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How Do Real Estate Receiverships Work?

Published on December 22nd, 2020

When things go awry between a commercial real estate lender and borrower, appointing an impartial third party receiver can be a powerful, stabilizing solution. Our Chicago commercial real estate leasing office provides receivership services to help add value to properties that have suffered from mismanagement, are in the process of foreclosure, or are undergoing unforeseen complications.

What is a Receivership?

Establishing a real estate receivership is a process by which a qualified and experienced person (or group) assumes control of managing a property. The receiver is an impartial party with the directive of salvaging the asset and/or adding value to the property, serving the direct interests of all parties. So long as the receivership is in place, the property’s principals have limited control over the property and the decisions that are being made.

A receivership is often enacted during foreclosure proceedings in order to secure the asset. In this example, the receiver assumes a protective role on the behalf of the court. The receiver will then work to protect or restore the value of the property which has been impacted by the buyer’s handling until the foreclosure is resolved.

What Duties Does a Receiver Have?

1. Secure the property. First and foremost, the receiver will look to ensure that the property is not damaged (or further damaged) by tenants, the borrower, or through acts of random vandalism. To this end, the receiver may change the locks, improve security measures, or arrange for building maintenance.

2. Manage tenants. A receiver can also be responsible for managing existing leases or creating new leases. In some cases, a borrower may have damaged relationships with the building’s tenants, which may need repair in order to secure cash flow. If units are empty in the rental property, the receiver may arrange marketing efforts to fill those vacancies.

3. Control the building’s finances. The receiver can manage the building’s finances, including collecting rental income, obtaining insurance, and paying property taxes. The receiver may take control of the bank account associated with the property, ensuring that the building’s income is being used towards paying off the mortgage or other relevant debts.

4. Sell the property. In some cases, the best choice after a lending arrangement has gone awry is to resell the property. Depending on the specifics of the receivership, the receiver may have the ability to sell the property. This typically requires the court’s, the lender’s, and the property owner’s consent.

Chicago Commercial Real Estate Leasing and Receivership

The Frontline Real Estate Partners are experienced at buying, selling, and managing all aspects of properties in the Chicagoland area. We are qualified to assist in matters of Chicago real estate leasing and receivership, even in complicated circumstances. Learn more about our receivership services and contact us today for assistance.

Any Questions?

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Frontline Real Estate Partners, LLC

477 Elm Place
Highland Park, IL 60035

[email protected]
Monday - Friday : 9am - 5pm

(847) 780-8065

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