Different Types of Receiverships in Real Estate
July 17, 2020
With many small businesses experiencing a decline in earnings, many business owners are having to resort to receivership. That being said, what one company encounters may not look the same for another. In real estate, understanding the different types of receivership is crucial when preparing for your business’s future.
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When a company is struggling to pay back loan payments, the bank will start taking remedial action. This is the job of a receiver. They act on behalf of a property owner by taking control of everything related to the financial and operational functions of the business. Learn more about the different types of receiverships.
Administrative Receivership
In the broadest sense, the processes of administration and administrative receivership are fundamentally different. In administration, the company’s directors are replaced by a licensed Insolvency Practitioner, and all creditor action is stopped. An administrative receiver, on the other hand, will invariably give all authority of the company’s assets to the creditor. Although not as common today, administrative receivership almost always means the end of a company.
Court-Appointed or Liquidated Receivership
When a company is facing financial difficulties, the judgment creditor will reach out to the appropriate authorities for assistance. Similar to a trustee in a bankruptcy proceeding, a general or liquidated receiver will assume the role of the debtor. In most cases, the court may appoint a receiver with specific powers and rights laid out.
A court-ordered receiver acts as a liaison between the debtor and creditor, but they are ultimately responsible to the court. With the powers they’re given, any assets that are recovered are prioritized based on the interests of all secured creditors.
Pro Tip: A secured creditor can appoint a receiver without a court order in unfortunate circumstances. Commonly referred to as “privately-appointed receivers”, it is ultimately the responsibility of the receiver to reclaim a debtor’s assets.
Limited Receivership
Unlike general receiverships, special or limited receiverships are bound by certain ramifications. A limited receiver will only take possession of certain securities, loans, or assets that have been specified. The goal of a limited receivership is to assist a company in certain financial and operational decisions so that bankruptcy doesn’t occur. In such cases, the rest of the assets will remain in control of the debtor.
Seeking the Appointment of a Receiver?
Having a reliable and trustworthy receiver is crucial for the success of your business. Secure your property’s value and profitability with help from our team of experienced professionals. From accounting, legal documentation, rent collection, or property management, our receivership team is ready to assist you.
Connect with our Commercial, Multifamily, Senior Living, and Student Housing receivers to keep your business functioning for the long term.