A recent panel entitled “Alternatives to Bankruptcy – Assignments for the Benefit of Creditors and Receiverships”  provided information about a new type of receivership being enacted by a growing number of states.  This article gives an overview of a new uniform law for commercial real estate receiverships.

In July 2015, the National Conference of Commissioner on Uniform State Laws adopted the Uniform Commercial Real Estate Receivership Act (UCRERA).  On March 25, 2017, Utah became the first state to enact UCRERA.  UCRERA creates a comprehensive receivership for commercial real estate, providing a standard set of rules and procedures for courts, receivers and practitioners to use in their receivership cases. Some examples of significant provisions of UCRERA are:

  • Upon appointment, the receiver has the status of a lien creditor under Article 9 as to personal property and fixtures, and under the recording statute of the state, as to receivership property that is real property (Section 9);
  • Property that a receiver or owner acquires after the receiver’s appointment is subject to a security agreement entered into before the appointment to the same extent as if the court had not appointed the receiver (Section 10);
  • The order appointing the receiver acts as a stay of any act to obtain possession, control or enforce a judgment against receivership property and to enforce a lien against receivership property to the extent the claim arose before the receivership (Section 14);
  • Unless the agreement of sale provides otherwise, any transfer is free and clear of liens and any right of redemption, but is subject to liens senior to the lien of the person who petitioned for the receivership (Section 16); and
  • With court approval, a receiver may adopt or reject an executory contract entered into by the owner related to receivership property (Section 17).

Since 2017, UCRERA has been enacted in Michigan, Nevada, Oregon, Tennessee, and Utah.  In 2018, the following states have introduced bills as follows:

  • Kentucky SB196
  • Oklahoma SB362 and HB1927
  • West Virginia HB4489

In California, receivers are used only where authorized by statute or where necessary to preserve property rights, e.g., joint interests in property, for the assignment of rents or to enforce a judgment. To date, UCRERA has not yet been enacted in California, and if introduced here, might not garnish universal support. However, given its bankruptcy-like provisions, this type of receivership might provide for a basis to retain California venue and local control of cases.

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