1. To Protect Assets

Receivership is about asset protection.  Court receivers take custody of property, usually real estate.  Sometimes, the asset being protected is a company that has become the subject of a dispute, typically because of management or economic issues.  Receivers are also appointed over family estates, typically the result of dissolution of marriage where an outside party must come in and help protect and, eventually, dispose of marital assets.  Receivers are appointed by municipalities to martial assets when owners violate health and safety or environmental rules.  Receivers are appointed to take over the activities of governing boards of condominiums and homeowners associations and to collect rents over abandoned properties within Florida communities.  Receivers also enforce judgments.

The appointment of a receiver is considered an “extraordinary remedy.” Courts appoint receivers as a last resort when compliance with the Court’s orders have been violated or ignored.

  1. To maintain property

A receiver secures real property in his custody, attempting to prevent theft of fixtures or vandalism.  The receiver frequently is assigned to abandoned properties that are the subject of late-night thefts and seeks to prevent the loss of vital infrastructure elements that go missing, particularly valuable items like electrical wiring, air conditioning units, electrical panels, industrial lighting installations and machinery.

The receiver, if ordered by the Court, maintains insurance and oversight of regulatory and tax issues that often envelop distressed properties.

  1. Business practices are reviewed and changed, as necessary

Fresh eyes!  A receiver with executive experience takes a de novo look at business operations.  Frequently, the receiver finds business practices that evolved over time, but which are no longer relevant to the business.  Management at these companies best explain outdated practices by saying, “it’s the way we’ve always done it!”  Inevitably, streamlining an operation that is bleeding cash results in quick savings.  A good receiver is always looking for opportunities to improve the value of the asset in his hands.

  1. Lenders don’t take possession of properties in foreclosure

While a foreclosure case winds its way through the courts, a receiver takes possession of the property.  Sometimes, owners who know they will be losing a property through foreclosure no longer maintain it.  An owner who collects rents often makes his tenants miserable during a foreclosure because, while he insists on collecting rent, the owner has lost interest in paying bills related to the property, especially to vendors who help to maintain the property or to his insurer.  A receiver takes possession and collects the rent, using the rent proceeds to maintain the property’s value.  A lender who appoints a receiver in this manner avoids taking possession of the property in their own name and therefore, has no liability associated with the property.  A receiver has judicial immunity from claims made against him in his caretaker role.

  1. A receiver can preside over the marketing and sale of property

Most courts cooperate with the goals of the receivership, to resolve the lender’s problem of marketing and selling real property.  Usually, the receiver will be given the authority to manage the sale of a real asset, alleviating the need for the lender to begin the marketing process once a foreclosure has been completed.

  1. A receivership is an equitable instrument of the court

The court’s receivership orders usually consist of business rules for the running of the receivership.  Rules, also known as the “receiver’s powers,” are elucidated in the Court’s order appointing the receiver.  There is plenty of flexibility in the implementation of these rules, allowing the petitioner or prospective receiver to suggest powers that exactly fit any individual receivership situation.  For example, an individual who has created problems can be the subject of a well-crafted “interference with the receiver” clause that would allow for the receiver to enforce the court’s order against the wrongdoer.

The receiver is an officer of the Court.  The receiver may use his most potent weapon when someone associated with the receivership refuses to comply with the receiver or creates mayhem in a business in receivership.  The receiver files a Motion with the Court and asks the judge to hold a hearing to determine whether the party creating the interference should be held in Contempt of Court.

Those found to be in contempt of court(contemnors) can be fined, jailed or may be subject to injunctive relief.  Sometimes, depending on the circumstances, someone found in contempt of court may be given the ability to “purge” themselves of the contempt, typically by complying with the receiver or through some other method imposed by the Court.