Receiverships for Distressed Commercial Real Estate: Lender, Servicer, and Borrower Concerns

Description

The economic fallout from COVID-19 has resulted or likely will result in defaulted loans and distressed real estate and the need for court-appointed receiverships. Lenders and servicers appoint receivers to manage, market, and sell distressed assets during or instead of foreclosure. Receiverships offer several benefits to lenders and servicers, primarily by providing an opportunity to stabilize and maximize the value of the subject property in a relatively quick and cost-effective manner. But, there are several factors to consider.

The lender must be familiar with the process for appointing the receiver, determine who the receiver will be, and demonstrate to the court that the appointment of a receiver will benefit the management of the property and preserve value.

Many states do not have statutes that define what powers a court-appointed receiver may have, so the order should contain all the powers and responsibilities of the receiver. Key provisions include the ability to manage and control property, collect rents, and pay all expenses incurred with managing the property, as well as the power to hire the management company and the leasing agent. The receiver should also be indemnified for any actions taken in compliance with the order.

Listen as our authoritative panel explains the factors that counsel for lenders, borrowers, and servicers should consider when evaluating whether to seek or oppose a receivership for distressed commercial real estate. The panel will also explain strategies for navigating the receivership process.