under no circumstances should the time limits set by HM Land Registry be missed by default.
11. Check to see whether IP has been appointed trustee and is still in office. If so, forward to him/her without delay.
12. Where RTLU are dealing with the property, send the notice to them immediately.
13. Where TLT solicitors are dealing with the sale of the OR’s beneficial interest, they will have applied to the Land Registry on his/her behalf. If this is the case, file the Land Registry notice with the papers and take no further action.
14. In the event of the OR not being aware of any property transaction or where the official receiver has not agreed to the withdrawal of the caution or Form J Restriction, refer the matter immediately to the B1/examiner for instructions.