Until July 1, 2020, commercial lenders have gone through immense struggle to protect their collateral following the default of a borrower in Florida. There was no comprehensive scheme to appoint receivers to ensure the value of the collateral is maintained. Instead, Florida law offered an inconsistent patchwork of different legal decisions made over the years.
Fortunately, that has changed now with Florida adopting the Uniform Commercial Real Estate Receivership Act (UCRERA) codified under Chapter 714 of the Florida Statutes. Effective July 1, 2020, UCRERA law aims to streamline Florida common law to provide lenders with more options to protect their commercial property when a lawsuit is initiated.
Though Florida law has for long recognized commercial receivership as a solution available to stakeholders, this section of law lacked uniformity. UCRERA systematizes existing law and provides uniformity.
According to UCRERA, a ‘receiver’ is defined as a person or independent party appointed by a court to take possession of another’s property to collect, take care, receive, and dispose of the property or profits of that property. This Act is imposed on receiverships of commercial real estate. However, it may apply to residential property as well but only if it is maintained by more than 4 dwelling units or under some other conditions.
Before this Act became effective, the court can appoint receivers upon interested party or mortgage lender’s request when:
the property was mismanaged
owner committed waste
need to preserve rent or income of the property
property may be subjected to serious loss risk
With UCRERA’s implementation, additional grounds have been added besides the above ones such as, now the appointment of the receiver is permitted if the property has been or about to undergo voidable transactions. This ground is beneficial to avoid the fraudulent transfer of commercial property.
Moreover, UCRERA particularly authorized the appointment of receiver post-judgment to carry-out the judgment, preserve judgment during the pending appeal, or to secure property’s rent during the foreclosure sale.
Under some conditions, UCRERA allows the appointment of a receiver without prior notice. For instance, the moving party had to certify in writing that they have made all possible efforts to issue a notice to the adverse party.
Unlike before, when the court order would set forth the powers of the receiver that varies from case to case, now UCRERA has provided statutory authority for broad powers. These may include:
to manage receivership property
to operate business accounting for receivership property
incur & pay expenses and debts of receivership property
assert claims relating to receivership property
improve receivership property
transfer or use receivership property other than a usual business course
accept or reject an executive contract associated with the receivership property
allow or disallow creditor’s claim
pay compensation to professional engaged by the receiver
With UCRERA’s implementation, additional grounds have been added besides the above ones such as, now the appointment of the receiver is permitted if the property has been or about to undergo voidable transactions. This ground is beneficial to avoid the fraudulent transfer of commercial property.
Moreover, UCRERA particularly authorized the appointment of receiver post-judgment to carry-out the judgment, preserve judgment during the pending appeal, or to secure property’s rent during the foreclosure sale.
Under some conditions, UCRERA allows the appointment of a receiver without prior notice. For instance, the moving party had to certify in writing that they have made all possible efforts to issue a notice to the adverse party.
UCRERA grants certain power to the Florida State Court as well. The court has the power to enter a stay of any proceedings that
concerns receivership property,
adjure anyone who may threaten to waste receivership property,
attempts for possession of the receivership property,
to enforce or control a judgment against the receivership property,
The owner of the property is required to help and cooperate with the receiver. If the owner intentionally fails to perform mentioned duties, the court is granted enough power that it may penalize the owner and grant the receiver with the damage along with attorneys’ fees and costs.