Attorneys already know the benefits of using a Receiver in foreclosures. Many of their lender clients have also come to understand the merits of having an experienced Receiver appointed, given the glut of foreclosures they are now forced to deal with daily. Richard K. Olsen, an Arizona real estate broker has served as a court-appointed Receiver for more than a quarter century. During
this time he has handled almost every type of real property, from a Scottsdale resort hotel with a $60,000,000 loan, to a working cinder mine in Flagstaff. To serve the need for assistance in all aspects of property management and asset conservation Olsen has assembled, REFAB, an affiliation of talented professionals to assist him on an as-needed basis. Civil engineers, surveyors, architects, inspectors, designers, contractors, environmental inspectors, etc, all of whom can help address any issue or problem a property may present.

1. Control Cash Flow. Unless the borrower and tenants cooperate, the Assignment of Rents provision in the Deed of Trust can be an ineffective remedy without a Receiver to enforce it. It's more likely that borrowers will continue to collect rent but not pay utilities or other property expenses. A lender without a Receiver often gets property back with past due bills and no cash or tenant deposits.

2. Recover Security Deposits. Arizona law makes a foreclosing lender potentially responsible to reimburse tenants’ their security deposits. In some situations the "law of the West" sometimes leads tenants to get downright nasty if told their security deposit isn't coming back to them. By the lender demanding their return within the filed form of Order, the Receiver has the legal authority to go after the Trustor and his management company for these deposits.

3. Protect Property From Physical Waste. Spite, anger and frustration can often provoke a borrower to "trash" a property. During the foreclosure, a borrower can strip the property of anything of value that can be resold such as light fixtures, installed appliances and cabinets. This theft is less likely if the borrower knows there’s a Receiver.

4. Preserve Current Occupancy. Loss of landlord services, problems with deferred maintenance, and the state of uncertainty that often surrounds a property in foreclosure makes rent-up difficult and move-outs likely. It's better to foreclose a fully occupied property that a half empty one as is often the case if owners are left in control during the 90-day foreclosure period.

5. Pressure The Borrower.  Possession gives borrowers an advantage in work-out negotiations, especially with out-of-state lenders. However, once a Receiver is appointed, the borrower loses his cash flow from the property and with it his negotiating edge. The appointment of a Receiver often ends a borrower's "stonewall" tactics. If a workout can be structured, appointment of a Receiver will more often than not be the catalyst that makes it come together, because it demonstrates the serious intent of the lender.

6. Be Prepared For Ownership.  Knowledge of the actual property income and expenses is invaluable when deciding what to do following foreclosure. Without a Receiver in place, prospective buyers usually know more about the property than the lender. Appointment of a Receiver can uncover valuable information and assist the lender and his appraiser in determining the fair market value and deficiency, if any.

7. Be Prepared For Bankruptcy.  Bankruptcy and threats of bankruptcy are common, especially for single asset entities with non-recourse loans. Since bankruptcies are typically filed the day before a scheduled trustee's sale, an appointed Receiver will have already obtained information about the property, which information can assist lender's counsel in obtaining relief from the automatic stay by
proving the borrower's lack of equity. (If there were any real equity, there likely wouldn't have been a foreclosure!) With a Receiver's input, bankruptcy lift stays may be easier to get. Also, a Receiver may be necessary to perfect the lender's security interest in the rents.

8. Save Time And Money Disposing Of The Property. This may be the best but least acknowledged reason for using a Receiver. Time saved by a lender marketing a foreclosed property for which he has complete information means his loan will be recouped sooner rather than later. The resulting savings invariably exceed any fee the Receiver may have earned. Plus, Receiver's fees are typically paid from rents collected, that in the absence of a Receiver, would otherwise have been taken by the borrower.

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The foregoing analysis is offered as opinion and not as legal advice. In all cases lenders should rely upon the advice and recommendations of their Arizona foreclosure counsel. 

© 2005 -2010 Richard K. Olsen
702 East Orangewood Ave , Phoenix, Arizona  USA  85020
(602) 216-6600,  Fax : 1-888-252-3832,   rko@cox.net 
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