Protecting Your Assets During Legal Proceedings

Receivership is a powerful legal tool used in many Florida foreclosure cases, particularly in commercial property foreclosures or when income-producing real estate is at risk. Under Florida Statutes § 714.16 and related civil procedures, a court may appoint a receiver—a neutral third party—to take control of the property, collect rents, manage operations, and preserve its value during the pendency of litigation.  This action often occurs before the final judgment in a case, especially when there are concerns about potential waste, mismanagement, or financial losses associated with the property.

A receiver can play several roles, such as completing construction on a partially built project, protecting assets during prolonged litigation, or addressing problems like unpaid mortgages that jeopardize the property’s value. Importantly, in some cases, receivership can prevent further financial damage while the courts work to resolve the matter.

Receivership is not limited to commercial properties. In some residential foreclosure lawsuits—especially those involving HOA disputes or investor-owned properties—a receiver may be requested by the plaintiff to safeguard collateral assets.

When Might a Receiver Be Appointed?

For a court to appoint a receiver, certain conditions must be met. Here are some key factors that courts typically consider:

• Likelihood of Success: The party requesting the receiver must demonstrate a strong likelihood of winning the case.
• Evidence of Waste: Courts often require proof of waste, such as deferred maintenance, misused rental income, or unpaid debts that pose risks to the property.
• Loan Agreements: Although loan documents may authorize the appointment of a receiver, courts will independently assess whether the circumstances justify such action.

If the property generates income, such as rents or profits, failing to use those funds to pay an outstanding mortgage could also be grounds for receivership. However, property owners may counter these claims by proving there’s enough equity in the property to cover the debt.

The Role and Authority of a Receiver

Once appointed, a receiver has significant discretion in managing the property. Their responsibilities can include:

• Overseeing maintenance and repairs to preserve the property’s value.
• Managing rental income and ensuring it is used appropriately.
• In some cases, selling the property to satisfy financial obligations, though this power depends on the specific legal context and court approval.

It’s worth noting that while receivers are independent, they operate under the supervision and instructions of the court—not the party that requested their appointment.

Florida’s Uniform Commercial Real Estate Receivership Act

In Florida, the Uniform Commercial Real Estate Receivership Act (UCRERA), which became effective in 2020, provides a legal framework for receiverships involving real estate. Under this act, receivership may be initiated to address issues such as:

• Waste or significant financial losses affecting the property.
• Voidable transactions that could harm the property’s value.

One of the most impactful aspects of UCRERA is that, under certain circumstances, receivers can sell the property, either before or after a judgment. For example, after a judgment, a receiver may sell the property to enforce the judgment or preserve its value during an appeal. Before a judgment, sales typically require either the property owner’s consent or evidence that the sale is necessary to prevent further losses.

Legal Defenses Against Receivership and Foreclosure

• Procedural challenges under the Florida Rules of Civil Procedure, including Rule 1.620 (Injunctions) and Rule 1.610 (Temporary Injunctions)
• Evidence of bad faith or improper lender practices
• Demonstrations that receivership is unnecessary to protect the property
• Appeals from improperly granted receivership orders

In Regions Bank v. Hyman, 902 So. 2d 318 (Fla. 2d DCA 2005), the appellate court held that a trial court must consider less drastic alternatives before appointing a receiver. Likewise, in AP-PBO, LLC v. Zwart, LLC, 198 So. 3d 1147 (Fla. 5th DCA 2016), the court emphasized the importance of evidentiary hearings before divesting an owner of control over their property.

What Does This Mean for You?

If you’re facing a receivership or foreclosure, understanding your rights and responsibilities is crucial. While a receiver’s appointment can help safeguard a property’s value, it also means relinquishing some control over the property’s management. You’ll want to work closely with your legal team to ensure that your interests are protected throughout the process.

Additionally, posting a bond is often required, and failing to meet this requirement can result in setbacks. 

Need Help Navigating Receivership?

Reach out today to schedule a consultation, and let us help you make informed decisions about your property.

Call Ormond Beach Real Estate Andrew J. Pascale, Esq.
📍 Law Offices of Andrew J. Pascale, P.A. – Foreclosure Defense & Real Estate Defense
📞 (877) 667 1211