Arizona recently adopted the Uniform Commercial Real Estate Receivership Act (hereafter “the Act”) which permits real estate lenders to have a receiver appointed to take possession of their real property collateral security and personal property collateral after default but before a foreclosure can be completed. The receiver displaces the borrower or the borrower’s designees (i.e. a management company) from having control over the rental income and the operation of the collateral security which enhances lender protection as required under the discrete facts of each lending situation. Waste, deterioration or other immediate harms to the collateral security can be averted.
In certain lending situations which involve collateral security requiring management intensive and labor intensive operations such as hotels, motels, nursing homes, student housing, the “going concern” value of the collateral security can be protected or enhanced, particularly where there has been mismanagement or diversion of revenues. Experienced managers with industry specific expertise can be brought in as an aid to stabilizing and protecting the operating performance of the collateral security and the enterprise value of the collateral security.
Under the Act, a whole range of creative and flexible solutions to the typical post-default conundrums confronting real estate lenders become possible. The Act creates a lender friendly receivership template which offers many of the attributes of a trustee in possession chapter 11 reorganization under the aegis of Arizona state courts. The Act mirrors the automatic stay provisions of the Bankruptcy Code and provides that an order appointing a receiver operates as a comprehensive stay of acts directed against the collateral security. Similarly, the Act confers upon the receiver many of the same kinds of powers conferred upon bankruptcy trustees including, but no limited to, the power to operate any business under the umbrella of the receivership, to assert rights, causes of action or defenses of the owner/borrower relating to receivership property (i.e. construction defect claims, lease enforcement and damage claims, etc.), to incur debt and borrow outside the ordinary course of business, to adopt or reject owner/borrower contracts and leases and to offer all, or a part, of the receivership property for sale.
In commercial business situations, the threat of irreparable harm for which there is no adequate remedy at law gives rise to rights for strategic expedited relief in the form of temporary restraining orders and preliminary injunctions to preserve the status quo and ultimately to the right for relief in the form of permanent injunctions to prevent critical business rights from being undermined. When emergency relief is required to avert a disastrous and irretrievable change in circumstances, injunctive relief is often implicated.
The attorneys of the Rose Law Group have demonstrable expertise in large scale receivership cases in a diverse range of commercial property types and circumstances. Similarly, the Rose Law Group has experience in both prosecuting and defending injunctive proceedings.
Attorneys of the Rose Law Group team possess numerous credentials attesting to their expertise and specialization in sophisticated real estate receivership matters. These credentials include, but are not limited to, Certified Business Bankruptcy Specialist, American Board of Certification; Certified Creditors’ Rights Specialist, American Board of Certification; Certified Real Estate Law Specialist, State Bar of Arizona Board of Legal Specialization; and Certified Bankruptcy Specialist, State Bar of Arizona Board of Legal Specialization.
Borrower defaults need to be vigilantly and decisively dealt with by real estate lenders. Triggering the enforcement of the assignments of rent so as to trap the income stream for the immediate benefit of the lender needs to be pursued.
Arizona recently adopted the Uniform Commercial Real Estate Receivership Act (hereafter “the Act”) which permits real estate lenders to have a receiver appointed to take possession of their real property collateral security and personal property collateral after default but before a foreclosure can be completed. The receiver displaces the borrower or the borrower’s designees (i.e. a management company) from having control over the rental income and the operation of the collateral security which enhances lender protection as required under the discrete facts of each lending situation. Waste, deterioration or other immediate harms to the collateral security can be averted.
The attorneys of the Rose Law Group have the experience to meaningfully oppose borrower action plans which have as their goal only delay without providing any material enhancement or benefit to the lender. This experience extends to representing lenders in borrower chapter 11 bankruptcy reorganizations in which the borrower is seeking to “cram down” its lender. This bankruptcy experience includes prosecuting motions to dismiss bankruptcy cases for lack of good faith, motions to lift the automatic stay for lack of equity or other cause, motions to appoint an examiner or trustee in the event of mismanagement or fraud, opposition to the confirmation of chapter 11 plans of reorganization, Section 1111 elections, protection of secured creditor credit bid rights in the context of Section 363 sales and prosecuting and defending a whole host of different types of adversary proceedings as well as conducting fact discovery as required pursuant to Bankruptcy Rule 2004.
Where the loans are with recourse and the foreclosure sale implicates a deficiency, post-foreclosure deficiency litigation will be brought on the lender’s behalf within the required statutory limitations period. In concert with its lender clients, expert appraisal data will be generated in support of the foreclosure bid price and the amount of the deficiency. Where there are guarantors, any and all permissible actions on the guaranties will be pursued on behalf of the lender.
Attorneys of the Rose Law Group team possess numerous credentials attesting to their expertise and specialization in sophisticated real property lending defaults, foreclosures and deficiency and guaranty recoveries.
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