Law.com Subscribers SAVE 30%

Call 855-808-4530 or email [email protected] to receive your discount on a new subscription.

The Bankruptcy StrategistFeaturesBankruptcyLitigation

Appointment of Receiver Under State Law No Assurance Receiver Will Stay If Ch. 11 Filed

By Andrew C. Kassner and Joseph N. Argentina Jr.
November 01, 2023

No sector is receiving more press about the impact of the rapid rise in interest rates than the commercial real estate industry. It seems like every day there is another article about the billions — or trillions — of dollars in debt that will mature over the next 24 months, secured by interests in real estate. For many properties, the owners' equity has been wiped out, and the lenders will be left to exercise rights to foreclose their collateral. An interim step in this process is often the appointment of a receiver to operate and or preserve the property during the foreclosure process. Many clients are not aware that the Bankruptcy Code provides that, upon the filing of a bankruptcy case, the receiver is required to give back possession of the mortgaged property to the debtor unless the lender obtains an order from the Bankruptcy Court excusing the receiver from this requirement. And most of the time, the lender does not want possession returned to the debtor that defaulted under the loan. So when can a receiver be excused from this requirement?

This decision regarding turnover ultimately involves whether the receiver or debtor is more likely to preserve and maximize the value of the property for the benefit of all creditors, not just the lender. The U.S. Bankruptcy Court for the Northern District of Illinois recently addressed this issue in In re Novus Structures, Case No. 23 B 6723 (Sept. 11, 2023), where a state court appointed receiver was not excused from turning over possession of commercial real estate property to the debtor that had filed for bankruptcy.

|

State Court Receiver Appointed In Foreclosure Litigation

According to the opinion, Novus Structures (debtor) owned a small apartment building with only three units and a two-car detached garage (property). The debtor was a borrower under a loan from J&D Commercial, LLC (lender) pursuant to a promissory note secured by a mortgage on the property and an assignment of rents derived from the property. The loan matured in 2019, and the lender initiated a state court foreclosure proceeding to collect the amount due.

This premium content is locked for Entertainment Law & Finance subscribers only

  • Stay current on the latest information, rulings, regulations, and trends
  • Includes practical, must-have information on copyrights, royalties, AI, and more
  • Tap into expert guidance from top entertainment lawyers and experts

For enterprise-wide or corporate acess, please contact Customer Service at [email protected] or 877-256-2473

Read These Next
How Secure Is the AI System Your Law Firm Is Using? Image

In a profession where confidentiality is paramount, failing to address AI security concerns could have disastrous consequences. It is vital that law firms and those in related industries ask the right questions about AI security to protect their clients and their reputation.

COVID-19 and Lease Negotiations: Early Termination Provisions Image

During the COVID-19 pandemic, some tenants were able to negotiate termination agreements with their landlords. But even though a landlord may agree to terminate a lease to regain control of a defaulting tenant's space without costly and lengthy litigation, typically a defaulting tenant that otherwise has no contractual right to terminate its lease will be in a much weaker bargaining position with respect to the conditions for termination.

Pleading Importation: ITC Decisions Highlight Need for Adequate Evidentiary Support Image

The International Trade Commission is empowered to block the importation into the United States of products that infringe U.S. intellectual property rights, In the past, the ITC generally instituted investigations without questioning the importation allegations in the complaint, however in several recent cases, the ITC declined to institute an investigation as to certain proposed respondents due to inadequate pleading of importation.

The Power of Your Inner Circle: Turning Friends and Social Contacts Into Business Allies Image

Practical strategies to explore doing business with friends and social contacts in a way that respects relationships and maximizes opportunities.

Authentic Communications Today Increase Success for Value-Driven Clients Image

As the relationship between in-house and outside counsel continues to evolve, lawyers must continue to foster a client-first mindset, offer business-focused solutions, and embrace technology that helps deliver work faster and more efficiently.