Brief Guide: What Happens When a Receiver Takes Over the Property?

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When a business or property is placed under receivership, it is not usually the end of the world for the receiver.

In most judicial proceedings, the lender often requests the court to appoint a receiver to manage the property on behalf of the borrower. This step is crucial in the legal proceeding because it automatically changes the dynamics between the lender and the borrower. To keep the commercial receivers in Arizona at bay, the disgruntled borrower initially used to file for bankruptcy. Still, this trick was averted by the introduction of obstruction carve-outs for intentional bankruptcies.

A receivership lasts as long as the legal proceeding, and this can last for years. Proceedings involving property are usually delayed intentionally by either the lender or receiver for their reasons. The idea behind appointing commercial receivers in Arizona to ensure the borrower does not mismanage the property that is of interest to the lender. The other purpose is to ensure the property is well managed and does not lose value in the hands of the broke borrower.

In this article, we will focus on receivership in Arizona, where legal proceedings take years before the judgment is given.

Fundamentals of Receivership

A receiver is usually appointed by the courts, with the sole aim of ensuring the property in question is in good hands while the case is ongoing. This means that whoever emerges the winner will get the property in good condition. The lenders do not have a say on how the receivers manage the property but may consult with both parties when the need arises. In cases where the receiver needs money from the lender for use with the property, the lender will have the upper hand in giving suggestions.

In a way, appointing a receiver is like selling off the property temporarily, only that the borrower’s consent (who is also the transferor) is not needed. The court permits without any prior notice. 

Before taking over, the receiver will be required to get a bond and file an oath within the shortest time possible. They will also be required to get a new taxpayer identification number and a new bank account where all the proceeds from the property will be deposited.

Managing the Property

At the commencement of the receivership, the receiver will need to document the condition of the building, preferably by taking photos and in the company of construction experts. During the receivership period, the property should, as much as possible to remain in the same state as immediately before the receivership. 

In cases where the property is not generating income, the commercial receivers will need to figure out how to get funds to pay for utility bills and any other such expenses. Here the lender is always the to-go-to person since most mortgage contracts allow the lender to put in money to protect the value of the property. These expenses will, however, be recovered from the borrower as part of the secured obligation. 

The Receiver’s Obligation

The receiver takes orders from the court and is required to be as transparent as possible. They should be able to set up a system that ensures all parties get all the relevant information. The receiver only has a special duty to the court and the property in question. They do not hold information in confidentiality, and as such, the borrower, the lender, and their legal representation should be aware of this when communicating with the receiver.

The receiver is mandated by sharing all relevant documents with all concerned parties and keep everyone updated on the developments. Clear and frequent communication will ensure that there are no complains later on from both parties.

Getting Grip of the Assets

The first responsibility of a receiver is to gather the assets that are under their jurisdiction. This means all the records on the property will be handed to the receivers. In some cases, the receiver will even take control of the bank accounts associated with the property. The first step is to give written notice to the borrower’s legal representative, attached to the order of appointment.

The next step will involve the receiver issuing the existing tenants with communication regarding the changes and directing them to remit their rent to the new account, belonging to either the receiver or a property manager appointed by the receiver. The borrower is required to hand over the property, failure to which the receiver is mandated to gain forceful entry. 


Working as a receiver is a pleasant experience because the receiver acts as a soft-landing place for aggrieved parties. The receiver is only expected to work for the good of the property under contention and execute his duty in a way that will be deemed fair to the borrower, the lender, and the court.

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