NALC Logo
Property for sale by Auction An illustration of a justice scale with a gavel, balancing two houses. The left house represents

The Equity of Redemption in Property Buybacks during Liquidation and Insolvency Cases under the 1986 Insolvency Act

Introduction

The equity of redemption refers to the right of a mortgagor, interested party or significant majority creditor to reclaim their property after the secured obligation has been performed. This right allows individuals who have defaulted on their mortgages the ability to reclaim their property by paying the agreed amount due, plus interest. As well as insignificant cases were other legal challenges have arisen and a mortgage may not be a significant factor,

Equity_of_redemption

Property Buybacks during Liquidation and Insolvency Cases
In the context of liquidation and insolvency cases, the equity of redemption plays a crucial role in determining the rights of the mortgagor in reclaiming their property. Here are some key points to consider:

1. Right of Redemption:
– The right of redemption gives mortgagors the opportunity to reclaim their property and stop a foreclosure sale from happening, or even repurchase their property during the sale process or after a sale has occurred.

investopedia.com/right-of-redemption.

2. Clogs on the Equity of Redemption:
– Traditionally, the courts have been vigilant in ensuring that the mortgagee does not introduce any artificial stipulations into the contractual arrangements to impede a mortgagor’s ability to satisfy obligations and reclaim the property. Such impediments are known as “clogs” on the equity of redemption, and the courts of equity have been particularly astute in striking down any provision which may be a clog.

3. Final Order for Foreclosure or possession :
– In the case where there has been a final order for foreclosure and if the property is sold to a bona fide purchaser for value, the mortgagor will, absent extraordinary circumstances, not be able to redeem the mortgage or debt and claim title back from a good faith purchaser.

The-mortgagors-equity-of-redemption

4. Right to Redeem Property:
– The right to redeem the property without any encumbrances by paying the loan or agreed amount is codified under Section 60 of the Transfer of Property Act, 1882.

 

Doctrine of clog on redemption

Insolvency Act 1986
The Insolvency Act 1986 is the relevant legislation that addresses company insolvency and winding up, including the winding up of companies that are not insolvent, and of unregistered companies. It also covers enactments relating to the insolvency and bankruptcy of individuals, the functions and qualification of insolvency practitioners, the public administration of insolvency, and the penalization and redress of malpractice and wrongdoing.

1986 Act/45/contents

In the context of insolvency, creditors are grouped into categories that determine their position in the payment hierarchy, as set out in the Insolvency Act, 1986. The liquidator is obliged to make repayments in this order, with different categories of creditors being paid in a statutory order of priority.

 

Directors advice

The Insolvency Act 1986 seeks to balance the interests of all stakeholders, ensuring that the impacts of insolvency are managed in an orderly and equitable manner.

 

companydebt.com/insolvency

 

In summary, the equity of redemption plays a significant role in property buybacks during liquidation and insolvency cases, providing mortgagors and or interested parties and owners with the opportunity to reclaim their property under certain circumstances. The Insolvency Act 1986 provides the legal framework for addressing insolvency and winding up, ensuring an orderly and equitable process for all stakeholders involved.

A Special Note of Thanks

As we conclude this exploration of the equity of redemption and its role in property buybacks during liquidation and insolvency cases, we would like to extend our deepest gratitude to Barrister Mr Marc Brittain How to contact Marc Brittain – Direct access Barrister 

Together with his Clerk of Chambers, Mr Matt Wildish. Matt Wildish – The Best Clerk of Chambers in Business

Over the past eight years, their unwavering support, guidance, and advice have been instrumental in our understanding and professional growth in this complex area of law. Their expertise and dedication to openly sharing their knowledge have not only enriched our learning but also empowered us to navigate the intricacies of these rules with confidence and some level of proficiency.

To Barrister Mr Marc Brittain and Mr Matt Wildish, we say thank you. Your contributions have been invaluable, and we look forward to continuing our journey of learning and growth under your guidance for many years ahead.