Receivership For Commercial Foreclosure

admin  /   December 21, 2020

What is The Receivership Process in a Commercial Foreclosure?

The looming expiration of stimulus protections will leave many people facing outstanding debts on their commercial real estate loans. As businesses all over the United States make arrangements, Sacramento property management companies are starting to cope with the inevitable as well: an ambush of foreclosure.

No one wants a foreclosure to occur, and certainly not in the wake of the COVID-19 pandemic. But when foreclosure does happen, it allows the lender to recoup funds when the borrower defaults. However, there is an alternative: receivership, a legal measure that can provide impactful measures to protect lenders’ assets and property.

The Receivership Process

Receivership action is considered a drastic measure that can protect a borrow by limiting liabilities. However, it is advised that borrowers seek alternative dispute resolution before seeking the appointment of a receiver. When a request for receivership is made, it is done to protect the commercial property’s value by preventing damage from a failure to perform routine maintenance and repairs. Moreover, receivership provides security that the borrower does not proceed by skimming rent, which means that the borrower uses income generated by the property to pay non-property expenses and creditors.

Receivership in real estate entails the appointment of a receiver. If the property owner was collecting rent for the building, those inside of the building would pay rent to the receiver. This safeguard is implemented to prevent the borrower from using the property’s income for outstanding bills issued by other creditors; instead, the receiver ensures this income is used for property expenses and loan payments. This helps protect the lender in retaining the assets of rent payment.

Receivers are court-appointment neutral entities that act in the best interests of both parties or companies. Receivership further holds the appointee not to act in his or her own benefit and not act in defiance of the parties’ interest.

What Is A Receiver?

On behalf of the lender and borrower, a receiver has to exercise their best efforts to satisfy both parties. After a receiver has been appointed to a case, this person is responsible for several aspects of property management. After the appointment of a receiver, the property must first be secured by the appointee. Employees are then addressed by the receiver, who is announcing themselves as new management. From there, receivership entails the full management of leases, the entering of new leases, rent collection, property maintenance, and reporting to the court.

How Is Receivership Granted?

A judge grants receivership through the court system. A lender may request a receiver upon the borrower’s default, either individually or as a part of its foreclosure action. Following such a request, some courts will grant a receivership ex parte.

Ex parte means that a receiver is granted based on the lender’s request and supporting evidence without notice to the borrower. However, the borrower may contest the ex parte order at a subsequent hearing, which is why it may not be ill-advised to seek counsel before making a request.

Laverty Chacón and The Receivership Process

Trusted by businesses and individuals to manage and optimize their commercial real estate portfolio, receivership is a process we are knowledgeable about. Here at Laverty Chacón, we have dedicated over 30 years to serving the community by providing outstanding commercial property management in Sacramento.

As real estate professionals, we have experience and expertise in Sacramento properties of all kinds. From commercial and industrial spaces to retail and office locations, we are dedicated to helping our customers through the process. If you have any questions regarding receivers and receivership or any other matter related to commercial real estate in Sacramento, call Laverty Chacón at (916) 722 0333.

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