1. Petitioning for a Court Receiver May Lead to a Settlement
While there is no intuitive reason for what may happen once a court receiver is appointed to a case, the very act of appointing a court receiver often leads to settlement. By petitioning the court to appoint a court receiver, you are letting all parties know that you mean business. The opposing party is put in the position of responding to your action by either settling with you or hiring legal counsel to challenge you. You are also letting the other party know that they run the risk of losing control of the disputed asset. Fear of losing the control of the asset often leads to settlement. In addition, the fear of incurring legal and receiver fees can lead to the opposing party wanting to settle.
2. Court Receivers Can Mediate Settlements Between Parties
In many cases, a court receiver acts as a mediator between the parties to the action. Disputing parties may developed a distrust for each other, as a result of their conflict, and look to a neutral party to help resolve the conflict. Since a court receiver answers only to the Judge, not the parties involved, the court receiver is in a unique position to influence a settlement between the parties. One key and very important advantage a court receiver has over a mediator, is the knowledge and experience from working with the assets in question and the parties and attorneys involved. An experienced court receive is often able to obtain an expedited settlement and save both parties time and money.
3. Court Receivers Can Protect Your Property
When assets are under the protection of a court receiver, the court receiver will ensure their safety. An experienced court receiver will, for example, prevent the theft of copper wire or piping, electrical wires and panels, heating units, air conditioning unites, and building materials. Court receivers will also make sure the property is safe from the dumping of hazardous waste. City and county inspectors may issue costly citations if a property is not maintained or managed properly. An experienced court receiver will ensure the property is not subjected to such actions. Having the right court receiver protects your property’s structure and value.
4. Court Receivers Bring a Fresh Approach to Management
Among the first actions performed by a newly appointed court receiver is to strip the opposing party of management and control of the asset. When this happens, the court receiver retains new management. This offers a fresh perspective and approach leading to an increase in efficiency and profitability. The court issued order may direct the court receiver to conduct an analysis of the asset’s current management. An experience court receiver, like Kevin Singer of Receivership Specialists, will have the resources to perform the duties as directed by the court order.
5. Court Receivers May Increase the Value of the Asset
After the recording of a Notice of Default by the lender, it may still take from 90 to 180 days to reach a trust deed sale . An experienced court receiver will take this time to increase the value of the property. Many investors base their offers on the condition of a property at the time of auction. An experienced court receiver will take action to improve the condition of the property and increase the value of the asset. When the asset is a business, an experienced court receiver will take action to stabilize business operations, streamline business practices, and increase the business’ revenue stream.
6. Court Receivers Determine Asset’s Highest and Best Use
The role of an experienced court receiver includes building relationships with appraisers, real estate brokers, management companies, city officials, contractors, inspectors, and other industry professionals. These relationships often provide resources that assist the court receiver in determining the “highest and best use” of an asset. The condition of the property, the condition of surrounding properties, and other factors may impact the value of the lender’s investment. An experienced court receiver often develops a strategy to reposition the asset and maximize the client’s investment.
7. Appointing a Court Receiver Avoids Foreclosure Liability
When a property is foreclosed upon by the lender, the legal title and the legal responsibility for all debts and liabilities is transfered to the lender. Without the assistance of an experienced court receiver, the lender becomes vulnerable to potential liability claims, tenant claims, code enforcement citations, and EPA citations. Even after the sale of the property, the new owners may bring future legal claims. As long as the property is in receivership, the borrower remains on title as the legal owner, allowing the lender to avoid legal liability.
8. Avoid Lender Liability and Stigma of REO Sale
When a property is sold as an REO (Real Estate Owned) property, it may bring much lower offers and have a lower sales price than a property sold in a more conventional manner. If approved by the presiding judge, and included in the court order, a receiver may be given the authority to sell the property. In this instance, the lender is not required to take legal possession of the property and needn’t assume any liability for its sale. The court receiver will sign all sales documents an behalf of the borrower and the lender’s name and reputation will not be stigmatized by the negativity associated with an REO sale.
9. Maintain Property and Liability Insurance
When a property is in distress, the owner of the property (the borrower) often fails to maintain the the property’s structure and liability insurance. Without the proper insurance, the lender’s collateral is at risk. The lender often has the right to institute “forced insurance” in order to protect the investment. This type of insurance has limited coverage and is often expensive. An experienced court receiver will research the property’s insurance status and ensure that proper insurance coverage is in place.
10. Bring in Investors to Resolve Litigation
Most lenders prefer avoid foreclosure litigation and dealing with defaulted loans. They would much rather have their loans to be reinstated, paid off, or sold. An experienced court receiver, without offering specific guarantees, is often able to provide credibility and and transparency to potential investors. Many investors are aware that experienced court receivers handle large numbers of lender’s notes and borrower’s distressed properties. As a result, these investors trust the court receiver has a better understanding of the property and more information than might be provided from the borrower. An experienced court receiver is often able to bring about the most beneficial resolution and avoid potential litigation.
Singer, Kevin A. (2011). Benefits of Appointing a Receiver, http://www.receivershipspecialists.com/court-receivers-benefits-of-appointing-a-receiver (accessed February 21, 2012)