Receivership Basics

One of the least misunderstood methods for collecting association debt is the filing of a receivership lawsuit. A receivership can be a very effective method of collecting association debt when more traditional methods of collection have failed. The receivership process permits an association to collect rental income from a vacant or tenant occupied property to offset the amount owed to the association.

The receivership process is started by the filing of a lawsuit requesting the appointment of a receiver. The receiver is a neutral, third party real estate professional that will ‘step into the shoes’ of the delinquent owner and act, in many ways, like the landlord of the property. Once a court permits the receivership to move forward, the receiver will make contact with the delinquent owner(s) and urge them to settle the matter with the association. If settlement efforts are unsuccessful, the receiver will contact the tenant(s) occupying the property and direct them to send future rental payments to them until the association’s debt is paid in full. The association receivers those payments after payment of the receiver’s fees and expenses.

 If a property is vacant, the receiver will advertise the property for lease and find a suitable tenant to pay fair market rent.  Should repairs be necessary to make the property habitable or suitable as a rental, the receiver will obtain bids for the requisite repairs. Any expenses incurred to make the property habitable, are typically advanced by the association and can be recovered against the delinquent owner as future payments are received.

If you have any additional questions relating to the receivership process, feel free to contact us.