Simon PLC Attorneys & Counselors – July 2025 Memorandum
Receivership As a Resource to Creditors Addressing the Challenges of Vacant Commercial, Retail and Residential Property
Troy, MI. Nobody likes living near a derelict abandoned property. These types of assets are public nuisances that suddenly become everyone’s problem but their owner. Neighbors suffer from decreased property value issues. Criminals target valued resources and occupy the assets for their own benefits. Tax revenue is lost to schools and communities. Environmental concerns go unaddressed. Code and law enforcement are required to assign resources to monitor crime, fire and other hazards. Creditors and lenders are constrained by notice provisions, redemption statutes, obstruction and delays all while watching asset value shrink.
A court appointed receiver is a solution to each of these concerns. A receiver can step in with speed and authority to mitigate and minimize the damage. A receiver is primarily tasked to preserve property or other assets of parties subject to litigation to ensure an equitable outcome for all parties involved. A receiver has the authority to investigate potential fraud, take actions to prevent waste of assets, gather and manage all relevant assets, and liquidate property as directed by the court.
Not all Receivership Estates enjoy the benefit of tenants, management, or even easy access to the property. By the time they have reached a court and litigation, the property under receivership can be seriously mismanaged, derelict and distressed. Sometimes the owner is in over their head and unable or unwilling to invest the time and resources to address basic maintenance and repairs. Sometimes the property has been inherited, or suffers from a partnership or shareholder dispute, an absentee or incarcerated owner, or a failed real estate empire. The circumstances that might lead to valuable property being abandoned or neglected are numerous.
No matter the background or reason for a property’s disrepair, the solution is easily found in receivership. A receiver of a challenged property can, with the authority and the support of the Court behind them, take over the responsibility for control of the property, managing its upkeep, addressing safety concerns, and preserving value until the legal dispute is resolved. Key points about receivers:
- Court-appointed: A receiver is a neutral party appointed by a court to take control of property or a business when there is a legal dispute or potential for asset mismanagement. A receiver’s neutrality requires that they do not represent the interests of individual creditors but are rather tasked with preserving property and assets during ongoing litigation.
- Fiduciary duty: Receivers have a legal duty to act in the best interests of all parties involved and must account for their actions to the court. A receiver is not an agent of, or for the benefit of, one party or the others, but rather appointed to protect and benefits parties equally with the strictest impartiality.
- Powers and duties: The receiver has the authority to take possession of the property, collect rents, manage operations, sell assets, and distribute proceeds according to court orders.
- Court oversight: The receiver must regularly report their actions and decisions to the court for approval.
The goal of the receiver over a vacant receivership estate is to prevent further deterioration of the premises and protect the surrounding neighborhood from blight. This is accomplished by securing the property, maintaining it, and potentially arranging for its sale, if necessary, all while acting under the court’s direction.
Secured creditors often enjoy the benefit of a mortgage with a right to foreclosure of the land and physical improvements in the event of a default. However, foreclosure is not always quick or streamlined with challenges such as redemption, junior liens, incomplete construction builds, and a lack of access. Receivership is an effective alternative to foreclosure as a remedy for creditors and interested parties of vacant buildings to have an immediate impact to resolve concerns such as neglect, blight, squatters, taxes, utilities, vandalism and many more.
Receivership by its very nature does not allow traditional business planning, investment and projections. Often, receivers are called upon to act quickly in response to emergency conditions with few resources. A receiver’s experience in managing challenging assets is critical to these functions. An experienced receiver will have a network of vendors, relationships and assets ready to respond upon an appointment from the court. Having the vision and understanding to quickly address chaotic situations is a key component that creditors look for in selecting a qualified receiver. In such circumstances, a receiver’s network of professionals and vendors must be responsive, reliable and tested to meet the needs of the court and the performance of the Receiver’s obligations.
Receivership can quickly remedy and address critical concerns:
- Security: Assessing, repairing and securing windows and doors to quickly identify and prevent crime, vandalism, squatting, and theft.
- Maintenance and repairs: Undertaking basic maintenance like lawn mowing, snow removal, addressing leaks, and fixing minor damages to prevent further deterioration. These basic functions have a dual benefit. First, demonstrating to potential trespassers that the property is under supervision and surveillance. Next, showing neighbors, city officials, and potential investors/purchasers that action is being taken to improve any eyesore or neglect.
- Code compliance: Municipalities often have restrictions on securing doors, prohibiting plywood, and general maintenance (etc.). A Receiver can be involved to avoid blight, violations, and assessments while ensuring the property adheres to local building codes. Receivers also establish themselves as a point of contact for enforcement officers and city officials to hopefully resolve, mitigate, and address any violations that may exist.
- finances: Receiver can look for ways to make the property productive by establishing tenancies, collecting any rental income if applicable, paying property taxes and insurance premiums, and managing any expenses related to the property’s upkeep.
- Marketing and selling the property: Depending on the situation, the receiver may be tasked with preparing the property for sale, listing it on the market, and managing offers to sell the property.
- Reporting to the court: The receiver must regularly provide detailed reports to the court detailing their actions, expenses, and any issues encountered while managing the property.
Break-ins and municipal intervention, balanced alongside a robust marketing and brokerage effort, require solutions from an experienced receiver. Frank R. Simon is routinely working on these types of challenges in many jurisdictions and different states. Assets under management by Frank as a receiver currently include a sixteen-parcel apartment complex with decaying infrastructure, subject to blight and creating an attractive nuisance, a high rise with 288 apartments, and both retail and grow space in the marijuana industry. Frank is regularly relied upon by Judges and appointed as a receiver involving shareholder disputes, creditor’s rights and debtor defaults. Those appointments touch on many other issues that require a receiver, including cannabis related matters, divorce and support orders, as well as neglected or otherwise abandoned vacant properties. Simon and the talented professionals at Simon PLC Attorneys and Counselors deliver an experienced team devoted to Receiverships, and a talented staff providing back-office support for property and construction management, financial reporting, and brokerage. Simon’s success in these practice areas and a reputation for results among his peers in the industry have led to his appointment as a Director for the Commercial Receivership Association.
N.B. Not Legal Advice: Please contact us if you would like to discuss the facts and circumstances of your specific matter. Simon PLC Attorneys & Counselors expressly disclaims all liability in respect to actions taken or not taken based on any or all the contents of this memorandum. The information contained herein may not reflect current legal developments and is provided without any knowledge as to the recipient’s location, industry, identity or specific circumstances. No recipients of this content, clients or otherwise, should act, or refrain from acting, on the basis of any content included in this memorandum without seeking the appropriate legal or other professional advice on the particular facts and circumstances at issue from an attorney licensed in the jurisdiction for which the recipient’s legal issue(s) involve. The application and impact of relevant laws varies from jurisdiction to jurisdiction, and our attorneys do not seek to practice law in states, territories and foreign countries where they are not properly authorized to do so.
