CRE Finance Council – Debunking the Receivership Myths
As the talk of another commercial real estate down-cycle begins to circulate, now is a good time for lenders to remember some common misconceptions about receivership that all too often interfere with maximum recovery on non-performing loans.
Remember that receivership is an “ancillary remedy” usually tacked on to an existing legal action like a foreclosure proceeding. The court appoints its own agent to serve as an impartial “disinterested third party” to take possession and control of assets that are the subject of the legal action until that action is resolved. Those assets are any and all things pledged as security for the loan.
The court will empower the receiver with whatever authority is necessary to accomplish the goal. This frequently includes taking over all real and personal property, as well as proceeds from operation of the property and — increasingly — the power for the receiver to sell the property.
The receiver for a distressed asset typically will find many inherent problems in addition to the monetary default, among them deferred maintenance, limited marketing activity and unhappy employees. If existing funds are limited, the lender may want to provide funds to the receivership estate to make repairs, management changes, environmental mitigation, etc., — ultimately maximizing value for a possible sale.
In the following article, we analyze and debunk common myths about receivership. >>> Read More