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Uniform Commercial Real Estate Receivership Act

On July 1, 2020, Florida became the tenth state to adopt the Uniform Commercial Real Estate Receivership Act (“UCRERA”) in the newly created Chapter 714, Florida Statutes.  The UCRERA applies to commercial foreclosure actions and establishes a process through which a receiver may be appointed by a court.  The role of the receiver in a foreclosure action is to preserve the mortgaged real property throughout the lender’s foreclosure action since litigation may take a significant amount of time to complete.

Under the UCRERA, a party, usually the foreclosing lender, may request the court appoint a receiver both before and after a judgment is entered in the commercial foreclosure action.  As examples, a foreclosing lender may seek the appointment of a receiver before the entry of a judgment if the property is in danger of loss or being impaired; or the lender may request a receiver be appointed after the entry of a judgment to preserve real property while an appeal of the judgment is pending.  The court may also rely on other equitable grounds to appoint a receiver.

In reviewing a party’s request to appoint a receiver, the UCRERA establishes several factors the court may consider in determining whether a receiver is appropriate for the real property involved in the foreclosure.  The court may look at whether the appointment is necessary to protect against loss or impairment, the borrower agreed to the appointment of a receiver on default in the loan documents, the sufficiency of the collateral to satisfy the secured obligation, whether the owner turned over any rents generated from the property, and whether any other receivers have been appointed by any other lienholders in the action.

As part of the appointment process, the court outlines the scope of the receivership and the duties the receiver must perform to preserve the property.  Preservation of the mortgaged property may include things such as collecting rents from tenants, insuring the property, managing repairs and maintenance of the property, and paying bills related to the property.  The UCRERA permits the court to revisit the scope and duties of the receiver as circumstances around the property change.

The receiver must be compensated for the services performed, and for its reasonable fees and expenses incurred in connection with the performance of the receiver’s duties.  The receiver is usually compensated from the proceeds derived from receivership property.  In some cases, the receiver may be compensated by the party who requested the appointment of the receiver in cases where the receivership property does produce proceeds sufficient to pay the receiver.

While the UCRERA is new, the appointment of receivers in commercial foreclosure actions is not new.  The UCRERA is a codification of the case law developed in Florida’s courts over the years; however, it does not entirely replace all existing case law. Nonetheless, it is hoped the UCRERA will bring stability and consistency to the process, which may become more important as the fallout from the Covid-19 pandemic continues.

Posted in Banks and Mortgages, Foreclosure, Real Estate Law, Receivership, Tenant/Landlord
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