How does receivership work for commercial real estate in California in the event of a foreclosure?

In California, receivership is a legal process that can be initiated by a lender when a borrower defaults on a loan secured by commercial real estate. In the context of a foreclosure, receivership is often used as a means of protecting and preserving the value of the property until it can be sold.

Here is a general overview of how receivership works for commercial real estate in California:

1. The lender files a petition for receivership with the court. The petition must state the reasons why receivership is necessary and provide evidence of the borrower's default.

2. The court reviews the petition and may appoint a receiver if it determines that receivership is necessary to protect the property and the interests of all parties involved.

3. The receiver is a neutral third party who is appointed by the court to take control of the property and manage it until it can be sold.

4. Once the receiver is appointed, they take over the management of the property and have the authority to collect rent, pay bills, and perform other necessary tasks to keep the property operating.

5. The receiver is required to file regular reports with the court to update the court and all parties involved on the status of the property.

6. The receiver is responsible for selling the property once the court approves the sale. The proceeds from the sale are used to pay off the outstanding debt, with any remaining funds distributed to the borrower and other parties with a legal interest in the property.

It's important to note that the specifics of receivership in California can vary depending on the circumstances of the foreclosure and the court's interpretation of the law. If you are involved in a commercial real estate foreclosure in California, it's recommended that you consult with a real estate attorney who is familiar with receivership and other aspects of California foreclosure law.

If you have any questions about this article or would like to discuss a scenario of your own with our team, please feel free to contact Colin Dubel at colin@harborwestcommercial.com or 949-735-6415.