Receiverships

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Receiverships by Mitchell Lieberman. Presented at GreenPearl Events' Distressed Real Estate Summit Chicago on May 13, 2010.

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Receiverships

  1. 1. RECIEVERSHIPS Mitchell A. Lieberman
  2. 2. RECEIVERSHIPS • 735 IMFL 5/15-1701(b)(2) Mortgagee is entitled to be placed in possession prior to judgment if: - Mortgage provides for possession - There is reasonable probability that mortgagee will prevail at hearing. • What constitutes a reasonable probability of success: - Real Estate Taxes - Maturity - Payment default - Due on sale violation
  3. 3. Receivership Continued… • Petition must be verified • Service Issues • Statutory presumption in favor of Mortgagee • Mortgagor must overcome statutory presumption in favor of Mortgagee and show good cause to remain in possession.
  4. 4. Good Cause • Traveler’s Insurance Company v. LaSalle National Bank as Trustee, 200 Ill. App. 3d 139, 558 N.E. 2d 579, 146 Ill. Dec. 616 (2d Dist. 1990) • Centerpoint Properties Trust v. Olde Prairie Block Owner LLC 2010 Ill. App. LEXIS 91 (1-09-1481) (1st Dist. February 10, 2010) • Management issues • Pending Affirmative Defenses
  5. 5. Mortgagee’s Burden • First Federal Saving’s Loan Association v. National Boulevard Bank, 104 Ill. App. 3d 1061, 433 N.E. 2d 1036, 60 Ill. Dec 798 (1st Dist. 1982) • Mellon Bank N.A. v. Midwest Bank & Trust as Trustee under Trust No. 85-02-4652, 265 Ill. App. 3d 859, 638 N.E. 2d 640, 202 Ill. Dec 772 (1st Dist. 1993) • Traveler’s Insurance as Trustee, 200 Ill. App. 3d 139, 558 N.E. 2d 579, 146 Ill. Dec. 616 (2d Dist. 1990)
  6. 6. RECEIVER BOND • Discretionary • Calculation of amount – Percentage of principal amount – Mathematical computation regarding gross income
  7. 7. POWERS OF A RECEIVER • 735 ILCS 5/15-1704 – Employment of third parties • Standard/ Prudent Person • Disbursements – Insurance – Taxes – Building expenses – Repairs • Court Authority
  8. 8. Powers Continued: • Submission of Bids • Building Condition/ Status Quo • Fees and Costs • Income deficient to cover operating expenses • Debt Retirement • Receiver’s Certificate – Paul Gaskill et al.,v. Earl Dean Gordon et al., 1993 WI 64642 (N.D. Ill)
  9. 9. Powers Continued: • When is an attorney necessary: - Upon petition with notice - Lease Issues - Condo Issues - Possession Issues - Document Turnover - Rent Turnover
  10. 10. RECEIVER’S AUTHORITY • From the court and statute • Receiver is an officer of the court • Custodial officer • Leases : Acceptance/ Rejection United States Fidelity & Guaranty Co. v. Old Orchard Plaza Limited Partnership, 333 Ill. App. 3d 727, 776 N.E. 2d 812, 267 Ill. Dec. 440 (1st Dist. 2002) 735 ILCS 5/15-1702 (g) Comerica Bank Illinois v. Harris Bank Hinsdale, 673 N.E. 2d 380, 284 Ill. App. 3d 1030, 220 Ill. Dec. 468
  11. 11. MORTGAGEE IN POSSESSION • Powers and Duties Distinguished from a Receiver – Collection of rents and application - Appointment not for the benefit of all parties
  12. 12. CONDOMINIUM PROJETS • Condo Board • What is collateral • What duties does receiver have in conjunction with the condominium management • Shared Expenses
  13. 13. RECEIVER’S LIABILITY • 735 ILCS 5/2-415 • Effect of Order Approving Reports • Res Judicata Effect

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