Receivership in Commercial Real Estate
admin / December 11, 2020
What is Receivership in Real Estate?
COVID-19 did not spare the real estate industry. Lenders and borrowers are in a problematic tug-of-war. Lenders, of course, want to get paid. However, borrowers are living in an unprecedented world, and many have suffered significant financial losses. Without a second federal stimulus package on the horizon, those who are owed money are starting to prepare to take matters into their own hands once foreclosure bans are lifted. As feuding parties involved with commercial properties are starting to materialize in court, receivership is regaining the spotlight.
What is Receivership?
In order to buy commercial real estate in Sacramento, it’s quite likely that you will take out a loan. Using credit for a property purchase is typically a sound decision, as it allows you to put less money down and increase your ROI. However, there is one problem that many people are starting to struggle with the oncoming expiration of Coronavirus provisions protecting from such measures. Because your lender, the bank, technically owns your property, they can also take that property back should you not be able to pay that loan.
Receivership in real estate occurs inside of courtrooms. A receiver is appointed by a judge that will act as the owner and perform property management and maintenance until the property ultimately sells. The receiver is a neutral agent or an arm of the court with a vested power to take possession of the estate assets that are relevant to the legal matter at hand. Due to the Coronavirus pandemic, there will be a tailspin of court-appointed receivership in about six months. At that point in time, banks will start taking back properties that people can no longer pay loans on.
What Exactly Does A Receiver Do?
A receiver has a slim set of essential tasks, of which the first is to obtain control of the property. When it comes to receivership, companies can cooperate with a third-party that is not associated with the lender pressing charges. This is why a receiver will step in as a neutral intermediary to cut costs and gain control over property managers and borrowers.
Their day-to-day responsibilities include rent collection, lease management, and sometimes, the court may give the receiver the authority to put the property up for sale. In this case, receivership becomes an alternative to foreclosure, simply leading to the real estate collateral’s selling.
Receivers are further responsible for preventing waste and managing risk to circumvent a scenario in which there is a significant financial loss. Additionally, receivers try to prevent fraud and cover the time period that falls between foreclosure filing and foreclosure sale.
Receivership and COVID-19
The economic downturn prompted by the Coronavirus pandemic is spurring a significant spike in the numbers of commercial real estate loan defaults. In these cases, lenders will have to use receivers to protect their assets and preserve their collateral value. Sacramento property management companies, like Laverty Chacón, have been paying attention to this changing climate and are streamlining their business operations to meet those needs.
How Can Laverty Chacón Help?
Commercial property management in Sacramento is what we’re best at here at Laverty Chacón. Many entities might face receivership in the future, and our team of local experts can answer any question you might have. With over 30 years of experience in consulting and advising commercial real estate investors, we have built a reputation for excellence.
Today, we continue to dedicate ourselves to expanding and optimizing our clients’ commercial real estate portfolios. For your commercial property needs or receivership questions, contact Laverty Chacón today at (916) 722-0333.
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