RECEIVERSHIPS: AN OVERVIEW OF THIS POWERFUL TOOL
As a secured lender, it is imperative that your security be maintained. But what if that security is at risk of being lost or destroyed? What recourse do you have? You may want to consider the appointment of a receiver.
A receiver may be appointed in circumstances where property is in danger of being lost, removed, destroyed, or materially injured. Actions in which receivers are appointed include an action to foreclose real property under a deed of trust to collect rents or when there is the potential for waste, unlawful detainer actions involving commercial real estate or large apartment complexes to collect rents and manage the property, or business disputes when there are allegations of mismanagement or self-dealing. For example, if you are a secured lender and have discovered that your borrower has allowed the property, your security, to fall into a state of disrepair or that the property lacks adequate insurance, you may want to consider the appointment of a receiver to secure and manage the property while initiating foreclosure proceedings.
Because the appointment of a receiver is such a power tool, courts view it as a drastic remedy to be employed only in exceptional circumstances after a showing of a compelling need. Courts may also appoint receivers on an emergency, or ex parte, basis when the facts presented establish an emergency and that the applicant will suffer irreparable injury if the appointment is not made. In order for the receiver to be appointed, s/he must be sworn in to perform the duties of a receiver faithfully and must give an undertaking in an amount determined by the judge.
Once appointed, a receiver has a number of powers over the receivership estate including taking possession of and managing the property, to bring and defend actions involving the property, employ attorneys, seller receivership property, or to invest funds. Notably, however, a receiver is an officer of the court and is subject to the court’s continuing control. Thus, receivers have only the powers granted by statute, but the order of appointment, and by subsequent court orders, over which a judge has broad discretion in issuing.
The appointment of a receiver is an oft overlooked tool that can be extremely beneficial for plaintiffs in property and business disputes. However, there is a high bar in obtaining a receiver and it is important to have attorneys on your side with experience in dealing with receiverships.
Receiverships are complex and detailed statutory structures. The information above is by no means exhaustive, and does not, and is not intended to, constitute legal advice. All information, content, and materials are for general informational purposes only and do not create an attorney-client relationship. The experienced and knowledgeable attorneys at Blake Law Firm are available to help you navigate receiverships, foreclosures, and other real property concerns.