Just as lenders are working through their portfolio of distressed commercial real estate loans, looking for remedies to address dissipating collateral, preserve the value of the property, and minimize their exposure, Florida’s new receivership statute, Florida Statutes Chapter 714, has arrived and is effective July 1, 2020.
What was once a loose body of common law and unevenly applied judicial discretion for the appointment of a receiver has now been codified, giving commercial lenders (and borrowers) detailed guidance as to how, and when, and for what purpose a receiver may be appointed. This is likely to provide long needed consistency and clarity in Florida. Here are some highlights from Florida’s adoption of the Uniform Commercial Real Estate Receivership Act, which applies to commercial property, including residential facilities (but not one or two dwelling units):
What’s new and exciting:
- receivers may be appointed pre- or post-judgment (hello, judgment collection!);
- the receiver may sell or transfer the property (with court approval) free and clear of liens (a long sought remedy);
- certain actions to enforce claims against receivership property are stayed (a nod to bankruptcy stays); and
- receivers may apply to the court of another state for appointment of an ancillary receiver with respect to receivership property in that other state (cross border collateral made easy!).
What’s codified from existing case law:
- a hearing is still required;
- appointment is dependent on waste, loss, substantial diminution in value, dissipation, or impairment;
- entitlement is strengthened by contractual provision for appointment and by diminished equity in the lender’s collateral and borrower’s failure to turn over rents/proceeds;
- the receiver may accept or reject executory contracts;
- a bond is necessary, and receiver certificates may be issued.
If you have any questions, please contact Gunster attorney Traci Rollins.