This summer, Florida became the ninth state to adopt a version of the Uniform Commercial Real Estate Receivership Act (UCRERA), which provides a formal process for the appointment and operation of a receiver over commercial real estate, an area that has been plagued by inconsistency because Florida’s courts were bound to follow case law and specific contract provisions before them. Alexander Zesch authored a November 5, 2020 article to help further explain the opportunities and improvements this new Act offers, as well as some hurdles.
In a typical, pre-UCRERA default on a commercial real estate loan, a lender would file a lawsuit on its promissory note and mortgage, obtain a foreclosure judgment and then take title to the property after a foreclosure sale. However, UCRERA means a lender can ask a court to appoint a receiver to step into the shoes of the borrower-owner and manage the receivership property, and a court can authorize a receiver to sell the property even before judgment is entered against the owner. This also benefits lenders who just want to sell rather than maintain ownership of a foreclosed property.
Zesch further explains a receiver’s obligations to notify owners prior to a sale. While an owner does not have to consent (but should not object), the court can approve a sale if the receiver demonstrates they gave adequate notice and that the sale is necessary to prevent waste, loss or other negative impacts on the property.
Among a few challenges under the law, one issues is that UCRERA does not address an owner’s right to redeem property after the court has approved its sell. While owners have a statutory right to redeem property after a foreclosure judgment until a certificate of sale is issued, such rights do not automatically exist for other judicially sanction sales. Courts will have to determine how to handle this issue since the legislature did not provide for any clarity on the issue.
For the full article, please click here.
