A receiver can benefit a secured lender because he or she offers the ability to avoid or minimize potential liability. The Receiver acts as a shield to the secured lender because a Receiver’s actions are considered actions of the Court, and it is the Receiver of the Court, not the lender, that makes the decisions related to the property. These decisions can include but are not limited to selecting a buyer, marketing a property, accepting contract terms and final prices.
Another way the Receiver acts as a shield for the lender is from liabilities associated with foreclosing and becoming the owner of collateral. As receiver, sale of the property is generally allowed free and clear of existing liens which often maximizes the property’s value. This arrangement allows a lender to avoid stepping into the chain of title to the property. In this way, a lender is shielded from potential direct liability for environmental conditions on the property, construction defects in the case of a partially completed project, building code and life/safety violations, and other matters that, while they may not be known at the time the lender forecloses, can surface long after the lender has disposed of the property.
For many assets, opting for the appointment of a receiver to operate and ultimately sell a property can save the lender considerable time and money. Even in the case of a borrower bankruptcy filing, in certain circumstances a bankruptcy court may permit a state-court appointed receiver to remain in place during the bankruptcy proceedings. In summary, placing an asset in Receivership, whether in the State or Federal Court, can be one of the best vehicles for protecting the asset from deterioration or loss of income.
A Receivership can shield you from potential liability and allow you to achieve commercially-driven solutions with a minimum time and cost. A Receivership would allow you to gain immediate access to an asset and begin the turnaround efforts while the foreclosure is being considered or processed.