Under CPLR §5106, a court may appoint a receiver to take possession of property that was the subject of litigation, who will then dispose of the property in accordance with the court’s direction. A temporary receiver may be appointed by the court under CPLR §6401(a), “where there is danger that the property will be removed from the state, or lost, materially injured or destroyed.” CPLR §6401(c) also states that the powers and duties of a temporary receiver exist until a final judgment is issued, unless extended by the court.

In the context of foreclosure, the function of the receiver is to take control of commercial income-producing property and manage and operate it. This means that the receiver will collect rents and use the money to pay for the expenses of the buildings of upkeep. If the property is large enough to warrant me expense, a receiver may seek to appoint a managing agent who operated. The receiver earns a commission for his or her services based on rents collected. This commission is determined by the court after the receiver files a written application (a motion). Under Section 1325 of the Real Property Actions and Proceedings Law, If a mortgage provides that a receiver may be appointed without notice, then the plaintiff may file an ex-parte motion for the appointment of a receiver. This means that plaintiffs may simply file a proposed order in affidavit and exhibits and asked the Court to sign the order without any notice of motion being sent to the defendant’s property owner. The owner may then try to file an order to show cause to vacate the appointment but it is difficult if the mortgage is truly in default for nonpayment. The judge will usually be concerned about health and safety issues, including removal of garbage and insuring against fire, and will also want to make sure that the tenants are provided with necessary services, such as heat in the winter, while the foreclosure proceedings continue. The judge may feel more comfortable having an independent third-party handle this. In a sense, the receiver is acting like an arm of the court during the case.

If you need assistance with receivership, contact us online or call Scott Lanin, Esq. at (212) 764-7250 Ext.201. Attorney Lanin has been appointed as a receiver himself in foreclosure and has handled cases representing and opposing receivers. Our firm offers a free phone consult to review and evaluate your case or you can schedule an office consult.