QUESTION: I am a receiver for a shopping center. I want to enter into a five year lease for one of the stores. Is there a statute or rule that limits the term of leases a receiver can execute?
ANSWER: There is no California statute or case that limits the term of leases a receiver can execute. However, limits are often placed on the term of such leases by the order appointing the receiver and often depend on the type of receiver appointed, i.e., a rents, issues and profits receiver versus an equity receiver. You don’t indicate which you are. In rents cases, the practice developed, at least in Southern California, to limit the term of such leases to no more than one year. That practice was based on general receivership law that receivers should not enter into leases beyond the probable term of the receivership, so as to not unnecessarily bind the receiver’s successors and the ultimate owners of the property. See Clark on Receivers, §450 (1992). When the Judicial Counsel form receivership order for rents receivers was drafted, with the help of a number of receivers from Southern California, the following provision was included:
“The receiver may without court approval enter into leases for a term not exceeding one year, obtain and evict tenants, and set and modify the amounts and terms of leases.”
If you are a rents receiver and you believe it is in the best interest of the estate to enter into a long term lease, you can do so if you get court approval. If you are an equity receiver, this limitation does not apply, unless it is set forth in your order of appointment. However, the best practice would be to either get court approval of the proposed long term lease or of parameters for leases you may enter into.