The Bank Wants to Appoint A Receiver. What does this mean? What can I do? A Chicago foreclosure attorney can help answer these tough questions.
Posted on Aug 16, 2013 in Bankruptcy
You’ve been struggling with the mortgage on your commercial real estate or industrial building. Now the bank has started a foreclosure in Illinois. You’re in a state of shock as it is. Now the bank has filed an emergency motion in court to appoint a receiver. What does this mean? What can you do about it?
When you signed your mortgage on an apartment building, commercial or industrial real estate in Illinois, you also agreed that if you didn’t pay the bank what you were supposed to when due, the bank could start mortgage foreclosure proceedings. You also agreed that the bank could ask the court to appoint a receiver. In Illinois, the lender’s right to a receiver is just about absolute. The only defense you might have is that you are not in default and the lender doesn’t really have the right to foreclose. But the lender will get the benefit of the doubt. It is a good idea to consult with a Chicago foreclosure attorney to discuss your next move.
So who is a receiver?
A receiver must be qualified to take possession and to operate the real estate. Typically the receiver is a real estate professional with a track record as a property manager for the type of real estate he is taking over. A receiver of an apartment building is typically a property manager for apartments. A receiver for a shopping center might be a shopping center developer. A receiver for industrial property might be an industrial property expert.
What can a receiver do? What does a receivership mean to you?
A receiver must post a bond with the court. That’s because the receiver is acting for the benefit of all parties involved in the foreclosure, not just the bank. The receiver acts as an officer of the court. He must be honest. He must account for all rents collected and all expenditures made. So the bond protects all parties against any dishonesty by the receiver. The receiver can’t sell the property – that would be a short-cut to the mortgage foreclosure process, and if any actions to sell the property arise, it is imperative to contact a Chicago foreclosure attorney immediately. However, the receiver can collect rents, enter into leases, contract for the maintenance and repair of the real estate. A typical order appointing a receiver will specify exactly what the receiver can do without court authority. If the receiver wants to do something which is not within the authority granted in the order appointing him as a receiver, he will ask the court’s permission. A receiver will frequently employ an attorney to represent him in matters which come before the court.
Who pays the receiver?
The lender pays the receiver initially. However, all expenses for the receivership are added to the loan and become the borrower’s responsibility if the loan is “with recourse.” Even if the loan is “without recourse”, the expenses of the receivership are added to the loan and become additional indebtedness against the real estate.
Can a Chicago Foreclosure Attorney Help Me?
The bank wants a receiver because it does not trust the borrower to take care of the property itself. If you file a bankruptcy case in chapter 11, you can try to get the property back from the receiver. However, our Chicago foreclosure attorneys warn you that the lender and the receiver have the right to keep the property in the hands of the receiver even if you filed a chapter 11. So if you are worried about keeping the property out of the hands of a receiver and think you have a reasonable possibility of success in chapter 11, file your bankruptcy case before the receiver is appointed.
For more information about receiverships, foreclosures and chapter 11 bankruptcy, including real estate reorganization, single asset real estate and real estate bankruptcy contact the Chicago foreclosure attorneys David Leibowitz or Jonathan Brand at Lakelaw.