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Navigating a Court-Ordered Receivership

Are you working through a court-ordered receivership or considering petitioning the court for a receivership appointment? Court-ordered receivership is a valuable tool used by lenders and parties who jointly own businesses and assets and are seeking to gain additional oversight and operational controls over a business or assets. There are many different circumstances where a receivership appointment may be appropriate.

Every state operates under their own established laws and statutes defining court-ordered receivership. So be sure to acquaint yourself with the specific state laws when navigating the application process for a court order. In Arizona, two statutes govern the appointment of receivers. Arizona Revised Statutes § 12-1241 and 12-1242 state that, “to protect and preserve property or the rights of parties therein,” an individual or their attorney may petition the court in writing for the appointment of a receiver.

Contending parties “may file counteraffidavits,” but the court ultimately gives the receiver the authority to “restrain the adverse party from removing, secreting, or otherwise disposing of the property.” States such as Arizona, where receivership appointments are common, have fairly well-conceived legislation outlining the roles of court receivers, as well as a substantial amount of case law to show how receivership plays out in different real-life applications. States with fewer cases tend to model their receivership laws after the higher volume states.

Receivership, as it pertains to the handling of real property assets, should require the appointment of a receiver with experience in the management and operation of the specific asset class. Before petititioning for the appointment of a receiver, make sure that the proposed receiver has extensive knowledge in the specific asset class.

  • Multifamily Court-appointed receivers. Receivers with multi-family experience can assist with a variety of issues ranging from rent collection, expense controls, operational efficiencies,  lease-up, evictions, debt restructuring, marketing, and sale.
  • Court-appointed receivers for industrial clients should be prepared to access the property, coordinate environmental testing, air quality and water testing, contain hazardous conditions, preserve and protect the assets, and potentially market and sell the property to an owner, occupant, or investor. Receivers must have the requisite background and experience to be able to administer assets for large-scale industry and navigate through a complex regulatory environment. 
  • Office/Commercial. Assets such as office buildings and businesses need to be managed properly by addressing tenant concerns, such as collecting rent on a timely basis, potentially evicting tenants who are in default, managing and maintaining the property to preserve and protect the asset, and achieving the highest and best value upon sale.

With all of the above asset classes, and with others, such as hotels, mini-storage, RV storage, mobile home parks, and others, taking a hands-on approach in the management and maintenance of the property, so as to preserve, protect, and enhance the value of the assets, is essential.  The production of a rent roll, profit and loss statement, and balance sheet will enable the parties and the judge to understand the property, the revenues, and expenses associated therewith, and will assist with the eventual sale of the property, when and if the receivership order provides for same.

In the resolution of litigation over disputed property or shared assets, a court-appointed receiver can play a vital role. It is imperative, that to ensure a case involving a court receiver reaches a positive outcome, that the correct court-appointed receiver is chosen for the job. In addition to understanding the laws and statutes governing receivership and real estate, receivers need to have a depth of experience and knowledge in order to reach a timely settlement.

Additionally, the court order providing for the appointment of a receiver must be specific and very comprehensive, as it acts as the receiver’s framework during his or her assignment. Comprehensive receivership reports provide a detailed look at engagement details and should be filed monthly.

The Court Appointed Receiver generally moves through a receivership assignment as follows:

  • Asset Intake. An Asset Intake Report should explain the Receiver’s findings upon taking control of the business and/or possession of the property. It should explain both the short- and long-term strategies for sale, lease, and management scenarios, as well as clarify any existing business operations. Court-appointed receivers will conduct an analysis of assets, complete onsite inspections, and review carefully any related documents governing the property and/or business. The Asset Intake Report then outlines short- and long-term strategies for management, sales, leasing, and/or other business operations.
  • Operational Plan. The Asset Intake Report is then utilized to develop the Operational Plan and provides a roadmap for qualified personnel to manage properties and businesses. R.O.I. Properties and other experienced court receivers employ a client services team staffed with trained, qualified representatives prepared to adapt to the variety of challenges typically encountered at each stage.
  • To accurately reflect the revenue and expenses associated with a business and/or property, along with all assets and liabilities, with the goal of preserving, protecting, and enhancing asset value and/or cash flow with sound accounting procedures, professional accounting services are essential to any receivership assignment.
  • Asset Stabilization and Operations. An experienced receivership team should ensure implementation of a flexible and timely operations plan and remain adaptable to a variety of situations.

Regular monthly reporting, including operational review, physical overview, case overview, legal posture, factual findings, rent rolls, recapping all physical, financial and operational issues is beneficial to all parties, as well as the judicial officer(s). Comprehensive financial statements should accompany reports and include balance sheets, profit and loss/income statements, cash flow projections/budgets, and a banking overview.

Navigating Receivership Made Easy

R.O.I. Properties can streamline the receivership process for your complex legal case.

Your court-appointed receiver should have the experience and knowledge necessary in the areas that matter to help get your case through challenging legal scenarios. We have performed receivership for over 100 cases, totaling more than $350 million in disputed assets.

Learn more about our receivership appointments on our website and by contacting a member of our receivership team.

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