What’s A Receiver? Why You Should Know….

What is a receiver? A receiver is an agent of the state or federal court who typically takes possession and control of real estate or a business as a neutral third party pursuant to a court order.  A receiver is frequently appointed at the request of a lender whose loan has gone into default in order to protect the lenders collateral.

Why should you know what a receiver is?  Lenders are increasingly looking to receivers to take control of, complete and/or sell the commercial property securing their non-performing loans. This is particularly the case with new condominium and tract housing developments (especially those that have homeowners associations), since a receiver can effectively insulate lenders from the onerous long term construction defects liability and related consumer protection obligations that come with this type of real estate.There are no formal requirements or training to be a receiver.  However, there is a general expectation by the courts that a receiver will have a working knowledge of how to prepare legal documents and will have a familiarity with basic judicial procedure.  A receiver will be expected to make court appearances, whether or not the receiver is an attorney.  Ironically, the simpler the receivership, the less likely the courts are to allow a receiver to engage an attorney (or other experienced professionals) at the cost of the receivership estate.

Experienced receivers typically specialize in business or real estate receiverships, although many do both.  The primary skill sets of receivers are development, property management, law, business management or accounting. You should always be looking for a receiver with the specific underlying skill set most applicable to the type of loan collateral being placed in receivership, and specific receivership experience with that type of collateral. For example, if you anticipate requesting a receiver to complete and sell a new condominium project, you want to find an individual with condominium development experience that has completed and sold units in receivership. If they’ve not done it before, you will inevitably pay for their education.

Although it involves the operation of real estate, a receiver is primarily the administrator of a temporary legal entity that controls the real estate.  There are outlines on both basic and advanced receivership issues on our web site at www.waldrealtyadvisors.com/downloads/download.html.   The California Receivers Forum offers educational materials and programs through its web site at www.receivers.org.  These educational materials include the Receivership Law & Practice DVD from their most recent educational conference.