Florida’s New Receiver Laws And Commercial Foreclosures
Often, when lenders have an interest in commercial property, they are concerned that the property will be damaged, or mismanaged. The lender has an interest in the property given that the property is the lender’s security for the loan.
Concerns a Foreclosing Lender May Have
When a business defendant is in foreclosure, and the business is or relates to real estate property, the lender may need to make sure that rents are being collected and that expenses on the property are being paid, in order to maintain it.
For example, let’s say that property has a leaking roof, which threatens the ability or willingness of tenants to continue paying the owner. The receiver, once appointed, could hire someone to fix the roof. Let’s say that many tenants are behind in paying rent, and the owner has been slow or unwilling to take legal action to collect back owed rent. The receiver could take action, in place of the owner.
A lender often may wonder why the owner cannot pay the loan payments; the owner may say that there is no money to make the mortgage payments, but the lender may feel that this is because of mismanagement, diverting of funds, or the failure to take other actions which could yield the owner the funds needed to pay the loan.
Appointment of a Receiver
So, the lender decides to do this itself. This often requires the appointment of a receiver.
A receiver is a neutral professional, appointed by the court at the request of a party (usually, the foreclosing lender in a commercial foreclosure case). Sometimes, a lender can even get a receiver appointed without the property owner’s knowledge, consent or permission, and sometimes, before the court even notifies the parties for a hearing, if the lender can show there is a real risk or concern that the property will be damaged.
Florida’s receivership law, which recently changed in 2020, allows the receiver to transfer property to other parties or to sell property free of liens, and the receiver can even reject certain kinds of contracts, if they are not in the best interest of the property.
The receiver can also do things like operate the business, pay (and where necessary incur) debts that the business may owe, and make claims against third parties that the business may have.
The receiver also can, with court approval, sell property even before a judgment is entered against the owner/Defendant.
The Owner’s Obligations
The owner of the property may be frustrated, as the receiver is now running the property, which may serve as part or all of the owner’s business. The law requires that the owners assist the recovery and cooperate with him or her, and to turn over all property of the business (related to the property) to the receiver. The owners must make records available to the receiver upon request.
Call the West Palm Beach business litigation attorneys at Pike & Lustig today for help with your business law questions, or with any business related legal issues you may have.