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What Happens When A Commercial Property Goes Into Receivership?

Businessman-madWhen you or your client face a situation where a lender is threatening to place a receiver on your commercial property (including multi-family, office, retail or industrial), you need to immediately retain a top notch, experienced lawyer.  Time is of the essence because with respect to receivers, a court can remove you from managing your property in favor of a receiver in most cases on only 24 hours notice.  A receiver can devastate your plans to turn around a property and can make a foreclosure virtually a foregone conclusion since a receiver will likely drastically change or even eliminate your marketing plans for new tenants, and will make prospective tenants who may be in the pipeline (or existing tenants contemplating a renewal) think twice about signing a lease due to concerns about instability as well as uncertainty as to the identity of the new owner if there is a foreclosure. 

Even if your loan documents expressly provide for a receiver upon default, the appointment of a receiver is not a foregone conclusion since courts always retain discretion to decide whether a receiver is appropriate and cost effective in each situation.  An experienced lawyer will present the facts to the court in the way most favorable to not having a receiver appointed by showing that you and your management team are well qualified, have an aggressive turn around plan in place which is achieving results and are far less expensive than a receiver.  In addition, options other than a receiver can be proposed which allow you to continue to manage your property but which protect the lender.

If you retain an attorney early enough, your attorney may be able to approach your lender before receivership proceedings are initiated and convince your lender that a receiver will be vigorously opposed and encourage your lender to negotiate a more suitable option which would allow you to retain management and control over your property.

James M. Gilbert is a California attorney with 20 years of experience in real estate and lending disputes. He has handled all types of high stakes real estate/lending disputes including those related commercial leases, lending, foreclosures, partnerships, receiverships, construction, purchase and sale, creditor’s rights, land use (CEQA), bankruptcy and boundary disputes).  You can contact James M. Gilbert here.

The information set forth herein is only general in nature, does not represent legal advice and you should be aware that each case is  different.  You are urged to contact and formally retain an attorney immediately if you have a legal problem.

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