Commercial Real Estate Receiverships: The Closing of the Action and Miscellaneous Matters

Kaufman & Canoles

Kaufman & Canoles

Part 4 of 4. Click here to see Part 3.

The sale order should require that the receiver file an accounting of its activities as receiver within so many days of the sale of the property. Once that has been filed, the secured lenders counsel can file a motion to terminate the receivership.

In situations where it appears likely that the borrower/owner will file bankruptcy once aggressive collection action is taken, and the lender believes that bankruptcy may be an acceptable forum for the resolution of the matter, it may be advisable to move for the appointment of a receiver rather than to proceed with a foreclosure. A borrower/owner that is likely to file bankruptcy to stop a foreclosure sale is also likely to file bankruptcy to stop a receiver appointment, and the costs to get to the receivership hearing are likely to be less than the costs to get to a foreclosure, simply considering foreclosure advertising costs alone.

While the filing of a receivership action where the real property is located appears to be the most logical venue, no specific venue provisions address receivership actions. This can be a particularly significant issue when there are multiple parcels of collateral located in different jurisdictions, or the loan documents provide for a venue other than the one where the real estate is located.

While the secured lender can force place insurance, if necessary, to protect its collateral, very often the receiver can ascertain the borrower’s insurance coverage and contact the insurer and be added as an additional insured on the policy pursuant to its status as receiver.

Often, a commercial real estate receivership can be a worthwhile alternative to foreclosure. These receiverships can be less expensive to complete than a foreclosure, while still accomplishing the same goals. Receiverships should be considered as an option for lenders looking to liquidate commercial real estate collateral.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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