Part 2 of 4. Click here to see Part 1.
Aside from the management and preservation of the property, there are several additional things the receiver should do upon entry of the receivership order and the filing of the surety bond, if required.
Perhaps the very first thing the receivers should do is to gain control of any bank accounts regarding the property. This will prevent the borrower/owner from removing the funds in any such accounts and may provide funds for the continued operation and management of the property. The receivership order should contain a paragraph specifically authorizing the receiver to take control of such accounts upon its presentation of the receivership order to the financial institution.
Next, the most obvious function of the receiver is to take control of the property, which is accomplished by appearing at the property with a certified copy of the order and sufficient personnel to take over at least the short-term operation of the property. The receiver can then determine which employees, if any, should be retained. The receivership order should contain a provision authorizing the sheriff to evict any owners representative who will not leave the property upon the receivers request.
When a receiver is appointed they are required to prepare a list of creditors of the person or entity for which they are receiver, and promptly notify such creditors of their appointment. Very often, it may be difficult for the receiver to compile the list of creditors. The Virginia Code states that the court may compel any defendant for whom a receiver is appointed to furnish and deliver a list of creditors to the receiver. Once again, the receivership order should contain such a provision.
The cost of the receiver can vary and is dependent upon whatever terms the secured lender and the receiver can negotiate. It can be done hourly or for a flat monthly fee, a percentage of gross monthly collections, or some combination thereof, usually with a startup fee included. Very often, if the receiver or one of its affiliates also will be listing the property for sale, the receiver’s fee will be lower.
To the extent there are not sufficient operating funds to do so, the secured lender will be responsible for funding the operation, management, and preservation of the property, including the receiver’s fees. The receiver is also likely to look to the secured lender for the payment of any attorneys’ fees it may incur in performing its duties, although the secured lender will usually prefer to utilize its counsel to perform whatever legal requirements may be appropriate.
Click here to see Part 3.