ASSET PRESERVATION PARTNERS              RECEIVER Q&A

What is a Receivership?

A receivership is a remedy that is authorized by a court’s equity powers. Upon appointment, the Receiver becomes an officer of the court to receive, care for, administer and dispose of property under the orders of the court. The Receiver’s powers and responsibilities are defined by the order of appointment.

A Receiver is commonly appointed to:
     1. administer and market real property;
     2. operate a business;
     3. collect on a judgment;
     4. recover fraudulently conveyed property;
     5. partition an interest in property or a business;
     6. stay foreclosure or a tax forfeiture of real property;

What Causes a Receivership?

Generally, receiverships result from business disputes or real estate foreclosures. In certain situations creditors can petition the court to establish a receivership.

A Receiver is appointed by the court as the result of a lawsuit. While the lawsuit is taking place, the parties may petition the Court for the protection afforded by receivership. The Receiver, simply, is a caretaker of assets, with the authority and power of the Court. The Receiver is responsible for protecting real property or an ongoing business that might be hurt or by lack of proper management.

Ideally, a Receiver would take over a business or property and provide practical improvements. Often, because of limited resources, the Receiver becomes limited in his ability to make changes and thus, becomes a caretaker manager. In this instance, preservation of the asset becomes paramount. Ultimately, a cash-strapped entity is liquidated and either sold as an entity or broken into component parts and sold to maximize the return to its owners or creditors.

Court orders appointing Receivers must be specific as to the responsibilities of the Receiver and provide the Receiver with quasi-judicial authority. The ordering Judge has the ultimate authority, with the Receiver as second-in-command in the receivership. The Receiver works independently of the parties, effectively answering only to the Judge who appointed him.

Usually, a Receiver is identified and recommended by the Plaintiff. The plaintiff’s goal is to find someone who is familiar with their business. Although lawyers are sometimes receivers, ongoing entities are sometimes better served by a Receiver with an entrepreneurial background, particularly someone who can step in and provide management or oversight of the entity, when necessary. A non-lawyer Receiver is commonly represented by an attorney to resolve any legal concerns that may arise.

A Receiver can be particularly helpful in both pre and post judgment proceedings. Due to the limitations of creditor's remedies, a Receiver may be the only remedy available to effect enforcement. The order appointing receiver grants unique powers to the Receiver to obtain compliance with the court’s orders.

How is a Receiver Appointed?

The appointment of a Receiver is accomplished by filing a motion or a complaint under one of the prescribed statutory provisions.

A Receiver is appointed at a hearing before the court at which time an order is entered. The order of appointment should include the following:
     1. Name and identifying information of the person or entity under Receivership;
     2. Assets to be administered under the Receivership; and
     3. Provision for bond for the Receiver.

How can I use a Receiver to enforce my court judgment?

A creditor's attorney can bring a motion before the court where the case is pending for appointment of a receiver to enforce the judgment. Asset Preservation handles enforcement receiverships where the recovery amount is at least $250,000. A receiver is only one possible remedy to enforce a judgment, and most cases where a receiver is appointed involve management of a corporation, small business or income-producing real property.

Why would a receiver be appointed to manage a corporation or small business?

There are a number of possible scenarios that would indicate the need to appoint a receiver. They usually involve the requirement to effectively manage the business in order to meet the claims of creditors or otherwise enforce an order of the court.

What is a Receiver’s Certificate?

A debt instrument issued by a receiver, who uses the proceeds to finance continued operations or otherwise to protect assets in receivership. The certificates constitute a lien on the property, ranking ahead of all other secured or unsecured liabilities in liquidation.

Does the receiver just bleed the business dry to satisfy the creditor's claim?

The receiver is mandated by law to use his best efforts to preserve the viability of the business while enforcing the court's order. The receiver can bring a fresh management perspective to the business and can effectively implement accounting practices that benefit the business well beyond the receivership period. Remember the receiver is not an agent of the creditor, but an officer of the court independent of any interested parties.

How does a receiver manage real property?

Receivers are appointed to manage real property when that property, either through generated income or from sale, is to be used to satisfy a creditor's claim. If the property is to be sold, the receiver manages the property to preserve its value until the sale is complete. Sometimes, the income produced by the property will be applied toward satisfaction of a creditor's claim and the receiver's job is to collect income, pay expenses and otherwise manage the receivership estate.

What is the time frame to appoint a receiver?

In cases where the party seeking to appoint the receiver needs to act on very short notice due to circumstances that threaten to irreparably damage a creditor's secured position Asset Preservation can prepare the necessary paperwork, acquire its bond and be ready for appointment within 3 to 5 business days, sometimes sooner if required for emergency cases.

What do I need to do to have a receiver appointed for my case?

Once we determine that the case meets our eligibility criteria, we will forward the necessary paperwork to your attorney to review, modify as necessary and file with the court. Asset Preservation can take control of the receivership estate as soon as the judge signs the order.

How much does it cost to appoint a receiver?

Although the costs of the receiver are usually paid through the receivership estate, the creditor must advance the costs necessary to appoint the receiver. If there are not sufficient liquid funds available within the receivership estate to support operation expenses, the moving party will need to loan funds to the receivership estate through a Receiver's Certificate. The Receiver's Certificate creates a priority lien against the estate and is paid out of the estate before distribution of any other payments.

Asset Preservation requires a minimum of $3,500.00 in liquid funds to operate any receivership estate, and a greater amount may be required based on the particulars of each case.

What region does Asset Preservation service?

Asset Preservation oversees a portfolio of 119 properties located in 19 states and in a multitude of different cities stretching from Oregon to Florida and everywhere in between. This portfolio contains approximately 14 million square feet of space representing property values of over $1 billion in multifamily, student housing, office, industrial, retail and other property types. The Asset Preservation staff includes in excess of 800 professionals with corporate headquarters in Houston, TX and regional offices located in Bryan/College Station, TX, San Jose, CA, Parker, CO, Nashville, TN and Guthrie, OK. With this staff and strategic office locations, Asset Preservation has the ability to service any and every property in the continental United States.