What Does Florida’s Adoption of the Uniform Commercial Real Estate Act Mean for Lenders

What Does Florida’s Adoption of the Uniform Commercial Real Estate Act Mean for Lenders

This summer, Florida became one of nine states to adopt a version of the Uniform Commercial Real Estate Receivership Act (UCRERA). In doing so, it brought uniformity to the state court receivership appointment process. Before, commercial real estate owners and investors could never be certain about how much properties would be protected during receivership. Now the law has changed, what does Florida’s adoption of the Uniform Commercial Real Estate Act mean for lenders?

What is a Receiver?

Under the UCEREA, a receiver is defined as a “person appointed by the court as the court’s agent, and subject to the court’s direction, to take possession of, manage, and, if authorized by this chapter or court order, sell, lease, license, exchange, collect, or otherwise dispose of receivership property.” When properties are involved in foreclosure or are the subject of litigation, they can fall into disrepair and be placed at risk of losing their value. A receiver’s job is to manage, maintain, and safeguard designated properties while the legal process is carried out. This includes insuring and making improvements and repairs as necessary during the pendency of any associated lawsuits.

What does Florida’s version of the Uniform Commercial Real Estate Receivership Act (UCRERA) do?

Florida’s version of the UCRERA only applies to receiverships initiated for commercial real estate properties. Therefore, the UCRERA does not apply to residential foreclosures or cases involving residential real estate.

Before adopting the UCRERA, Florida Courts had to follow contract provisions and case law regarding receivership appointments. This resulted in inconsistencies between courts regarding when receivers should be appointed and what their powers and responsibilities would be after the fact.  The adoption of the Act clarified the standards for receivership and brought uniformity to the process.

How Are Receivers Appointed Under the UCRERA?

Florida judges have retained discretion regarding when to appoint receivers. However, the UCRERA provides grounds for when receivers could be appointed both before and after judgment.

Additionally, under the Act, the court must consider the following facts and circumstances, along with any other relevant facts in deciding whether to appoint a receiver in foreclosure or other mortgage enforcement matter:

  1. Appointment is necessary to protect the property from waste, loss, substantial diminution in value, transfer, dissipation, or impairment;
  2. The mortgagor agreed in a signed record to the appointment of a receiver on default;
  3. The owner agreed, after default and in a signed record, to appointment of a receiver;
  4. The property and any other collateral held by the mortgagee are not sufficient to satisfy the secured obligation;
  5. The owner fails to turn over to the mortgagee proceeds or rents the mortgagee was entitled to collect; or
  6. The holder of a subordinate lien obtains appointment of a receiver for the property.

Receivers Have Specific Duties and Powers under the UCRERA

Under the UCRERA, receivers have a list of duties they are required to fulfill. For instance, receivers must conduct accountings for receivership property, and they are required to retain proper business records. They also have to file a report at the end of the case detailing all of their expenditures and activities concerning the real estate. Receivers have enumerated powers under the Act, such as being able to improve receivership property after obtaining court approval.

How the UCRERA Benefits Lenders

Before Florida adopted the UCRERA, there was a lack of consistency in how receivers were appointed and what they were required to do to protect commercial properties. Lenders, borrowers, and anyone else with an interest in a commercial property often had no way of knowing what to expect during a receivership. Now, with Florida’s adoption of the UCERA, there are more precise guidelines and consistency as to when receiverships may be appropriate and how they will operate during cases.

Contact the Florida Board Certified Real Estate Attorneys of Rabideau Klein

At Rabideau Klein, we have extensive experience handling multi-million-dollar transactions for high-end commercial real estate in the Town of Palm Beach and Palm Beach County. David E. Klein, Esq. and Guy Rabideau, Esq. are also Florida Bar Board-Certified Real Estate attorneys with the expertise and experience you need to protect your interests during your Palm Beach luxury real estate matter.  Contact Rabideau Klein today to discuss your Palm Beach real estate legal needs.

 

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